Profit Margin Calculator
Calculate gross profits, margin percentages, and markups instantly based on wholesale costs and retail selling prices. Free, secure, client-side calculations.
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Profit Margin vs. Markup: The Key Differences
While profit margin and markup both describe relationships between product costs and selling prices, they are calculated differently and express different financial ratios.
- Profit Margin: The percentage of the selling price that is profit. It is based on sales revenue.
- Markup: The percentage added to the cost price to determine the retail selling price. It is based on cost.
The Pricing Formulas
$$\text{Gross Profit} = \text{Selling Price} - \text{Cost}$$ $$\text{Profit Margin \%} = \left(\frac{\text{Gross Profit}}{\text{Selling Price}}\right) \times 100$$ $$\text{Markup \%} = \left(\frac{\text{Gross Profit}}{\text{Cost}}\right) \times 100$$Frequently Asked Questions (FAQ)
What is the difference between margin and markup?
Margin is calculated as profit divided by selling price. Markup is calculated as profit divided by cost. Markup is always higher than margin for any positive profit.
Can profit margin be over 100%?
Gross profit margin cannot exceed 100%, since you cannot earn more profit than the selling price itself unless you have negative costs. Markup, however, can be infinitely high (e.g. 200% or 500% markup).
What is a standard retail markup?
A standard retail markup is 100%, commonly called 'keystoning'. It means selling an item for double what it cost to buy wholesale.
Why is margin preferred by accountants?
Margins map directly to financial statements. If a company has a 30% gross margin, it means 30% of every dollar of sales revenue is retained as gross profit.