Markup & Margin
Turn a cost and selling price into markup percent, profit margin, and unit profit.
Profit $20.00 per unit · margin 20%.
Markup measures profit against cost; margin measures it against the selling price. With a cost of $80 and a price of $100, profit is $100 − $80 = $20. Markup is $20 ÷ $80 = 25%, while margin is $20 ÷ $100 = 20%.
Markup and margin from cost and price
Both describe the same profit, but they divide by different bases. Markup is how much you add on top of cost — profit as a share of what the item cost you. Margin is profit as a share of the price the customer pays. Because price is always larger than cost on a profitable sale, the margin percent is always smaller than the markup percent.
margin % = (P − C) ÷ P × 100, where C is cost and P is selling price
Worked example
You buy an item for $80 and sell it for $100. What are the markup and the margin?
- 1 Find the profit. Subtract cost from price: $100 − $80 = $20.
- 2 Divide profit by cost for markup. $20 ÷ $80 = 0.25, so the markup is 25%.
- 3 Divide profit by price for margin. $20 ÷ $100 = 0.20, so the margin is 20%.
Markup converted to margin
Margin = markup ÷ (1 + markup). The same profit looks smaller as a margin.
| Markup % | Margin % |
|---|---|
| 10% | 9.09% |
| 25% | 20% |
| 50% | 33.33% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.67% |
| 300% | 75% |
Why markup and margin are never equal
They split the same $20 profit over different denominators, so confusing them quietly distorts pricing. A 25% markup is only a 20% margin; aiming for a 25% margin actually needs a 33.3% markup. Margin also has a hard ceiling: it can approach but never reach 100%, because that would require a cost of zero. Markup has no upper limit — a $1 cost sold for $4 is a 300% markup but just a 75% margin.