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Edlintics

Markup vs. Margin

Convert between markup on cost and margin on price.

The markup vs. margin calculator converts between the two: markup = (price − cost) ÷ cost, margin = (price − cost) ÷ price — the same profit expressed as a percentage of cost versus a percentage of price, which is why a 50% markup is not a 50% margin.

ByHoang Truong
Margin40.0%
Markup66.7%
Profit€40

Worked example

Using the numbers above:

Cost
€60
Price
€100
Margin40.0%
Markup66.7%
Profit€40

The formula

LaTeX
Markup=P−CCMargin=P−CPMarkup = \dfrac{P - C}{C} \qquad Margin = \dfrac{P - C}{P}

Variables

Price (€)
Cost (€)

What markup and margin mean — and why they're not the same

Markup and margin both describe the profit on a sale, but they measure it against different bases. Markup is profit as a percentage of cost — "how much did I add on top of what I paid?" Margin is profit as a percentage of price — "what share of the final sale price is profit?" Because cost is always smaller than price on a profitable sale, the same euro amount of profit is always a _bigger_ percentage of cost (markup) than of price (margin). Mixing the two up is one of the most common pricing mistakes — a "50% markup" and a "50% margin" describe two very different prices for the same cost.

This shows up constantly in retail and wholesale pricing, and in exam questions that ask you to convert between the two.

How to calculate it

Two inputs: cost and price.

  1. Profit = price − cost.
  2. Markup = profit ÷ cost — profit expressed against what you paid.
  3. Margin = profit ÷ price — profit expressed against what you charged.

The two convert into each other directly, without needing profit again:

  • margin = markup ÷ (1 + markup)
  • markup = margin ÷ (1 − margin)

Both formulas are built into this calculator — change either input and both figures update together.

A worked example

A product costs €60 to produce and sells for €100. Profit is €100 − €60 = €40. Markup is €40 ÷ €60 ≈ 66.7% — you added two-thirds of the cost on top as profit. Margin is €40 ÷ €100 = 40% — 40% of the final sale price is profit. Check the conversion: markup ÷ (1 + markup) = 0.667 ÷ 1.667 = 0.40 — exactly the margin.

Now contrast a smaller example that trips people up: cost €10, price €15. Markup here is €5 ÷ €10 = 50%. Margin is €5 ÷ €15 ≈ 33.3% — a 50% markup is _not_ a 50% margin. To actually get a 50% margin on €10 cost, price would need to be €20 (a 100% markup).

Limitations to know

Both figures only describe a single sale — they say nothing about volume, fixed costs, or whether the resulting price is competitive. A wholesale business quoting "40% markup" and a retail business quoting "40% margin" are using consistent, correctly-applied formulas — they're just speaking two different pricing languages, and it's worth confirming which one you're being quoted before comparing numbers across companies or industries.

Frequently asked questions

No — this is the single most common pricing mix-up. A 50% markup means price = cost × 1.5 (e.g. €10 cost → €15 price), which works out to a 33.3% margin, not 50%. A 50% margin means price = cost ÷ 0.5 (e.g. €10 cost → €20 price), which is a 100% markup. Markup is calculated on cost; margin is calculated on price — the same euro amount of profit is always a bigger percentage of the smaller number (cost) than of the bigger number (price).