Margin Calculator
Convert between cost, revenue, gross margin and markup. Margin and markup are NOT the same.
Inputs
Select which value to calculate. All others become inputs.
Gross Profit
$40.00
Gross Margin
40.00%
Profit as a share of revenue. Use this for income statement analysis.
Markup
66.67%
Profit as a share of cost. Use this for pricing from a cost base.
Cost
$60.00
Revenue
$100.00
Step by step
Gross Profit
$100.00 − $60.00
= $40.00
Gross Margin (% of revenue)
$40.00 ÷ $100.00
= 40.00%
Margin = gross profit / revenue. A 40% margin means 40 cents of every dollar sold is profit.
Markup (% of cost)
$40.00 ÷ $60.00
= 66.67%
Markup = gross profit / cost. The same 40% margin corresponds to a 66.7% markup.
How it works
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.
Formulas
Gross Margin
Margin % = (Revenue − Cost) / Revenue × 100
- R
- Revenue (selling price)
- C
- Cost
Markup
Markup % = (Revenue − Cost) / Cost × 100
- R
- Revenue (selling price)
- C
- Cost
Revenue from cost and margin
Revenue = Cost / (1 − Margin)
- m
- Margin as a decimal (e.g. 0.40 for 40%)
Frequently Asked Questions
Why is my markup always higher than my 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%.
Which should I use to set prices — margin or markup?
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.
Can gross margin exceed 100%?
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.
Does this include operating expenses?
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.