Business

Margin & Markup Calculator

Margin is profit against the price; markup is the same profit against the cost. Enter what an item costs and what it sells for to get both, then set a target to see the two different prices it implies.

Margin on this price

33.33%

$20 of profit on a $60 price. The same profit against the $40 cost is a 50% markup — the larger figure, always, whenever there is any profit at all.

What this price produces

Margin (share of price) $20.00 as a share of the $60 price. This is the figure an income statement and every published retail benchmark use.: 33.33%
Markup (share of cost) $20.00 as a share of the $40 cost. This is the figure you add to cost when setting the price.: 50%
Profit per unit $60 less $40. Gross — before rent, wages, payment processing, shipping, returns and tax.: $20.00

The same target, priced twice

As a margin A 50% margin: $40 / (1 − 0.50), leaving $40 of profit — and a 100% markup.: $80.00
As a markup A 50% markup: $40 × 1.50, leaving $20 of profit — which is a margin of only 33.33%.: $60.00
Apart The distance between the two prices one target names, and $20 a unit of profit. Pricing this target as a markup when a margin was meant gives away 50% of the intended profit — the share lost is the target itself.: $20.00

$60 against a $40 cost is $20 of profit: a 33.33% margin against the price, and a 50% markup against the cost. Both describe that same $20; only the denominator changes. The 50% target is where that distinction costs money. As a margin it prices at $80; as a markup, $60 — $20 apart on one stated number, and $20 a unit of profit. Getting it the wrong way round gives away 50% of the profit you intended, and that share is always the target itself. Markup is the larger of the two whenever there is profit, which is the check that needs no arithmetic: a quoted percentage that turns out to be the smaller figure on your own cost and price was a margin. It also has no ceiling, while margin cannot reach 100% at all — profit cannot be the whole of the price it is a share of. Both figures are gross and per unit: what is left after the cost of the goods, before rent, wages, payment processing, shipping, returns and tax, on one item with no volume attached. Published retail benchmarks are margins rather than markups — the Census Bureau measured 31.6% of sales for US retail as a whole in 2022, which is a 46.2% markup — so a benchmark added to cost prices well under the figure it came from.

Every published benchmark is a margin

US retail gross margin as a percentage of sales, by kind of business, as the Census Bureau measured it for 2022. The markup column is not published anywhere — it is computed here, by the same engine the calculator above uses, as the markup that produces each margin on a $100 cost. Read across a row and the trap is plain: matching the 50.8% clothing figure takes a 103.3% markup and a price of $203.25. Adding 50.8% to cost instead gives $150.80, which is a margin of 33.7%.

Gross margin as a percentage of sales for US retail firms by kind of business in 2022, the equivalent markup, and the price each implies on a cost of $100
Kind of business	Margin	Same as markup	Price on $100
Automobile dealers	21.8%	27.9%	$127.88
Warehouse clubs and supercenters	23.0%	29.9%	$129.87
Grocery stores	28.0%	38.9%	$138.89
Pharmacies and drug stores	28.1%	39.1%	$139.08
Electronics and appliance stores	29.5%	41.8%	$141.84
Beer, wine and liquor stores	31.0%	44.9%	$144.93
Retail trade, total	31.6%	46.2%	$146.20
Health and personal care stores	33.1%	49.5%	$149.48
Department stores	34.7%	53.1%	$153.14
Building materials and supplies dealers	35.9%	56.0%	$156.01
Electronic shopping and mail-order houses	39.7%	65.8%	$165.84
Sporting goods, hobby, instrument and book stores	45.4%	83.2%	$183.15
Clothing stores	50.8%	103.3%	$203.25
Shoe stores	51.0%	104.1%	$204.08

Industries the Census Bureau suppressed as not meeting its publication standards are absent rather than estimated. These are measurements of what firms reported, at an industry level, and not a target for any one business.

