How this calculator works
This calculator converts between cost, price, margin and markup in three directions. Enter cost and price to get both margin and markup percentages, enter cost and a target margin to solve for the price you need to charge, or enter price and a target margin to solve for the maximum cost you can afford.
Margin and markup get confused constantly because they describe the exact same dollar profit as two different percentages. Margin divides profit by the selling price; markup divides profit by the cost. Since price is always larger than cost when there is a profit, markup is always a bigger percentage than margin for the same sale, and the gap widens as the margin gets larger.
The formula
Profit = Price − CostMargin % = Profit ÷ Price × 100Markup % = Profit ÷ Cost × 100Price from cost and margin: Price = Cost ÷ (1 − Margin ÷ 100)Cost from price and margin: Cost = Price × (1 − Margin ÷ 100)Worked example: $100 cost, $150 price
- Profit = 150 − 100 = $50.
- Margin = 50 ÷ 150 × 100 = 33.3% (profit as a share of the selling price).
- Markup = 50 ÷ 100 × 100 = 50% (the same $50 profit as a share of cost instead).
- The two percentages describe the identical sale; neither one is "wrong," they just answer different questions.
Frequently asked questions
Which one should I use, margin or markup?
Margin is more common for evaluating overall business profitability and is what most gross margin and profit margin figures in financial reports refer to. Markup is more common in retail pricing, where a common approach is to mark a product up by a fixed percentage over cost to set the shelf price.
Why is markup always higher than margin for the same profit?
Because markup divides by cost, which is smaller than price whenever there is a profit. Dividing the same numerator by a smaller number always gives a larger percentage.
Can margin be negative?
Yes, if price is below cost the transaction loses money; this calculator's cost-and-price mode reports a negative margin and markup in that case, since profit itself is negative.
What margin should I price at?
It depends heavily on the industry, competition and other costs. There is no universal target margin, so use this calculator to translate whatever target percentage your own pricing strategy calls for into an actual price or cost figure.
How do I convert a markup percentage into a margin percentage without redoing the cost and price?
Divide the markup by 1 plus the markup, using decimals rather than percentages: margin = markup ÷ (1 + markup). In the calculator's own example, a 50% markup (0.5) converts to 0.5 ÷ 1.5 ≈ 0.333, the same 33.3% margin shown for that $100 cost, $150 price sale — because both percentages describe the identical dollar profit, just divided by a different base.