Margin & Markup Calculator
A 40% margin is very different from a 40% markup.
What this calculator does
Gross Margin represents profit as a percentage of your selling price, whereas Markup represents profit relative to your unit cost. Confusing the two causes catastrophic pricing errors. If an item costs 100, adding a 40% markup gives a price of 140—but your actual Gross Margin is only 28.6%. To achieve a 40% Gross Margin, you must price it at 167. This tool supports three crucial functions: calculating price from cost+margin, deriving cost from price+margin, and generating both percentages directly from wholesale/retail figures.
Formula & how it works
Margin = (Price − Cost) ÷ Price. Markup = (Price − Cost) ÷ Cost. Target Selling Price = Cost ÷ (1 − Target Margin).
Worked examples
- Cost: 200, Markup 50%: The selling price is 300, rendering a true margin of only 33.3%.
- Target Margin 60%, Cost 80: You must price the product at 200.
Frequently asked questions
- Why do restaurants usually talk in terms of markups?
- The hospitality industry often uses a standard rule of 'times three' pricing (food costs equal approx 33%), which is intuitive to operate but technically represents a 67% Gross Margin.
- What's the difference between gross margin and net margin?
- Gross Margin only subtracts the direct cost of goods sold. Net Profit Margin subtracts everything, including operations, marketing, taxes, and debt, offering the true representation of bottom-line health.