What this calculates

This answers two questions that sound like one. The first is what margin and markup a price you already charge actually produce: enter the cost and the price and both come back, along with the profit in dollars, so the two percentages sit side by side on the same item rather than being quoted separately by different people. The second is the pricing question in reverse. Give it a target percentage and it prices that target twice — once as a margin, profit as a share of the selling price, and once as a markup, profit as a share of the cost — and shows the gap between the two prices in dollars. On a $40 item at a 50% target those prices are $80 and $60, which is not a subtle difference and is the reason this page reports both instead of choosing. Nothing here models overheads, tax, shipping or returns: it is unit arithmetic on one item, and the figures it produces are gross rather than what the business keeps.

How it works

profit = price - cost

margin = profit / PRICE    (a share of what you charge)
markup = profit / COST     (a share of what you paid)

Same profit. Different denominator. Markup is always
the larger of the two whenever there is any profit at
all, because the cost is smaller than the price.

Pricing in reverse, from a target t:

  price at t% margin = cost / (1 - t/100)
  price at t% markup = cost x (1 + t/100)

Which is where the asymmetry shows. Dividing by
(1 - t/100) runs away as t approaches 100 and is
undefined at it; multiplying by (1 + t/100) does not
care how large t is.

  a 50% margin is a 100% markup
  a 75% margin is a 300% markup
  a 100% margin is nothing at all

Converting between them, with no prices involved:

  markup = margin / (1 - margin)
  margin = markup / (1 + markup)

Both as fractions rather than percentages.

One rounding note, honestly stated. The engine works
to cents, so pricing a target margin on a small cost
can land a fraction of a point off the number asked
for: $1.00 at 35% wants $1.5385 and the price is
$1.54, a 35.06% margin. Measured across 57,300
cost-and-target pairs the printed margin differs from
the target at one decimal in 230 of them, 0.4%, and
every case is a cost under about $8. A cent is a real
constraint on a price and the page shows the price it
would actually charge.

Both numbers describe the same dollar of profit. Only the denominator changes, and that is the whole of it.

Take a $40 item sold for $60. The profit is $20. As a share of the $60 the customer pays, that is a 33.33% margin. As a share of the $40 it cost, it is a 50% markup. Neither figure is wrong and neither is the real one; they answer different questions. Margin asks what fraction of your revenue you keep, which is the question an income statement asks. Markup asks how much you add to cost, which is the question you answer when setting a price on the shop floor.

The confusion becomes expensive going the other way. Suppose you decide you want 50% on that $40 item. Priced as a margin, the price is $80 and the profit is $40. Priced as a markup, the price is $60 and the profit is $20. Same $40 cost, same stated target, half the profit. And the shape of the error is stable rather than incidental: wanting a 20% margin and pricing at 20% markup loses 20% of the intended profit, 30% loses 30%, 40% loses 40%, 50% loses 50%. The proportion you lose is the target itself. Every one of those figures came out of the engine before it was written here.

Markup is always the larger number when there is any profit, because you are dividing by the smaller of the two figures. That gives a quick sanity check with no arithmetic in it: if someone quotes you a percentage and it is the smaller of the pair on your own numbers, they are talking about margin. The conversion needs no prices at all — markup = margin / (1 - margin) — so 20% margin is 25% markup, 25% is 33.3%, 33.3% is 50%, 40% is 66.7%, and 50% is 100%. Past that it accelerates: 60% margin is a 150% markup and 75% is a 300% markup.

The ceiling is the single cleanest distinction between them. A margin of 100% would mean the profit is the entire price, which requires the cost to be nothing; 110% would mean the profit exceeds the price, which is not a thing that can happen. So margin lives strictly below 100% and the engine refuses a target at or above it by name. Markup has no ceiling whatsoever — a 400% markup is an ordinary thing to say about jewellery — and that is why the target field on this page stops at 95%: it prices one number both ways, so it is bounded by the stricter definition. If you genuinely want a 150% markup, that is a real target and this page cannot pair it with anything, because there is no margin that corresponds.

