Margin versus markup: what do a cost of 80 and price of 100 mean?
Both measures use profit in the numerator, but they divide by different amounts. Confusing markup with margin can make a selling price miss the intended profitability target.
Profit margin and markup calculator →Identify the denominator
In this tool, profit is selling price minus the cost entered. Margin divides that profit by selling price; markup divides it by cost. The entered cost has the scope you give it. The calculator does not automatically include every operating expense or decide whether an accounting figure qualifies as gross or net profit.
Calculate both measures for one sale
With cost of 80 and a selling price of 100, profit is 20. Margin is 20/100 = 20%, while markup is 20/80 = 25%. Both percentages are correct because their denominators differ. Adding only 20% to the 80 cost gives a price of 96 and a margin of approximately 16.67%, not 20%. This is why a pricing instruction should name the intended measure explicitly.
Define the cost and tax scope
Entering purchase cost alone gives a product-level contribution figure rather than profit after rent, wages, refunds and all taxes. Use consistent tax-inclusive or tax-exclusive amounts so tax collected on behalf of an authority is not accidentally treated as ordinary profit. Label margin and markup clearly in quotes or internal spreadsheets. The calculator checks the arithmetic but cannot determine the complete cost allocation for a business.
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