Profit margin & markup calculator
Compare margin and markup without mixing them up, or calculate the selling price needed for your target percentage.
- Cost per item
- $60
- Profit margin
- 40.0%
- Markup on cost
- 66.67%
Include any taxes, fees or overheads that should form part of the price or cost.
Included
- Profit per item from selling price minus cost
- Profit margin as a percentage of selling price
- Markup as a percentage of cost
- Target selling price from either a margin or markup goal
Not included
- Tax, VAT or GST unless you include it consistently in both price and cost
- Fixed overheads, payment fees, discounts, returns and other costs not entered
- Advice about what price customers will accept
What this means
Margin and markup use the same profit amount but divide it by different numbers. Margin divides profit by the selling price. Markup divides profit by cost. That is why a 50% markup is only a 33.33% margin.
Use Known selling price when you already know cost and price. Use Target margin or Target markup to work backwards to a selling price. The target-margin formula divides cost by one minus the margin rate; the target-markup formula multiplies cost by one plus the markup rate.
Use costs and prices on the same basis. If cost excludes tax but selling price includes tax, the percentages will not describe the underlying sale accurately.
Formula & worked example
profit = selling price − cost margin % = profit ÷ selling price × 100 markup % = profit ÷ cost × 100 target price from margin = cost ÷ (1 − margin rate) target price from markup = cost × (1 + markup rate)
An item costs $60 and sells for $100
- Profit: $100 − $60
- $40
- Margin: $40 ÷ $100
- 40%
- Markup: $40 ÷ $60
- 66.67%
A $40 profit on a $100 selling price is a 40% margin and a 66.67% markup.
How this calculation works
The calculation follows the formulas, definitions and assumptions explained on this page. The references below support the method and any stated boundaries.
Official sources
- University of Maine Cooperative Extension — markup and margin formulas — US educational guidance defining markup on cost and margin on selling price
- Mississippi State University Extension — product pricing and break-even — US educational guidance for calculating selling price from a desired gross margin
- Internal Revenue Service — margin and markup definitions — US federal guidance distinguishing margin on selling price from markup on cost
- Business Victoria — margin, markup and break-even — Definitions and margin/markup formulas