Markup and Margin — Two Set Comparison Calculator
What are markup and margin?
Markup and margin are similar concepts: they both help you calculate the profit you can make by selling a good at a given price. There are, however, some differences.
Before talking about margin and markup, let's see the setup of our problem. Let's say that your company produces a good paying a certain amount (that includes the raw materials, the manufacture, shipping, etc.). We call this amount
cost. In order to stay afloat, you need to sell this good for a higher price than the one you spent in the production process. We call this final price
The difference between revenue and cost is the profit:
profit = revenue − cost
Knowing this, we can understand the concepts of margin and markup by looking at cost, revenue, and profit from two different points of view.
The margin is the percentage of the revenue that becomes profit; and
The markup is the percentage increase of the price that brings us to the revenue.
When choosing the selling price, you need to consider both these quantities, but usually, the markup has more importance as it allows you to always cash in a profit.
An example of how to calculate the margin and markup for 2 sets with our calculator
Let's give you an example; you know you want a profit margin of anything between 35% and 40% on your sales. Start by inserting these data in our calculator, in the two
margin variables. You can use our percentage calculator to speed up the calculation.
Say that the object costs you $100. Input this quantity: we will print out revenue, profit, and markup in both cases. You can see that you need to set your price between $153.85 and $166.67 to generate the desired margin.
You can set both margins (or both markups) to
auto-save to speed up the process if you're dealing with hundreds of items: click on the grey tile on the right of the variable to see the controls. Just enter the cost, and you'll have your min and max prices!
Unlock the variable
cost in the same way to calculate the cost as a function of markup or margin!
How do I calculate the markup from the margin?
To calculate the markup from the margin, follow these easy steps:
If you know the margin as a percentage, divide it by
100to find its decimal value.
Find the decimal markup with the following formula:
markup = 1/(1 − margin) − 1
Multiply the result by
100%to find the percentage markup.
What is my profit on a $1000 revenue with 5% margin?
The profit would be $50. To find this result, invert the formula we use to calculate the revenue knowing the profit:
revenue = 100 × profit/margin
In this equation, the margin is expressed as a percentage.
Find the profit with the following formula:
profit = revenue × margin/100 = $1000 × 5/100 = $50
What is the difference between markup and margin?
Margin and markup can be easily confused. Here are the differences between them:
The margin is the fraction of the selling price the company retains after subtracting the cost of the goods sold (COGS): it's a measure of the revenue.
The markup is again a measure of the revenue but in the other direction. The markup measures how much the cost of the goods is increased to reach the selling price.
Even though their definition is pretty similar, the numerical values of markup and margin always differ (unless they are both
How do I calculate the revenue knowing the markup and the cost?
To calculate the revenue knowing markup and cost, follow these easy steps:
- Convert the percentage markup to decimal, if needed.
- Multiply markup and cost.
- Sum the cost to the result of the previous step to find the revenue.
Notice how the result of Step 2 is also the profit you'd make with such markup.