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Margin (gross profit margin) and markup are two different ways of expressing profit in business. Margin shows profit as a percentage of the selling price, while markup shows profit as a percentage of the cost price.
The calculator uses these mathematical relationships:
Where both values are expressed as decimals in the formulas (e.g., 25% = 0.25).
Business Pricing: Understanding the difference helps in setting appropriate prices and understanding true profitability.
Financial Analysis: Different industries may use one or the other, so conversions are needed for comparisons.
Steps: Enter either your margin or markup percentage, select the conversion direction, and click calculate.
Q1: Why are margin and markup different?
A: They represent profit relative to different bases - margin to selling price, markup to cost.
Q2: Which is better to use?
A: Margin is generally more useful for understanding profitability, while markup is often used in pricing decisions.
Q3: What's a typical markup percentage?
A: This varies by industry - retail might use 50-100% markup, while services might use much higher.
Q4: Can margin ever be 100%?
A: No, margin approaches but never reaches 100% as markup increases toward infinity.
Q5: How do I choose between margin and markup?
A: Use margin when analyzing profitability, markup when setting prices based on costs.