Margin and markup are related measures, but they are not the same percentage. This free profit margin calculator shows gross profit per unit, gross margin and markup from an entered cost and selling price. It can also calculate a selling price from unit cost and a target gross margin. Use it to compare simple pricing scenarios, understand a quotation or check the effect of a proposed price. The tool does not calculate complete business profit or recommend a selling price.
Use the calculator
Check the assumptions in the guide below before using the result.
Choose the calculation you need
Select Margin and markup from cost and price when you know both figures. Enter the unit cost and selling price, then choose Calculate. The target-margin input is ignored in that operation. Select Selling price from target margin when you know the unit cost and the desired gross margin percentage. In that operation, the entered selling-price field is ignored and the tool calculates the required price.
Choose a currency label for monetary results. The label does not perform exchange conversion or choose tax rules. Keep cost and price on a consistent basis, using the same currency, unit and tax treatment. Comparing the cost of a full case with the selling price of one item produces a mathematically valid but practically misleading result. Define the unit clearly before entering the numbers.
Gross profit per unit
Gross profit in this simplified calculation equals selling price minus unit cost. If an item costs 60 and sells for 100, gross profit per unit is 40. If it costs 100 and sells for 80, the result is a loss of 20. The calculator allows that negative result so you can see the effect of selling below the entered cost rather than hiding the loss.
The meaning of unit cost depends on what you include. A purchase price alone may omit freight, packaging, transaction fees or other costs relevant to your decision. This tool does not decide which expenses belong in your costing method. Document the assumptions and use an appropriate accounting approach for formal reporting. The result is a unit comparison based on your inputs, not a verified financial statement.
Gross margin formula
Gross margin equals gross profit divided by selling price, multiplied by one hundred. With a cost of 60 and selling price of 100, profit is 40 and gross margin is forty percent. The denominator is selling price. That means the margin describes the share of sales revenue remaining after the entered cost, before other expenses not included in that cost.
If the selling price is zero, the margin ratio is undefined and the tool says so. A negative profit with a positive selling price produces a negative margin. For example, cost of 100 and price of 80 produce a margin of minus twenty-five percent. Read the output together with the original monetary values so the percentage does not obscure the size of the profit or loss.
Markup formula
Markup equals gross profit divided by cost, multiplied by one hundred. With cost of 60 and price of 100, the markup is approximately 66.67 percent. This differs from the forty-percent margin because the denominator is cost rather than revenue. Both percentages describe the same transaction from different reference points. Confusing them can lead to setting a price below the intended target.
If cost is zero, markup is undefined because the formula divides by cost. The calculator reports that limitation instead of showing an invented number. A zero cost and positive selling price can still give a gross margin of one hundred percent within this simplified model. That does not establish that there are no real business costs; it only reflects the cost value entered.
Calculate selling price from target margin
To find a selling price from cost and target margin, divide cost by one minus the margin percentage divided by one hundred. If cost is 60 and the target margin is forty percent, the result is 60 divided by 0.6, which equals 100. The target margin must be below one hundred percent, and this operation requires a positive cost.
A target of zero percent gives a selling price equal to cost in the model. A target approaching one hundred percent produces a rapidly increasing price. The calculator does not judge whether customers will pay that amount or whether the target is commercially sensible. It simply solves the stated formula. The calculated price is displayed to two decimal places; recheck the realized margin if you round or adjust the price further.
Why a forty-percent markup is not a forty-percent margin
Suppose an item costs 60 and you add a forty-percent markup. The added amount is 24, producing a selling price of 84. Profit is 24, and margin is 24 divided by 84, or approximately 28.57 percent. To obtain a forty-percent margin from the same cost, the price must instead be 100. Using the wrong denominator changes the outcome substantially.
When discussing pricing with another person, say explicitly whether a percentage means margin or markup. Avoid shorthand such as “add our normal profit percentage” without identifying the calculation. Include the cost basis and price alongside the percentage in your records. A clear pricing explanation is easier to review than a single target number with no formula attached.
Discounts change realized margin
A price chosen to meet a target margin can produce a lower margin after a discount. If cost is 60 and price is 100, the original margin is forty percent. A twenty-percent discount reduces the selling price to 80, leaving profit of 20 and margin of twenty-five percent. The discount rate and margin reduction are different quantities.
Use our discount calculator to model successive percentage reductions, then bring the resulting before-tax selling price into this margin calculator. The percentage calculator handles other percentage comparisons. Keep the actual transaction basis consistent, especially if taxes, fees or shipping are included in one figure but excluded from another.
Gross margin is not net profit margin
This tool calculates gross unit margin using one cost figure. It does not separately deduct rent, salaries, advertising, finance costs, taxes or other operating expenses. If those amounts are not reflected in the entered unit cost, they remain outside the result. A product with a positive gross margin does not automatically make the overall business profitable.
For pricing decisions, consider demand, competitor offerings, capacity, service obligations and the cost of fulfilling the sale. The calculator provides arithmetic rather than business advice. If you need formal accounts or a detailed profitability model, use a suitable accounting process and qualified support where appropriate. Do not label the output net profit simply because it is the only profit percentage displayed.
Use the result in customer documents carefully
Once you have decided on an appropriate price through your own process, our quotation generator can format proposed customer pricing. The invoice generator provides a billing document when appropriate. Neither tool automatically imports your costing assumptions or verifies the commercial agreement.
Keep internal cost and margin records separate from information the customer needs to receive. A quotation can state the agreed item price without disclosing your entire cost structure. Check the final unit price and quantity before sending, and account for any later discount or change in scope. A correct internal formula does not prevent a document-entry mistake.
Save and review the calculation
Select Print / Save as PDF after calculating to open a clean result. Use the print button in that window to select paper or a PDF destination. Keep the operation, cost basis, selling price and target assumption with the saved output. Editing a field hides the previous result until you calculate again.
The tool runs in your browser without registration and does not intentionally upload or retain its form values. The surrounding site may use normal cookies, analytics and advertising. Avoid entering confidential details that are unnecessary for the arithmetic. Before using the result, verify the unit, currency, included costs and denominator, then decide whether the simplified gross comparison is sufficient for your purpose.
Frequently asked questions
Is markup the same as margin?
No. Markup divides profit by cost, while margin divides profit by selling price. The calculator shows both so the denominator remains clear.
Does this calculate net business profit?
No. It calculates a simplified gross unit comparison. Expenses not included in the entered cost remain outside the result.
