Profit Margin Calculator
Calculate gross profit, profit margin percentage, and markup percentage. Switch between pricing strategies to find your target selling price.
Last verified: September 2026Inputs & Parameters
Calculation Results
Profit Margin is 50.00% of revenue. Markup is 100.00% of cost. Gross profit is $50.00.
Understanding Profit Margin vs. Markup
One of the most frequent pricing errors in business is confusing Profit Margin with Markup. While both metrics measure the profitability of a product or service, they express profit relative to different benchmarks.
| Metric | Formula | Denominator (Base) | Business Meaning |
|---|---|---|---|
| Profit Margin | (Profit / Revenue) × 100 | Revenue (Selling Price) | Percentage of the sale price retained as earnings. |
| Markup | (Profit / Cost) × 100 | Cost of Goods Sold (COGS) | Percentage added on top of unit cost to set selling price. |
Mathematical Derivation
If you know your desired gross margin percentage and cost, you can calculate the necessary selling price using:
Selling Price = Cost / (1 - (Desired Margin % / 100))
Worked Example
If an inventory item costs $60.00 to produce and you sell it for $100.00:
1. Gross Profit = $100.00 - $60.00 = $40.00
2. Profit Margin = ($40.00 / $100.00) × 100 = 40.00%
3. Markup = ($40.00 / $60.00) × 100 = 66.67%