Which brings up the trap in every benchmark you are likely to be shown. Published retail figures are margins — shares of sales — essentially without exception. The Census Bureau's Annual Retail Trade Survey reports gross margin as a percentage of sales by kind of business, and for 2022 that was 31.6% for retail as a whole, 28.0% for grocery stores, 34.7% for department stores, 39.7% for electronic shopping and mail-order houses, 45.4% for sporting goods, hobby, musical instrument and book stores, and 50.8% for clothing stores. Read as markups, computed here, those are 46.2%, 38.9%, 53.1%, 65.8%, 83.2% and 103.3%. A clothing retailer who hears "about 51%" and adds 51% to cost is pricing at a 33.8% margin — seventeen points under the figure they thought they were matching, and about a third of their intended gross profit gone.

It is worth knowing that even the federal tax guide's vocabulary is slippery here. IRS Publication 334, in "Testing Gross Profit Accuracy", tells a retail or wholesale business to "divide gross profit by net receipts" — that is a margin — and then to "compare this percentage to your markup policy". Its example has net receipts of $300,000, cost of goods sold of $200,000 and gross profit of $100,000, describes a business that marks up "so that you will realize a gross profit of 33 1/3 % on its sales", and concludes: "The resulting 33 1/3 % confirms your markup percentage of 33 1/3 %." On those same figures, profit as a share of cost is 50%. The publication is explicit about what it divides by, so a reader who follows the instruction gets the right answer — but a reader who takes the phrase "markup percentage of 33 1/3 %" to the shop floor and adds a third to cost has priced at a 25% margin instead of a third. The ambiguity is in the words, not in the arithmetic, and that is exactly the failure this page is built to prevent.

Two things these figures are not. They are gross, so they are what is left after the cost of the goods and before rent, wages, payment processing, shipping, returns and tax — a 40% margin is not 40% of profit in any sense a bank would recognise. And they are per unit, which means nothing here knows your volume: the question of how many units cover your fixed costs is a different calculation with a different answer, and it is the one the break-even calculator does.

A worked example

An item that costs $40 and sells for $60, and a decision to aim for 50% on it.

Start with what the current price produces. $60 less $40 is $20 of profit. Against the $60 price that is a 33.33% margin; against the $40 cost it is a 50% markup. The item already runs at "50%" on one definition, which is worth noticing before you go looking for one.

Now the pricing decision, which is where the two definitions stop agreeing. You want 50%.

As a margin, the price is the cost divided by (1 − 0.50): $40 / 0.5 = $80. Profit $40. As a markup, the price is the cost multiplied by 1.50: $40 × 1.5 = $60. Profit $20.

Twenty dollars a unit apart, from one stated target. At a thousand units a month that is $20,000, and nothing on the invoice says which definition produced the price. If the intention was a 50% margin and the price was set at a 50% markup, exactly half the intended profit is gone — and, as the section above records, that proportion is not a coincidence of this example: at a 20% target you lose 20% of the intended profit, at 40% you lose 40%.

The check that costs nothing is to look at which number is bigger. The $60 price gives a 33.33% margin and a 50% markup; the $80 price gives a 50% margin and a 100% markup. Markup is the larger figure in both cases, always is when there is profit, and so a quoted percentage that turns out to be the smaller of your own pair was a margin.

Now push the target and watch the two measures come apart. At 60% the margin price is $100 and the markup price is $64. At 75% the margin price is $160 while the markup price is $70 — a $90 gap on a $40 item. And at 100% the margin price does not exist: the cost divided by zero is not a number, and the engine refuses it with a message saying so rather than returning an infinity. A 100% markup, meanwhile, is simply $80. That asymmetry is the most useful thing to carry away from this page, because it is the one difference you cannot talk yourself out of.

