Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. The same sale gives two different percentages, so mixing them up leads to mispriced products.
Side by side
| Margin | Markup | |
|---|---|---|
| Formula | (Price – Cost) / Price | (Price – Cost) / Cost |
| Based on | Selling price | Cost |
| Maximum | Below 100% | Can exceed 100% |
| Cost $60, price $100 | 40% | 66.7% |
When to use which
Use margin to see how much of each sale is profit and to compare against a target. Use markup when you set prices by adding a percentage to cost. A 50% markup equals a 33.3% margin.