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Margin and Markup Formulas

Here are some common formulas we use in our line of work, when writing custom reports , creating custom databases, and when discussing concepts in training.

Depending on what values you start with, some formulas will be more useful to you than others. Remember, Margin and Markup are two completely different things. Margin represents your profitability as a percentage of your Selling Price. Markup represents your profitability based on your Cost. And of course, as you can see, the formulas for each are completely different.

Profit = Selling Price – Cost

Margin = Profit / Selling Price

Selling Price = Cost / (1 – Margin)

Cost = Selling Price – (Selling Price * Margin)

Profit = Selling Price * Margin

Markup = Profit / Cost

Selling Price = Cost * (1 + Markup)

 

Examples:

Selling Price $300 – Cost $205 = Profit $95

Profit $95 / Selling Price $300 = Margin .31667  (31.667%)

Cost $205 / (1 – Margin .31667) =  Selling Price $300

Selling Price $300 – (Selling Price $300 * Margin .31667) = Cost $205

Selling Price $300 * Margin .31667 = Profit $95

Profit $95 / Cost $205 = Markup .46341

Cost $205 * (1 + Markup .46341) = Selling Price $300

 

Using these sample numbers, you are making 31.667 % Margin on your Selling Price of $300. And, you have Marked Up your cost by 46.341%.

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