Gross Margin vs Markup Calculator
Understand the difference between gross margin and markup — calculate both from cost and selling price.
How to use this tool
- Enter cost of goods sold and selling price in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your gross margin and the full breakdown beneath it.
Margin and markup are both based on profit, but use different denominators. Margin divides by price; markup divides by cost. Confusing them can lead to pricing errors.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Gross Profit = Selling Price − Cost of Goods Sold
Gross Margin % = (Gross Profit ÷ Selling Price) × 100
Markup % = (Gross Profit ÷ Cost) × 100
How it works
This calculator computes gross margin and markup from the same gross profit figure, highlighting that the two metrics use different denominators: margin divides by revenue (selling price), while markup divides by cost. Confusing them is a common pricing error, since a 50% markup produces only a 33% margin.
Results are gross figures and do not account for operating expenses, taxes, or other overhead beyond the direct cost of goods sold. Use margin when benchmarking profitability against revenue; use markup when setting prices from a known cost base.
Worked example
- Cost = $60; Selling price = $100.
- Gross Profit = $100 − $60 = $40.
- Gross Margin = ($40 ÷ $100) × 100 = 40%.
- Markup = ($40 ÷ $60) × 100 ≈ 66.67%.
Gross margin: 40%; Markup: 66.67%; Gross profit: $40.
Common mistakes to avoid
- Using margin% and markup% interchangeably when quoting prices -- a 50% markup yields only a 33% margin, not 50%.
- Calculating margin on cost rather than selling price, which is the markup formula; true gross margin always divides gross profit by the selling price.
- Omitting shipping and payment processing fees from COGS, causing actual margin to be lower than calculated.
Key terms
- Gross margin
- Gross profit expressed as a percentage of the selling price. Used to compare profitability across products or industries on a revenue basis.
- Markup
- Gross profit expressed as a percentage of the cost. Used when pricing goods from a known cost to achieve a target profit.
- Gross profit
- The dollar difference between selling price and the cost of goods sold, before operating expenses.
- Cost of goods sold (COGS)
- The direct costs attributable to producing or acquiring the goods that were sold, excluding overhead and operating expenses.
- Pricing spread
- The gap between cost and selling price; it funds gross profit, but must also cover overheads to generate net income.
Frequently asked questions
- What is the difference between margin and markup?
- Gross margin = profit / selling price. Markup = profit / cost. For the same product, markup is always higher than margin. For example, a 50% markup on a $60 cost gives a $90 price and a 33.3% margin.
- Which should I use for pricing?
- Retailers typically think in terms of margin (% of revenue). Manufacturers often use markup (% over cost). Know which your industry uses to avoid miscommunication with partners and buyers.