What this calculator does
Margin and markup describe the same gap between cost and price, measured against different bases. Margin divides the profit by the selling price; markup divides it by the cost. A 50% markup is a 33% margin, and confusing the two is one of the most common and expensive errors in small-business pricing.
This calculator reports both from the same pair of numbers, along with profit per unit and total profit at whatever volume you enter. If a supplier quotes you a markup and your accountant asks for a margin, the conversion is right here.
The formula
Both figures start from the same profit: price minus cost. Margin expresses that profit as a share of what the customer pays; markup expresses it as a share of what you paid. Because the price is always larger than the cost, the markup percentage is always the larger of the two.
| Term | Meaning |
|---|---|
| Cost | What the unit costs you, including landed freight if applicable. |
| Price | What you sell it for. |
| Margin | Profit ÷ price, as a percentage. |
| Markup | Profit ÷ cost, as a percentage. |
The inputs explained
| Field | What to enter |
|---|---|
| Unit cost ($) | Your cost per unit. Include freight and any per-unit handling: leaving these out inflates the apparent margin. |
| Selling price ($) | The price you charge, excluding sales tax. |
| Units sold | How many units you expect to sell. Set to 1 to look at a single unit. |
When to use it
Setting a price from a target margin
Adjust the price until the margin lands on your target. Working the other way, adding a markup to cost, will undershoot the margin you had in mind, which is exactly the trap the two terms create.
Translating a supplier’s markup
Distributors often quote in markup, retailers usually think in margin. Enter the cost and the marked-up price to see what margin the arrangement actually leaves you.
Checking whether a discount is affordable
Reduce the price by the discount you are considering and watch the margin. A 20% discount on a 30% margin product cuts the profit by roughly two thirds.
Comparing products on profitability
A high-priced item with a thin margin can be less profitable per sale than a cheap one with a fat margin. The profit per unit column settles it in dollars.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
Margin and markup at different prices
A product costing $40, sold at a range of prices. Notice how far markup and margin diverge as the price rises.
| Selling price | Gross margin | Markup | Profit per unit |
|---|---|---|---|
| $50 | 20.0% | 25.0% | $10.00 |
| $60 | 33.3% | 50.0% | $20.00 |
| $80 | 50.0% | 100.0% | $40.00 |
| $100 | 60.0% | 150.0% | $60.00 |
| $133 | 69.9% | 232.5% | $93.00 |
| $200 | 80.0% | 400.0% | $160.00 |
What different costs do at a fixed $100 price
Holding the price at $100 and selling 500 units, with the cost varying.
| Unit cost | Gross margin | Markup | Profit per unit | Total profit |
|---|---|---|---|---|
| $20 | 80.0% | 400.0% | $80.00 | $40,000.00 |
| $35 | 65.0% | 185.7% | $65.00 | $32,500.00 |
| $50 | 50.0% | 100.0% | $50.00 | $25,000.00 |
| $65 | 35.0% | 53.8% | $35.00 | $17,500.00 |
| $80 | 20.0% | 25.0% | $20.00 | $10,000.00 |
| $90 | 10.0% | 11.1% | $10.00 | $5,000.00 |
Questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. For the same product, markup is always the higher number. A $40 item sold at $100 carries a 60% margin and a 150% markup.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup), with both as decimals. A 50% markup gives 0.5 ÷ 1.5, which is a 33.3% margin. Going the other way, markup = margin ÷ (1 − margin).
Can margin exceed 100%?
No. Margin is a share of the selling price, so it approaches 100% but never reaches it while the cost is above zero. Markup has no upper limit.
Should the cost include overheads?
This calculator works on gross margin, which uses direct unit cost only. Rent, wages and other fixed overheads are covered by the total gross profit: the break-even calculator is the tool for that question.
What is keystone pricing?
Doubling the cost to set the price: a 100% markup, which is a 50% margin. It is a long-standing retail convention rather than a rule, and works only where it covers your overheads.
To find the volume that covers fixed costs, use the break-even calculator. For discounting decisions, see the discount calculator.