Margin and markup calculator

Margin and markup use different baselines

Profit is selling price minus cost. Margin divides profit by selling price, while markup divides profit by cost. A $60 cost and $100 selling price produce $40 profit, a 40% margin, and a 66.67% markup.

Why the percentages are not interchangeable

A target markup cannot be entered as the same target margin because the denominators differ. As profit grows, markup can exceed 100%, while a positive gross margin remains below 100% when selling price is positive.

Choose the correct cost definition

The result depends on what cost includes. Product acquisition alone differs from a fully allocated cost that includes shipping, payment fees, labor, returns, overhead, and taxes. State the chosen cost basis when comparing products or periods.

Work backward from a target with the correct denominator

To find a selling price from a target margin, divide cost by one minus the target margin. A $30 cost and 40% target margin imply $30 ÷ 0.60, or a $50 price. To apply a target markup, multiply cost by one plus the markup. A 40% markup on the same cost produces $42, which is only a 28.57% margin.

Gross profit does not prove the business is profitable

This calculation subtracts one entered cost from one entered price. It does not automatically include rent, advertising, owner compensation, financing, tax, returns, or every operating expense. Label the result as gross or unit arithmetic unless the chosen cost basis genuinely includes the additional items required for a different measure.

Connect margin to volume and pricing

Use the Break-Even Calculator to test whether per-unit contribution can cover period fixed costs. The small-business pricing, margin, and break-even guide shows how discounts, commissions, transaction tax, product mix, cost classification, and realistic volume can change a price that initially appears profitable.

This educational calculation is not accounting, pricing, tax, or financial advice. It reports gross arithmetic from two inputs and does not determine net profit or an appropriate selling price.