Formula used
- Profit = Revenue (excluding tax) − Unit cost
- Margin % = (Profit ÷ Revenue ex tax) × 100
- Markup % = (Profit ÷ Unit cost) × 100
- Price from margin = Unit cost ÷ (1 − Margin)
- Price from markup = Unit cost × (1 + Markup)
- Break-even price (ex tax) = Unit cost ÷ (1 − Discount)
- Unit cost = Base cost + (Shipping ÷ Quantity) + (Overhead ÷ Quantity)
How to use this calculator
- Select a mode based on what values you already know.
- Enter your base unit cost and optional allocations.
- Add a selling price, or set a desired margin/markup.
- Include discount and tax settings for realistic results.
- Press Calculate to see KPIs above the form.
- Download CSV or PDF to share with your team.
Example data table
| Scenario | Unit Cost | Selling Price | Discount | Tax Rate | Margin | Markup |
|---|---|---|---|---|---|---|
| Retail item | $20.00 | $35.00 | 0% | 0% | 42.86% | 75.00% |
| Promotion sale | $20.00 | $35.00 | 10% | 0% | 36.51% | 57.50% |
| Service package | $50.00 | $85.00 | 5% | 15% (included) | 33.42% | 39.50% |
Article
Margin and markup measure different efficiency
Margin is profit divided by selling price, so it describes how much of every sales dollar stays as gross profit. Markup is profit divided by cost, so it describes how much you add on top of your cost base. For a $20 cost and $35 price, profit is $15; margin is 42.86% while markup is 75%.
Converting targets prevents pricing mistakes
Teams often quote “50% markup” when they actually want “50% margin.” The difference is material. A 50% markup means price equals cost × 1.5, which produces a 33.33% margin. A 50% margin requires price equals cost ÷ 0.5, which is cost × 2.0 and implies a 100% markup.
Discounts compress margin faster than expected
Discounts apply to revenue, not to cost. If you discount a $35 price by 10%, revenue becomes $31.50 while cost stays $20, reducing profit to $11.50. Margin drops to 36.51% and markup drops to 57.50%. The calculator models this directly so promotion pricing stays profitable.
Taxes should not inflate profit calculations
Profit should be evaluated on revenue excluding tax because tax is collected for authorities, not retained as earnings. When tax is included in the entered price, the tool backs it out before computing profit and margin. This is especially important in VAT environments where a 15% tax can distort perceived margin.
Allocations turn “true cost” into usable pricing
Shipping, handling, platform fees, and overhead are frequently real costs that get ignored. By allocating totals across a selected quantity, the calculator builds a unit cost that reflects the full burden. This improves comparability across products and helps avoid underpricing when logistics and operating costs fluctuate.
Sensitivity charts support negotiation and guardrails
The Plotly chart visualizes what happens to margin, markup, and profit as price moves ±30% around your baseline. It highlights break-even points and shows how small concessions impact gross profit. Use it to set minimum acceptable prices, create discount policies, and align sales and finance on targets.
FAQs
What is the simplest way to remember margin vs markup?
Margin uses selling price in the denominator, while markup uses cost. Margin answers “profit per sales dollar,” and markup answers “profit per cost dollar.” Both use the same profit value.
Why does a 50% markup not equal a 50% margin?
Because the denominators differ. With 50% markup, price is 1.5× cost, so profit is one-third of price, producing a 33.33% margin. A 50% margin requires price to be 2× cost.
Should I include tax in my selling price input?
If your listed prices already include VAT/sales tax, choose “Yes, tax is included.” The calculator removes tax before computing profit. If you add tax at checkout, choose “No, add tax on top.”
How does discounting affect margin the most?
Discounts reduce revenue but do not reduce cost. That means profit falls by the full discount amount, and margin drops quickly. Use the break-even price and sensitivity chart to set discount limits.
What is a good break-even check before approving a quote?
Compare your quote’s price (after discounts) to the break-even price. If it is lower, the deal loses money at the unit level. Adjust price, discount, or allocations before approving.
Can this calculator help set a price from a profit target?
Yes. Enter your unit cost plus allocations, then use “Cost + Desired margin” or “Cost + Desired markup.” You can also enter targets to see suggested prices alongside the computed results.