Margin Calculator
margin 40%
How do you calculate profit margin?
Profit margin is the share of the price that is left after the cost. Markup is the same profit measured against the cost instead, which is why the two figures differ.
- Enter what the item cost you and what you sell it for.
- Take the cost away from the price. What is left is the profit on one unit.
- Divide that profit by the price and multiply by a hundred. Margin percent = (price - cost) / price x 100.
- Divide the same profit by the cost instead to get the markup. Markup percent = (price - cost) / cost x 100.
- To work the other way, give the widget a cost and the margin you are aiming at. Price = cost / (1 - margin), with the margin written as a decimal.
The same profit, read as a margin and as a markup
Each row is one profit read against two different bases. The margin column divides by the price and the markup column divides by the cost, so the markup is always the larger of the two figures on the same sale. The third row is a rounded third rather than an exact one, which is why its twin lands just under 50 instead of on it.
| Margin | The same sale as a markup | Cost | Price |
|---|---|---|---|
| 20% | 25% | $100.00 | $125.00 |
| 25% | 33.3% | $100.00 | $133.33 |
| 33.3% | 49.9% | $100.00 | $149.93 |
| 50% | 100% | $100.00 | $200.00 |
Worked Example: a $60 cost and a $100 price
The margin is 40%. A $60 cost and a $100 price is $40 of profit, a 40 percent margin and a 66.7 percent markup.
$60 cost, $100 price → 40% margin, 66.7% markup
The $40 of profit did not change between those two figures; the number it was divided by did. Quote the margin to anyone who is looking at your revenue, and the markup to anyone who is pricing up from a supplier invoice.
Where Do Margin and Markup Get Confused?
The two words get swapped in conversation
Margin and markup describe the same profit against a different base: margin divides by the price, markup divides by the cost. A 50 percent markup is a 33.3 percent margin.
Where the mistake costs money
Adding 30 percent to a cost and calling the result a 30 percent margin leaves you with about 23 percent. Do that across a price list and the shortfall is a real hole in the year, made by one word rather than by any error in the arithmetic.
What this figure covers
This page works out profit margin, the gap between what something costs you and what you sell it for. It does not price a brokerage margin account or borrowing against a position.
Frequently Asked Questions
Does this page calculate profit margin or margin trading?
Profit margin. It compares what something costs you with what you sell it for, and it has nothing to say about a brokerage margin account or borrowing against a position.
What is the difference between margin and markup?
Margin divides the profit by the price; markup divides the same profit by the cost. The markup on a sale is always the larger figure, and the gap widens as the profit grows.
How do you work out the price from a target margin?
Give the widget your cost and the margin you want, and it divides the cost by one minus that margin. Adding the margin to the cost instead lands you short of the target.
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