Markup Calculator
Determine your selling price and profit margins accurately.
Gross Profit
$50.00
Gross Margin
33.33%
Markup vs. Gross Margin
Business owners often confuse markup and gross margin, but they are two distinct metrics. Markup tells you how much you are charging above your cost, while gross margin tells you how much of your revenue is actually profit.
The Formulas
Markup Formula
((Price - Cost) / Cost) × 100Margin Formula
((Price - Cost) / Price) × 100Key Differences
- Markup is typically used to set prices. You decide you want a 50% markup on your goods.
- Margin is used to analyze profitability. A 50% markup results in a 33.3% gross margin.
- Margin can never reach 100% (unless cost is 0), whereas markup can be infinite (e.g., 200%, 500%).
Understanding the relationship between these two numbers is crucial for pricing your products correctly to cover operating expenses and achieve your desired net profit.
FAQ
What is the difference between markup and margin?
Markup is the percentage added to the cost price to get the selling price. Margin (or Gross Margin) is the percentage of the selling price that is profit. For example, if cost is $100 and price is $150: Markup is 50%, but Margin is 33.3%.
How do I calculate markup percentage?
The formula is: Markup % = ((Selling Price - Cost Price) / Cost Price) * 100.
Why is margin always lower than markup?
Because margin is calculated based on the total selling price (which includes the profit), whereas markup is calculated based on the cost alone. The denominator for margin is larger, making the percentage smaller.
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