Profit Margin Calculator
Calculate profit, gross margin and markup from cost and selling price.
Profit margin formula
Profit = Selling Price − Cost
Margin % = Profit ÷ Selling Price × 100
Margin vs markup
Margin is based on selling price, while markup is based on cost.
Example
If a product costs $60 and sells for $100, profit is $40, margin is 40%, and markup is about 66.67%.
How businesses use margin
Gross margin is often used to compare how much of each sales dollar remains after the direct cost of the item. It is different from net profit margin, which can include payroll, rent, payment fees, advertising, tax and other operating costs. For product pricing, keeping gross margin and markup separate prevents a common pricing mistake.
Using target margin for pricing
If you know the product cost and want a target margin, the selling price must be high enough for profit to represent that share of the final selling price. A 50% margin does not mean adding 50% to cost; adding 50% to cost is a 50% markup and produces a lower margin.
Frequently Asked Questions
Is margin the same as markup?
No. Margin divides profit by selling price; markup divides profit by cost.
Is gross margin the same as net profit margin?
No. Gross margin usually considers revenue minus direct cost of goods, while net profit margin also reflects operating expenses and other costs.
Can profit margin be negative?
Yes. If cost is greater than selling price, profit is negative and the calculated margin will also be negative.