How to use the markup calculator
- What do you know? Pick Cost and markup %, Cost and margin %, Cost and price, or Price and margin %.
- Cost per item: what you pay for one unit, including freight and any per-item fees.
- Markup (% of cost), Margin (% of selling price) or Selling price per item: fill in the two fields your option shows.
- Read the selling price, profit, markup and margin under Your results. The small line below them shows the arithmetic with your numbers.
How markup and margin are worked out
Both start from the same profit, which is selling price minus cost. Markup divides that profit by cost. Margin divides it by selling price. That one difference is why a 50% markup is only a 33.33% margin.
- Markup % = (price - cost) / cost x 100
- Margin % = (price - cost) / price x 100
- Price from a markup = cost x (1 + markup)
- Price from a margin = cost / (1 - margin)
- Margin = markup / (1 + markup), and markup = margin / (1 - margin)
These are the definitions used by Corporate Finance Institute. The conversion tables above list common pairs.
Worked example with the starting numbers
An item costs $40.00 and you add a 50% markup. The selling price is $40.00 x 1.5 = $60.00, so profit is $20.00 per item. That $20.00 is 50% of the $40.00 cost (the markup) but only 33.33% of the $60.00 price (the margin). To earn a 50% margin on the same item you would need a 100% markup and an $80.00 price, which is the traditional keystone rule of doubling your cost.
Limits and edge cases
- Selling price means the price before sales tax. Discounts, returns, shipping and card fees are not included, so your real margin can be lower. The discount calculator shows what a markdown does to a price.
- Cost must be above $0 because markup divides by it. Margin must stay below 100%, because 100% would mean the item costs nothing. Markup has no upper limit.
- A markup below 0% or a margin below 0% means you sell below cost, and the results show a loss per item.
- Dollar amounts are rounded to the cent for display only. Percentages come from the unrounded price.
- Item margin is not business profit, because overhead comes out of it. To test whether margins cover your costs, use the break-even sales calculator; for fuller profit math, the profit margin calculator.
Markup and margin questions
What is the difference between markup and margin?
Both use the same profit, but markup divides it by cost and margin divides it by selling price. On a $40.00 item sold for $60.00, profit is $20.00, so markup is 50% and margin is 33.33%. Whenever the price is above cost, markup is the larger number.
How do I convert markup to margin?
Divide the markup by one plus the markup. A 25% markup is 0.25 / 1.25 = 20% margin, a 50% markup is a 33.33% margin and a 100% markup is a 50% margin. To go the other way, divide the margin by one minus the margin.
What markup do I need for a 40% margin?
You need a 66.67% markup, which is 0.40 / 0.60. On a $40.00 cost that gives a selling price of $66.67. Choose Cost and margin % and enter 40 and 40 to see it.
Can a 100% markup give a 100% margin?
No. A 100% markup doubles your cost, which is a 50% margin. A 100% margin is impossible when an item has a cost, because profit would have to equal the entire selling price.
Should I price with markup or margin?
Either works if you stay consistent. Markup is the quick way to price from a supplier's cost list. Margin is the share of revenue that accountants report, so it is the figure to compare with your income statement and profit goals.
Sources: Corporate Finance Institute, Markup. Results are pricing estimates, not accounting advice.