Profit Margin Calculator
Solve for price, cost, or margin — and stop confusing a 50% markup with a 50% margin, because they are not the same thing.
Your details
Totals
Costs that do not change with volume
This calculator runs entirely on your device. Nothing you enter is uploaded, stored, or sold. How this works
Gross margin
60.0%
$60.00 profit per unit — 60.0% margin, 150.0% markup
Includes your inputs, the full breakdown, and every row of the table.
Gross margin
60.0%
Markup
150.0%
Profit per unit
$60.00
Break-even volume
250 units
- Revenue on 500 units
- $50,000
- Less cost of goods
- − $20,000
- Gross profit
- $30,000
- Less fixed overhead
- − $15,000
- Net profit
- $15,000
| Gross margin | Equivalent markup | Price on a $40 cost |
|---|---|---|
| 10% | 11.1% | $44.44 |
| 20% | 25.0% | $50.00 |
| 25% | 33.3% | $53.33 |
| 30% | 42.9% | $57.14 |
| 40% | 66.7% | $66.67 |
| 50% | 100.0% | $80.00 |
| 60% | 150.0% | $100.00 |
| 70% | 233.3% | $133.33 |
What this means
- Margin and markup describe the same profit against different bases. $60.00 of profit on a $100.00 sale is a 60.0% margin, but against a $40.00 cost it is a 150.0% markup. Quoting one when you meant the other is a routine and expensive mistake.
- Gross margin excludes fixed overhead. It tells you what each additional sale contributes, which is what you need for pricing decisions. Net profit after overhead is shown below for the volume you entered.
How the profit margin calculation works
Margin and markup are the two ways of expressing the same profit, and confusing them is one of the most common and costly errors in small business pricing. Margin measures profit against the selling price. Markup measures the same profit against the cost. A product costing $50 and selling for $100 carries a 50% margin and a 100% markup — identical money, very different numbers.
The gap widens as profitability rises, which is what makes the mistake dangerous. A 25% markup is only a 20% margin, a modest difference. But a 60% margin requires a 150% markup, and a business that applies a 60% markup believing it is achieving a 60% margin will be pricing at roughly two thirds of what it intended. Over a year, that is the difference between a healthy business and one that cannot explain where the money went.
The distinction matters most when translating a target into a price. If you want to keep 40 cents of every dollar of revenue, divide the cost by 0.6 rather than multiplying it by 1.4. Multiplying gives a 28.6% margin instead, an error of more than a quarter of the intended profit on every single sale.
Gross margin also deliberately ignores fixed overhead, which is a feature rather than an omission. Rent and salaries do not change when you sell one more unit, so pricing decisions should be made on the contribution each sale makes. Overhead is then covered by volume, which is what the break-even figure describes.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of the cost. On a $40 item sold for $100, the $60 profit is a 60% margin and a 150% markup. Margin can never exceed 100%, while markup has no ceiling.
How do I price for a 50% margin?
Divide the cost by 0.5, which doubles it. A $40 cost becomes an $80 price. The common shortcut of adding 50% gives $60, which is only a 33% margin. The rule is price = cost ÷ (1 − margin).
What is a good profit margin?
It depends entirely on the industry. Grocery retail runs on gross margins in the low twenties and survives on volume; software often exceeds 80% because the cost of one more copy is close to zero. What matters is whether the gross margin covers your fixed overhead at realistic volume, which is why the break-even figure is more useful than any benchmark.
Should margin include labour?
Include labour that varies with production — the hours spent making or delivering the specific thing you sold. Salaried staff who are paid the same regardless of volume belong in fixed overhead. Getting this split right is what makes the break-even calculation meaningful.
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Disclaimer. This calculator is provided for general information and educational purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Results are estimates based on the inputs you provide and the assumptions described above. Confirm any figure with a qualified professional before acting on it.