Markup and margin use the same dollars of profit but different denominators — and confusing them is a classic pricing mistake. Here is both, plus the conversion.
Margin is =(Price-Cost)/Price. Same profit, different base.
The example
An item costs $60 and sells for $100. The profit is $40 either way — but the percentages differ.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Cost | $60 |
| 3 | Price | $100 |
| 4 | Markup | 66.7% |
| 5 | Margin | 40.0% |
The formula
Both start from the same profit (price minus cost); only the denominator changes:
How it works
The crucial difference:
- Profit is the same both ways: $100 − $60 = $40.
- Markup divides profit by cost: $40 ÷ $60 = 66.7%. It answers 'how much did I add on top of cost?'
- Margin divides profit by price: $40 ÷ $100 = 40%. It answers 'what share of the sale is profit?'
- Margin is always the smaller number because price is larger than cost.
To convert: margin = markup / (1 + markup) and markup = margin / (1 − margin).
Try it: interactive demo
Enter cost and price; see both markup and margin side by side.
Variations
Price from cost and target margin
Back into a price that hits a margin goal.
Price from cost and target markup
Or set price by markup instead.
Pitfalls & errors
Pricing for a 40% markup when you meant a 40% margin leaves money on the table — a 40% margin needs a 66.7% markup.
Decide which one your business talks in and label the column clearly so nobody mixes them up.
Practice workbook
Frequently asked questions
Which is bigger, markup or margin?
How do I convert markup to margin?
Which should I price with?
Stop fighting formulas. Learn them in a day.
This recipe is one of hundreds of real-world formulas we teach. Our Excel Formulas & Functions class covers lookups, logic, text, and dynamic arrays hands-on — live in Dallas–Fort Worth, Houston, Austin, Oklahoma City, Denver, or online.
See the Formulas & Functions Class