Last updated: 2026-07-02

Markup and margin defined

Markup and margin both describe the profit on a sale as a percentage, and both start from the same gross profit — selling price minus cost. They differ only in what they divide that profit by. Markup divides profit by the cost; margin divides profit by the selling price. Because cost is smaller than price, the same sale always shows a higher markup than margin.

The two are easy to confuse, and treating them as interchangeable sets prices too low. A shop aiming for a 40% margin but applying a 40% markup ends up with a margin near 29%. This calculator reports both from a single cost and price, and works the other way too: enter a target markup or margin and it returns the price that reaches it.

The two formulas

Gross profit is what is left from a sale once the direct cost of the item is subtracted:

Markup measures that profit against cost:

Margin measures the same profit against price:

For an item that costs $60 and sells for $100, profit is $40. Markup = $40 / $60 = 66.7%. Margin = $40 / $100 = 40%. One sale, one profit, two percentages — and markup is the larger because its denominator, the cost, is the smaller number.

Worked example: pricing a handmade candle

A maker spends $8.40 on wax, wick, fragrance, and jar for each candle. Two questions come up when setting the shelf price.

Question 1 — target a 65% margin. The price that leaves 65% of revenue as profit divides the cost by one minus the margin:

Profit is $24.00 − $8.40 = $15.60. Checking the markup: $15.60 / $8.40 = 185.7%. So a 65% margin on this candle is the same as a 185.7% markup — the same price described two ways.

Question 2 — the shortcut trap. Suppose the maker instead applies a 65% markup, thinking it delivers the same result:

• Price: $8.40 × 1.65 = $13.86
• Profit: $13.86 − $8.40 = $5.46
• Margin: $5.46 / $13.86 = 39.4%, far short of the 65% goal

The markup-based price undercuts the margin target by more than $10 per candle. On a product sold in the hundreds, that gap decides whether the line is profitable.

Converting between markup and margin

Because both share the same profit but divide by different bases, every markup maps to exactly one margin and back again:

A 66.7% markup is 0.667 / 1.667 = 40% margin. A 40% margin is 0.40 / 0.60 = 66.7% markup. A few common pairs:

The gap widens as the numbers grow: a 25% markup is only 5 points off its margin, but a 300% markup is 225 points above its 75% margin.

Which base to use

Retail and hospitality often price on markup because the cost sheet is the starting point — take what an item cost and mark it up by a set percentage. Finance and accounting report on margin because it maps directly to the income statement, where profit is measured against revenue.

The two views answer different questions. Markup answers "how much did I add on top of cost?" Margin answers "how much of the sale did I keep?" Neither is more correct, but a price quoted as a markup and a target set as a margin must be converted before they can be compared.

Choosing a calculation mode

This calculator solves in three directions, depending on which values are known:

From Cost and Price takes both figures and reports profit, markup, and margin together — useful for auditing an existing price or comparing items across a catalog.

From Cost and Markup takes a cost and a markup percentage and returns the selling price, the way a retailer prices up from a supplier invoice.

From Cost and Margin takes a cost and a margin percentage and returns the selling price that hits that margin — the common question when pricing from a financial target.

To turn a per-unit margin into a break-even sales volume, pair this with the Break-Even Calculator, which finds how many units must sell before fixed costs are covered.