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Finance & Business · pattern A, Numeric fields

Markup, and how it differs from margin.

Enter cost and markup percentage for the selling price, with the margin that same price represents — two different numbers that are constantly confused.

Inputs

The formula used

price = cost × (1 + markup)

Markup is calculated on cost; margin is calculated on the selling price. A 50% markup is a 33.3% margin.

Selling price

60.00

Profit per unit
20.00
Margin this represents
33.333 %
Markup needed for a 50% margin
100 %
Price for a 40% margin
66.67
Cost as a share of price
66.67 %
Break-even units on £1,000 fixed cost
50

Markup and margin describe the same price differently.

A 50% markup on a £40 cost gives a £60 price, £20 profit — which is a 33.3% margin, because margin divides profit by the selling price rather than the cost. Businesses that set prices by markup and report performance by margin need both numbers, and confusing them systematically overstates profitability in planning.

Questions about markup

Which do retailers use?
Markup for setting prices, because they start from cost. Margin for reporting, because it is comparable across products and industries.
What markup gives a 50% margin?
100%. Doubling the cost gives a price of which cost is exactly half.
Can markup exceed 100%?
Easily. Restaurant drinks and fashion routinely run several hundred per cent, which corresponds to margins in the seventies or eighties.

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