Margin vs Markup Calculator
Gross margin, markup, and the price you need to charge to actually hit your target.
Margin divides profit by the price; markup divides it by the cost. They are never equal, and the gap widens as they rise. Adding your target margin to cost as a markup is the classic error: to keep a 50% margin on $60.00 of cost you must charge $120.00, not $90.00.
Margin and markup answer different questions about the same two numbers. Margin divides profit by the price. Markup divides it by the cost. They are never equal, and the gap widens as they rise.
Worked example. An item costs $60 and sells for $100. Profit is $40, so the margin is 40% and the markup is 66.7%. Same transaction, two very different-looking numbers.
Frequently asked questions
Is markup or margin the right one to use?
Margin, for judging profitability, because it is the share of each sale you keep and it is what income statements report. Markup is a pricing mechanic: a rule for getting from cost to price. Use markup to set the price, then check the margin it produces.
Why can margin never reach 100%?
Because margin is profit divided by price, and profit can never exceed the price unless the item costs nothing. As margin approaches 100% the required markup approaches infinity. A 90% margin needs a 900% markup.
Does this include overhead?
No, this is gross margin: price minus the direct cost of the unit. Rent, salaries, and marketing come out of that gross profit. A healthy gross margin can still leave a business unprofitable once overhead is covered, which is what the profit margin calculator shows.
What is a good gross margin?
It is entirely industry-specific. Grocery runs on single digits, restaurants target 60 to 70% on food, and software often exceeds 80%. Compare against your own industry and your own history, never against a general number.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.