Explanation
Profit margin and markup
The same profit has two percentages. Margin compares profit with revenue; markup compares profit with cost. A price of one hundred dollars and cost of eighty dollars has a twenty percent margin and a twenty-five percent markup.
Choose the question and enter values
Choose margin for the share of selling price kept as profit, or markup for the percentage added to cost. Enter cost and selling price in dollars.
Margin = (P − C) ÷ P × 100. Markup = (P − C) ÷ C × 100.
| C | Cost (USD) |
|---|---|
| P | Selling price (USD) |
Margin on an $80 cost
| Cost | 80 |
|---|---|
| Selling price | 100 |
| Result | 20% |
Profit margin: profit is $100 − $80. Divide profit by the price $100 for margin or by the cost $80 for markup, then × 100. Result = 20%.
Markup on the same transaction
| Cost | 80 |
|---|---|
| Selling price | 100 |
| Result | 25% |
Markup on cost: profit is $100 − $80. Divide profit by the price $100 for margin or by the cost $80 for markup, then × 100. Result = 25%.
Selling below cost
| Cost | 100 |
|---|---|
| Selling price | 80 |
| Result | -25% |
Profit margin: profit is $80 − $100. Divide profit by the price $80 for margin or by the cost $100 for markup, then × 100. Result = -25%.
Diagram of this result
A bar splits the selling price into cost and profit. Margin divides the profit by the price; markup divides the same profit by the cost.
The cost, price and profit or loss are listed as exact dollar amounts beside the bar.
Common mistakes
A 25% markup is not a 25% margin. Include relevant unit costs consistently; this calculator does not infer shipping, overhead or taxes.
Assumptions and limits
Both cost and price must be positive whole-cent USD amounts. Selling below cost produces a negative percentage. This is a unit gross-profit comparison, not business net profit. Educational estimates only, not financial, tax or investment advice.
Can the result be negative?
Yes. A selling price below cost represents a loss, so both margin and markup are negative.
Method and references
Margin and markup divide the same per-unit profit by different bases: the selling price or the cost. The U.S. Small Business Administration covers pricing and business finances at https://www.sba.gov/business-guide/manage-your-business/manage-your-finances . The examples above are independent fixtures for both ratios.