Profit Margin Calculator
How it works
Profit is simply selling price minus cost. From there, the same dollar figure is expressed two ways: gross margin divides it by the selling price (profit / sellingPrice), answering "what share of what the customer paid is profit?" Markup divides it by the cost instead (profit / cost), answering "how much was added on top of what it cost to make?" Markup is always the larger number for a profitable sale, because cost is always smaller than selling price — the two only meet when profit and cost are equal.
Frequently asked questions
What is the difference between margin and markup?
They divide the same profit by two different bases. Margin is profit over the selling price; markup is profit over the cost. A 50% markup on a $10 cost prices the item at $15 — but that $5 profit is only a third of the $15 selling price, a 33% margin, not 50%. The two only converge as markup approaches infinity, and are equal only when profit and cost are the same size (a 100% markup, which is exactly a 50% margin).
Why must both cost and selling price be positive?
A cost or price of zero or less is not a real transaction, and division by either one is what produces the two percentages here — a zero denominator has no defined margin or markup, and a negative one flips the sign in a way that no longer means "profit as a share of X."
How do I price a product for a target margin?
Rearranging the margin formula gives sellingPrice = cost / (1 − targetMargin), where targetMargin is written as a fraction (0.25 for 25%). For a $10 cost and a 25% target margin, that is 10 / 0.75 = $13.33. Plug that price back into this calculator alongside the same cost to confirm the margin lands where you meant it to.