How to Calculate Margin Vs. Markup

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Margin and markup are sometimes confused. They both represent the difference between what your outlay is and what you get for it. However, they are calculated working from different points. For example, you pay $10.50 for something, and sell it for $2, your margin is your percent of the final price that is gross profit (prior to other costs). In this case, it's $10.50, so 50 percent. However, the markup is the relationship of the your cost to price. Here, the $10.50 is doubled. Hence, the markup is 100 percent.

Calculate markup amount, deducting your cost from the sale price. For example, an item costing you $30 that you sell for $48 represents an $18 markup.

Calculate the percentage of markup, dividing the markup amount by your cost. In this example, $18 divided by $48 yields a 44.4 percent markup on your cost.

 

Calculate the margin percentage, dividing the markup amount by the sale price. Here, $18 divided by $48 yields a 37.5 percent margin for your item.

 

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Bill Brown has been a freelance writer for more than 14 years. Focusing on trade journals covering construction and home topics, his work appears in online and print publications. Brown holds a Master of Arts in liberal arts from St. John's University and is currently based in Houston.

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