What this tool does
Keep margin and markup distinct when checking a price or planning a selling price from a desired gross margin.
How to use it
- Choose whether to check a selling price or target margin.
- Enter product cost and the price or margin target.
- Review selling price, profit, margin and markup.
Formula and method
Profit = selling price − cost. Margin = profit ÷ selling price; markup = profit ÷ cost. Target selling price = cost ÷ (1 − target margin).
Example
A cost of 60 and price of 100 gives profit 40, margin 40% and markup 66.67%. A 40% target margin on cost 60 also requires price 100.
Useful for
- Checking retail price structure
- Explaining margin versus markup
- Planning a target gross margin
Limits and notes
This is a gross unit calculation. Taxes, platform fees, payment fees, shipping, returns, overhead, discounts, inventory loss and local accounting rules are excluded unless included in cost.
Frequently asked questions
Why are margin and markup different?
Margin divides profit by selling price, while markup divides the same profit by cost.
Can the target margin be 100%?
No. A finite selling price cannot produce a 100% margin when cost is above zero.