Margin and markup are different percentages of different bases — confusing them mis-prices products. Margin is profit over price; markup is profit over cost. Here’s both, and how to convert.
The example
$60 price, $40 cost.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Margin | 33.3% |
| 3 | Markup | 50.0% |
The formula
The formula:
How it works
How it works:
- Margin = (price − cost) ÷ price — profit as a share of the selling price.
- Markup = (price − cost) ÷ cost — profit as a share of cost.
- Convert markup→margin:
markup / (1 + markup); margin→markup:margin / (1 - margin). - Price from cost and a target margin:
cost / (1 - margin); from a markup:cost * (1 + markup).
The classic pricing error: applying a 30% markup when you meant a 30% margin leaves money on the table. A 30% markup on $70 cost gives a $91 price — but that’s only a 23% margin. To actually earn a 30% margin, price at cost / (1 - 0.30) = $100. Always be clear which base you mean.
Try it: interactive demo
Price and cost.
Variations
Markup
Over cost:
Price from margin
Target margin:
Markup to margin
Convert:
Pitfalls & errors
Different bases. Margin uses price, markup uses cost — the same dollar profit gives two different percentages.
Margin < markup. A 50% markup is only a 33% margin — never interchange them.
Don’t divide by zero. A zero price or cost breaks the respective formula.
Practice workbook
Frequently asked questions
What's the difference between margin and markup in Excel?
How do I price for a target margin?
How do I convert markup to margin?
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