How to use the margin calculator
Enter cost and selling price. The difference is gross profit. Margin expresses that profit as a percentage of selling price, while markup expresses it as a percentage of cost.
Margin formula
Margin is often more useful than markup when you want to know what share of revenue remains after the cost entered.
Example: Grace checks gross margin
Grace sells an item for $75 that cost $50. Gross profit is $25. Dividing $25 by the $75 selling price gives a gross margin of 33.33%.
The same $25 profit is 50% of the $50 cost, which is the markup. Gross margin is not net profit margin because it does not deduct every business expense.
Margin and markup use different denominators
Buy for $60 and sell for $100: gross profit is $40, gross margin is 40%, and markup is about 66.67%.
A negative margin means the selling price is below cost. Gross profit here excludes overhead, tax and other expenses not included in the entered cost.
Assumptions and limitations
What the estimate assumes
This is gross margin based only on the cost entered. Operating expenses and taxes are not included.
Margin Calculator FAQs
What is gross margin?
Gross margin is gross profit divided by selling price, expressed as a percentage.
Why is margin lower than markup for the same sale?
They use different denominators. Margin divides by selling price; markup divides by cost.
Can margin be negative?
Yes. If selling price is below cost, gross profit and margin are negative.
Does this calculate net profit margin?
No. Net margin requires additional business expenses, taxes, and other items.
Gross-margin calculation only. It does not represent net business profit.