How the markup vs margin calculator works
Markup and margin use the same profit amount but different denominators. Markup expresses profit as a percentage of cost. Gross margin expresses it as a percentage of selling price. Confusing them can cause a sales quote to deliver less profit than intended even when the arithmetic looks plausible.
A cost of 100 with a 50% markup produces a price of 150 and a margin of only one third. A 50% margin on that same cost requires a price of 200. This calculator begins with actual cost and quoted price, then displays both percentages beside profit per sale.
Markup = (price − cost) ÷ cost × 100; margin = (price − cost) ÷ price × 100
Worked example
Start with the example inputs below. The calculator opens with these values; reset the example at any time to compare your own scenario. Monetary examples use GBP, and all amounts must use the same currency.
| Measure | Value |
|---|---|
| Cost per sale | 600 |
| Selling price | 1000 |
| Measure | Value |
|---|---|
| Markup on cost | 66.67% |
| Gross margin on revenue | 40% |
| Profit per sale | £400.00 |
Markup divides profit by cost; margin divides it by revenue. A price below cost produces a negative result.
How to use the result
Use markup when checking how far a quote sits above cost, and margin when checking what share of revenue remains after direct delivery costs. State which measure is meant in pricing approvals and commission discussions. A percentage without a denominator can lead two teams to think they agreed when they did not.
Keep the unit and cost scope consistent. For a project quote, match the entire quoted project revenue with its direct delivery cost. For a subscription, compare costs and revenue over the same billing period.
Assumptions and common mistakes
Gross profit is not net profit: it does not deduct all fixed operating costs, finance charges or tax. A price below cost produces negative markup and margin. Zero cost makes markup undefined and zero price makes margin undefined, so this tool requires both inputs to be positive.