Markup vs Margin Calculator
A 40% markup on cost is not a 40% margin on price. The confusion between these two numbers leads to real pricing mistakes.
Markup vs margin calculator
The same transaction, two different percentages — markup is profit over cost, margin is profit over selling price, and they are never the same number except at 0%.
Educational illustration only. A common, costly mistake: pricing to hit a target margin by adding that same percentage as markup on cost — a 40% markup on cost is only a 28.6% margin on price, not 40%.
Two denominators, two different numbers
Markup = Profit ÷ Cost. It asks: how much was added on top of what it cost to produce or buy?
Margin = Profit ÷ Selling Price. It asks: of what the customer actually paid, how much was profit?
Markup is always a higher percentage than margin for the same transaction (as long as there’s a profit at all), because the denominator — cost — is always smaller than the denominator for margin — selling price.
The pricing mistake this causes
A business that wants a 40% profit margin, but prices by adding 40% markup on cost instead, ends up with a real margin of only about 28.6% — well short of the target. To actually hit a 40% margin, the correct markup on cost is 66.7%. Confusing the two is one of the most common pricing errors in retail and small business.