Finally, against the published benchmarks. If this is a clothing item, the Census Bureau measured a 50.8% gross margin as a percentage of sales for clothing stores in 2022. Matching that means the margin price of about $81.30, not $40 plus 50.8%, which would be $60.32 and a margin of 33.7%. Hitting a 50.8% margin from a $40 cost takes a 103.3% markup — you roughly double the cost. That is what a retail benchmark actually asks of a price, and it looks nothing like the number people repeat.

What this assumes

Cost means the cost of the goods for one unit — what you paid for it, or what the materials and direct labour came to. Overheads that do not change with the unit are deliberately excluded, because including them would turn a margin into something closer to a break-even calculation and the two answer different questions.
Price is what the customer pays before sales tax. Tax collected on the buyer’s behalf is not revenue and including it would overstate every figure on the page.
Both percentages are gross. They describe what is left after the cost of the goods and before rent, wages, payment processing, shipping, returns, breakage and tax.
The target field is capped at 95% because it prices one number as both a margin and a markup, and a margin of 100% or more cannot exist. Markup alone has no upper bound.
All arithmetic is per unit and volume-free. Nothing here knows how many you sell, so nothing here can say whether the margin is enough to run the business.
Prices are rounded to whole cents, which is a real constraint rather than a display choice. On a small cost a target margin can therefore print a fraction of a point away from the number requested — measured at 0.4% of 57,300 cost-and-target pairs, all at costs under about $8.
A zero cost is allowed and reports a 100% margin with no markup figure, because profit as a share of nothing has no finite value. A zero price is refused: there is no margin on an item that generates no revenue.
Discounts are not modelled. A price cut is applied to the price, so it comes entirely out of the profit and moves both percentages by more than the size of the discount — which is a calculation this page can show you only by changing the price and looking again.

What it does not model

This cannot tell you what margin your business needs. That depends on your fixed costs, your volume, your sector and your competition, none of which appears here, and a per-unit percentage is silent about all four.
Gross figures overstate what you keep, sometimes by a lot. Payment processing alone is typically a low single-digit percentage of the price, and returns, shipping and shrinkage come out of the same profit; a business with healthy gross margins can still lose money.
One unit at a time, one price at a time. Real pricing spans a range of products cross-subsidising each other, and the blended margin across a catalogue is not the margin of any item in it.
The Census Bureau figures quoted on this page are US retail estimates by kind of business for 2022, published in the Annual Retail Trade Survey — which has since been folded into the Annual Integrated Economic Survey. They describe what firms measured, at an industry level, and are not a target for any individual business. Several detailed industries in that table are suppressed for quality reasons and are not quoted here.
Nothing here is a tax computation. Gross profit in the sense used by IRS Publication 334 is an accounting figure built from net receipts and cost of goods sold across a year, including inventory movements this page has no view of.
Cost is treated as fixed and known. In practice it moves with order quantity, supplier terms, freight and currency, and a margin computed from last quarter’s landed cost is a historical statement rather than a current one.
No allowance is made for the price a market will actually bear. The arithmetic will happily produce a price that no customer pays, and a target margin is a wish rather than a plan until something confirms demand at that price.

Questions

What is the difference between margin and markup, in one sentence?

Margin is profit as a share of the price you charge; markup is the same profit as a share of what the item cost you. On a $40 item sold for $60 the profit is $20 either way, but against the $60 price that is a 33.33% margin and against the $40 cost it is a 50% markup. Neither is more correct — they answer different questions, and the reason both appear on this page is that quoting one while meaning the other is the most expensive small mistake in pricing. A useful consequence: markup is always the larger of the two whenever there is any profit at all, because you are dividing by the smaller number. So if someone quotes a percentage and it turns out to be the smaller figure on your own cost and price, they were talking about margin.

I want a 50% target. What should I charge on a $40 item?

That depends entirely on which 50% you mean, and the two answers are $80 and $60. As a margin, you divide: $40 / (1 − 0.50) = $80, and the profit is $40, half of the price. As a markup, you multiply: $40 × 1.50 = $60, and the profit is $20, half of the cost. Same cost, same stated target, twice the profit in one case. If you intended a margin and priced as a markup you have given away exactly half the profit you meant to make, and the general form of that is worth remembering: the share of intended profit you lose is the target itself, so a 30% mix-up costs 30% and a 40% one costs 40%. Every figure in this answer came from the engine on this page rather than from a worked-out sum in someone’s head.

