Convert between cost, revenue, gross margin and markup.
Margin and markup measure the same gross profit from different angles. Margin divides profit by revenue — it's the portion of each sales dollar kept as profit, and it's what income statements report. Markup divides profit by cost — it tells you how much you've added on top of what you paid. Because the denominators differ, a given dollar of profit produces a higher markup percentage than margin percentage. For example, buying at $60 and selling at $100 gives a 40% margin but a 66.7% markup. Confusing the two when setting prices leads to under-pricing.
Gross Margin
Margin % = (Revenue − Cost) / Revenue × 100
Markup
Markup % = (Revenue − Cost) / Cost × 100
Revenue from cost and margin
Revenue = Cost / (1 − Margin)
Markup uses cost as the denominator; margin uses revenue. Since revenue is always greater than cost (assuming a profit), dividing the same gross profit by a smaller number (cost) gives a bigger percentage. A 50% markup on a $100 cost gives $150 revenue, but that's a 33.3% margin — not 50%.
It depends on how your industry works. Retailers typically target a margin (because they think in terms of revenue). Manufacturers and contractors often use markup (because they start from a known cost). Whatever you choose, be consistent — mixing the two in calculations is a common and costly mistake.
No. Gross margin is always between −∞ and 100%. A margin at or above 100% would imply zero or negative cost, which isn't meaningful for most products. Markup, however, can exceed 100% — luxury goods, software, and high-end services often carry markup of several hundred percent.
No — this calculates gross margin, which deducts only the direct cost of goods sold (COGS). Operating expenses like rent, salaries, and marketing are subtracted further down the income statement to reach operating margin and net profit margin.