Guide
Markup vs Margin
Markup and margin both compare price, cost, and profit, but they use different denominators. Markup is based on cost. Margin is based on selling price or revenue.
The Main Difference
Markup measures profit relative to cost. Margin measures profit relative to selling price or revenue.
Because selling price is usually higher than cost, markup is often a larger percentage than margin for the same transaction.
- Markup answers: how much did price exceed cost?
- Margin answers: what share of revenue became profit?
- The percentages are not interchangeable.
When to Use Each
Use markup when you are setting or analyzing a price from a known cost. It is common in cost-plus pricing and product pricing workflows.
Use margin when you are evaluating profitability from revenue. It is more useful for financial reporting and comparing profitability across products or projects.
Markup and Margin Formulas
Markup
Markup % = (Selling Price - Cost) / Cost x 100
Markup uses cost as the denominator.
Margin
Margin % = (Selling Price - Cost) / Selling Price x 100
Margin uses selling price or revenue as the denominator.
Worked Examples
$60 cost sold for $90
- Input
- $60 cost, $90 selling price
- Formula
- Markup = $30 / $60; Margin = $30 / $90
- Output
- 50% markup and 33.33% margin
The same $30 profit produces different percentages because the denominator changes.
$100 cost sold for $125
- Input
- $100 cost, $125 selling price
- Formula
- Markup = $25 / $100; Margin = $25 / $125
- Output
- 25% markup and 20% margin
A 25% markup does not mean a 25% margin.
$40 cost sold for $80
- Input
- $40 cost, $80 selling price
- Formula
- Markup = $40 / $40; Margin = $40 / $80
- Output
- 100% markup and 50% margin
Doubling cost creates 100% markup, but the margin is 50%.
Frequently Asked Questions
Is markup the same as margin?
No. Markup divides profit by cost, while margin divides profit by selling price or revenue.
Why is markup higher than margin?
Markup uses cost as the denominator. Since cost is usually lower than selling price, the markup percentage is usually higher.
Which one should I use for pricing?
Use markup when pricing from cost. Use margin when evaluating profitability or setting revenue-based targets.
Can markup and margin ever be the same?
They are the same only when profit is zero. Otherwise, they use different denominators and produce different percentages.
What happens if selling price is below cost?
Both markup and margin become negative, which indicates a loss under the costs entered.
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