Why does the target field stop at 95%?

Because it prices one number as both a margin and a markup, and a margin of 100% is impossible while a markup of 100% is routine. Margin is profit divided by price, so 100% would mean the profit is the entire price — which requires the item to have cost nothing — and anything above 100% would mean profit exceeding the revenue it came out of. The formula shows it: price = cost / (1 − margin), and at a margin of 1 that is a division by zero. The engine refuses a margin target at or above 100% by name rather than returning an infinity. Markup has no ceiling at all, because there is no limit to how much you can add to a cost; 300% and 400% markups are ordinary in some trades. If you genuinely want a 150% markup, that is a real target and this page simply cannot pair it, since no margin corresponds to it.

How do I convert between them without knowing the prices?

markup = margin / (1 − margin), and margin = markup / (1 + markup), both with the percentages written as fractions. No cost or price is needed. Worked through the pairs people actually use: a 20% margin is a 25% markup, 25% is 33.3%, 33.3% is 50%, 40% is 66.7%, and 50% is 100%. Past a half it accelerates hard — 60% margin is a 150% markup, 75% is 300%, 90% is 900% — which is the same asymmetry that puts a ceiling on one and not the other. The two conversions are inverses, so you can check yourself by going in both directions and landing back where you started.

Are published retail benchmarks margins or markups?

Margins, effectively always, and taking one for a markup is how a business prices itself into trouble. The Census Bureau’s Annual Retail Trade Survey reports gross margin as a percentage of sales by kind of business, and for 2022 it measured 31.6% for retail as a whole, 28.0% for grocery stores, 33.1% for health and personal care stores, 34.7% for department stores, 39.7% for electronic shopping and mail-order houses, 45.4% for sporting goods, hobby, musical instrument and book stores, and 50.8% for clothing stores. Converted to markups by the engine on this page, those become 46.2%, 38.9%, 49.5%, 53.1%, 65.8%, 83.2% and 103.3%. So matching the clothing figure means roughly doubling your cost, not adding half to it — a clothing retailer who adds 51% to cost is running a 33.8% margin and is about a third short of the gross profit they believed they had priced in. Those are measurements of an industry, not recommendations for your shop.

Does the IRS use margin or markup?

Both words, in the same paragraph, which is a fair indication of how slippery the vocabulary is. IRS Publication 334’s section "Testing Gross Profit Accuracy" tells a retail or wholesale business to "divide gross profit by net receipts" — profit over sales, which is a margin — and then to "compare this percentage to your markup policy". Its example gives net receipts of $300,000, cost of goods sold of $200,000 and gross profit of $100,000, describes a business marking up "so that you will realize a gross profit of 33 1/3 % on its sales", and ends: "The resulting 33 1/3 % confirms your markup percentage of 33 1/3 %." On those same figures, profit over cost is 50%. The publication is explicit about what it divides by, so following the instruction gives the right answer to the question it asks — but carrying the phrase "markup percentage of 33 1/3 %" to the shop floor and adding a third to cost prices at a 25% margin instead. Note also that gross profit there is an annual accounting figure built from receipts and inventory movements, which is not what this page computes: this is unit arithmetic on one item.

What happens to my margin when I discount?

It falls by more than the discount does, because the whole of the reduction comes out of the profit while the cost does not move. Take the $40 item at $80, a 50% margin with $40 of profit. Take 10% off and the price is $72: the profit is $32, so the margin is 44.4% and you have lost a fifth of the profit for a tenth off the price. At 20% off the price is $64, the profit is $24, the margin is 37.5%, and 40% of the profit is gone. The general rule is that a discount costs you profit in proportion to the price, and the thinner the starting margin the more brutal it is — on a 20% margin a 20% discount removes the profit entirely. You can see any particular case on this page by entering the discounted price directly and reading the margin it produces.

