Margin and markup calculator
Gross margin is profit divided by the selling price. Markup is profit divided by cost. If an item costs $60 and sells for $100, profit is $40, gross margin is 40% and markup is 66.67%. Enter any two values below to find the third, or the selling price needed for a target margin.
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Estimate only. Gross margin ignores overhead such as rent, payroll, shipping and marketing, so it is not the same as net profit.
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Gross margin vs. markup
Both measure the same profit against a different base.
\[ \text{gross profit} = \text{selling price} - \text{cost} \]
\[ \text{gross margin}\% = \dfrac{\text{profit}}{\text{selling price}} \times 100 \]
\[ \text{markup}\% = \dfrac{\text{profit}}{\text{cost}} \times 100 \]
Markup can exceed 100%; gross margin never can. Mixing the two up is the most common pricing mistake: a 50% markup is only a 33.3% margin.
Converting markup to margin
\[ \text{margin}\% = \dfrac{\text{markup}}{100 + \text{markup}} \times 100 \]
| Markup | Gross margin | Multiplier |
|---|---|---|
| 25% | 20% | 1.25 |
| 50% | 33.33% | 1.50 |
| 100% | 50% | 2.00 |
| 150% | 60% | 2.50 |
To price from a target: selling price = cost × (1 + markup), or cost ÷ (1 − gross margin).
3 real-life examples
Cost $60, price $100
Gross profit = 100 − 60 = $40. Markup = 40 ÷ 60 = 66.67%. Gross margin = 40 ÷ 100 = 40%.
Pricing a $50 product for a 40% margin
Selling price = 50 ÷ (1 − 0.40) = $83.33. Profit is $33.33, which is a 66.67% markup.
How much can you pay for a $200 item?
You want a 35% gross margin on a $200 selling price. Maximum cost = 200 × (1 − 0.35) = $130.