1. What is Gross Margin and Markup?

Gross Margin and Markup are key financial metrics used to analyze profitability. Gross Margin shows the percentage of revenue that exceeds the cost of goods sold, while Markup shows how much the selling price exceeds the cost.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• Gross Profit = Revenue - Cost
• Revenue = Selling price × Quantity sold
• Cost = Cost to produce or acquire the product

3. Importance of These Metrics

Details: Gross Margin helps assess a company's financial health by showing what percentage of revenue is profit. Markup is crucial for pricing strategy, showing how much to add to costs to reach desired profitability.

4. Using the Calculator

Tips: Enter revenue and cost in USD. Both values must be positive numbers, and revenue should be greater than or equal to cost for meaningful results.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between margin and markup?
A: Margin is profit as a percentage of revenue, while markup is profit as a percentage of cost. A 50% margin equals a 100% markup.

Q2: What are typical margin/markup values?
A: These vary by industry. Retail might have 20-50% margins, while software could have 70-90%. Markups typically range from 20% to 100%+.

Q3: Can margin exceed 100%?
A: No, since gross profit cannot exceed revenue. But markup can exceed 100% if selling price is more than double the cost.

Q4: How do discounts affect margin?
A: Discounts reduce both revenue and gross profit, typically lowering the gross margin percentage.

Q5: Should I use margin or markup for pricing?
A: Margin is better for assessing profitability, while markup is more useful for setting prices based on costs.