Is a good margin the same as a profitable business?

No, and the distinction matters more than the percentage. Both figures here are gross: they are what is left after the cost of the goods and before rent, wages, payment processing, shipping, returns, breakage, software and tax. Grocery stores measured a 28.0% gross margin as a percentage of sales in 2022 and run famously thin net margins, because volume and overheads decide the outcome rather than the per-unit spread. Two things follow. A high gross margin on a product nobody buys is worth nothing, since gross profit per unit multiplied by zero units does not pay rent. And the question of how many units it takes to cover your fixed costs is genuinely separate arithmetic — it needs the contribution margin per unit and your monthly fixed costs — which is what the break-even calculator on this site is for.

Sources

IRS Publication 334 — Testing Gross Profit Accuracy (opens in a new tab)
The claim that the vocabulary itself is ambiguous, quoted from the "Figuring Gross Profit" chapter. The instruction to "divide gross profit by net receipts", the resulting percentage being compared to "your markup policy", and the example whose net receipts are $300,000, cost of goods sold $200,000 and gross profit $100,000, described as a business that marks up "so that you will realize a gross profit of 33 1/3 % on its sales" and concluding "The resulting 33 1/3 % confirms your markup percentage of 33 1/3 %." Profit as a share of cost on those same figures is 50%, computed by this site’s engine rather than taken from the publication. Cited to establish that one figure is called both things in federal guidance, not to assert an error: the passage states its own divisor explicitly. It backs no figure this page calculates.

Checked September 19, 2026
Census Bureau — Annual Retail Trade Survey: gross margin as a percentage of sales (opens in a new tab)
Every retail benchmark quoted on this page, read from the published table "Estimated Annual Gross Margin as a Percentage of Sales of U.S. Retail Firms by Kind of Business: 1993-2022" for the 2022 column: retail total 31.6%, retail excluding motor vehicle and parts dealers 33.4%, GAFO 35.5%, automobile dealers 21.8%, warehouse clubs and supercenters 23.0%, grocery stores 28.0%, pharmacies and drug stores 28.1%, electronics and appliance stores 29.5%, beer, wine and liquor stores 31.0%, health and personal care stores 33.1%, department stores 34.7%, building materials and supplies dealers 35.9%, electronic shopping and mail-order houses 39.7%, sporting goods, hobby, musical instrument and book stores 45.4%, clothing stores 50.8%, furniture and home furnishings stores 51.0% and shoe stores 51.0%. These are margins — shares of sales — which is the point they are quoted for; the markup equivalents shown alongside them were computed by this site’s engine. The table marks several detailed industries "S", an estimate that "does not meet publication standards", and none of those is quoted here. The survey states that estimates are national, cover employer businesses in the 50 states and DC, are published at an industry level under NAICS, and "have not been adjusted for price changes".

Checked September 19, 2026
Census Bureau — About the Annual Retail Trade Survey (opens in a new tab)
What the benchmark table is and what became of it. ARTS "produced national estimates of total annual sales, e-commerce sales, sales taxes, end-of-year inventories, purchases, total operating expenses, and gross margins for retail businesses located in the United States", covering employer businesses in the retail trade sector in the 50 states and the District of Columbia, with nonemployers included "through imputation or administrative data provided by other federal agencies", published "at an industry level" using NAICS and released "approximately 15 months after the reference year had concluded". It also records that ARTS "transitioned to the Annual Integrated Economic Survey (AIES)", whose data collection "began in March 2024" — which is why 2022 is the most recent year this page can quote from the ARTS gross margin tables.

Checked September 19, 2026

Formula reviewed: September 19, 2026
Formula version: 1

Version 1 means the formula has not changed since this page was published. If it changes, this number moves and the change is described here.

Cost, price, target

Both percentages, and both prices