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Daily Dose of Utilities

Profit Margin & Markup Calculator

Margin is profit divided by price; markup is profit divided by cost. An item that costs $60 and sells for $100 makes $40 profit: a 40% margin and a 66.67% markup.

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Profit

$40.00

Margin

40%

Markup

66.67%

Show the math

  1. 1

    Profit = price − cost

    $100.00 − $60.00 = $40.00

    = $40.00

Read the steps as text
  1. Profit = price − cost. $100.00 − $60.00 = $40.00
  2. Margin = profit ÷ price. $40.00 ÷ $100.00 × 100 = 40% Gross margin: how much of each dollar of sales is profit.
  3. Markup = profit ÷ cost. $40.00 ÷ $60.00 × 100 = 66.67% Markup is always the bigger number, because it divides the same profit by the smaller cost.

Margin versus markup

Both describe the same profit, measured against different things. Margin compares profit to the selling price: of every $100 in sales, how much is profit. Markup compares profit to the cost: how much was added on top of what you paid.

Because the cost is always smaller than the price, markup is always the bigger percentage. A 50% markup on a $60 item gives a $90 price, but the margin is only $30 ÷ $90 = 33.33%. Mixing the two up is a common pricing mistake that leaves less profit than expected.

Pricing for a target margin

To hit a target margin, divide the cost by one minus the margin: for a 40% margin on a $60 item, $60 ÷ 0.6 = $100. Adding 40% to the cost instead would give only $84, which is a 28.6% margin.

This calculator works with gross margin, which only subtracts the direct cost of the item. Net margin also subtracts overheads like rent, wages and marketing, so it's always lower.

Frequently asked questions

How do I calculate profit margin?
Subtract the cost from the selling price to get profit, divide by the selling price, and multiply by 100. ($100 − $60) ÷ $100 × 100 = 40%.
How do I calculate markup?
Divide the profit by the cost and multiply by 100. ($100 − $60) ÷ $60 × 100 = 66.67%.
What price do I need for a 30% margin?
Divide your cost by 0.7. An item costing $70 needs a price of $70 ÷ 0.7 = $100.
Can a margin be over 100%?
No. Margin is profit as a share of the price, so it's always below 100% unless the cost is zero. Markup can be any size: a 200% markup triples the cost.

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