Method and assumptions
Margin divides profit by selling price, while markup divides profit by cost. The two percentages answer different pricing questions and should not be used interchangeably.
Gross profit per unit = selling price - all unit costs. Margin = profit / selling price. Markup = profit / unit cost.
Worked scenario
Enter a 40 USD cost and test a 50% markup versus a 50% gross margin target. The two produce different prices because markup uses cost as the denominator while margin uses selling price. Add variable selling cost before treating the gross-margin price as a profitable marketplace price.
How to interpret the result
Gross margin describes revenue after the selected cost base; markup describes price relative to cost. Teams should name which costs are inside the base. A product gross margin based only on purchase cost is not the same as contribution margin after fees, fulfillment and advertising.
Input reference
- Currency
- Example default: USD
- Selling price per unit
- Example default: 40
- Product cost per unit
- Example default: 15
- Other variable cost per unit
- Example default: 5
- Units
- Example default: 100
Common mistakes
- Using margin and markup as interchangeable percentages.
- Leaving freight or packaging outside the chosen cost base.
- Applying a gross-margin target without marketplace variable fees.
Before using the result
- Document the cost base used by the team.
- Convert existing markup targets before comparing margins.
- Validate the final price with a full contribution model.
Questions to check before deciding
Is a 50% markup the same as a 50% margin?
No. A 50% markup on a cost of 20 gives a price of 30 and a margin of 33.33%.
Should shipping be included in unit cost?
Include variable shipping or fulfillment when it is incurred for each unit sold.
Independent calculator. Not affiliated with or endorsed by the platforms mentioned.