Markup vs margin
Markup is profit divided by cost. Margin is profit divided by selling price. A 40% markup does not mean a 40% margin; on a 60 cost, a 40% markup produces an 84 price and a 28.57% margin.
Example
With a unit cost of $60 and 40% markup, selling price is $84 and unit profit is $24. At 100 units, total gross profit is $2,400 before other expenses.
Common mistakes
Do not use margin and markup interchangeably in pricing sheets. They use different denominators and produce different percentages.
How to use the output
Check both the selling price and the gross margin before using the result in a quote, menu or product listing. A markup that looks large on cost can still produce a lower margin than expected once it is expressed as a share of selling price.
References
- Corporate Finance Institute: Markup - markup and margin concept reference, accessed 2026-05-17.
Last reviewed: 2026-05-17