Calculate both measures from the same amounts
markup = (price - cost) / cost
- price
- Selling price on the selected basis (currency per unit) — user input
- cost
- Cost at the selected layer (currency per unit) — user input
margin = (price - cost) / price
- price
- Selling price on the selected basis (currency per unit) — user input
- cost
- Cost at the selected layer (currency per unit) — user input
markup = margin / (1 - margin); margin = markup / (1 + markup)
- markup
- Gross profit divided by cost (ratio) — calculated
- margin
- Gross profit divided by selling price (ratio) — calculated
Worked example: one profit amount, two percentages
| Measure | Calculation | Result |
|---|---|---|
| Gross profit | 100 - 60 | 40 currency units |
| Markup | 40 ÷ 60 | 66.67% |
| Margin | 40 ÷ 100 | 40% |
| Price from 40% markup | 60 × 1.40 | 84 currency units |
| Margin at that price | (84 - 60) ÷ 84 | 28.57% |
Use a two-way checkpoint
- Price and cost use the same unit and indirect-tax basis. (not complete)
- Gross profit equals price minus the selected cost. (not complete)
- Margin recalculates against price. (not complete)
- Markup recalculates against cost. (not complete)
- The result is passed to volume and break-even checks rather than treated as proof of viability. (not complete)
Methodology used
- Target Margin & Pricing methodology — Margin101
Related tools
- Target Margin & Pricing Planner
Set a price for a target gross margin