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.
Gross margin starts with revenue minus cost
At its simplest, profit dollars equal revenue minus the cost entered into the calculator. Margin then expresses that profit as a percentage of revenue.
For example, $150 of revenue and $100 of cost produce $50 of gross profit and a 33.33% margin. The result changes if your definition of cost includes additional expenses.
Margin and markup answer different pricing questions
Margin asks what share of the selling price remains as profit under the entered cost definition. Markup asks how much was added on top of cost.
A business targeting a specific margin should not substitute the same percentage as markup. Use the appropriate formula for the pricing target you actually have.
Gross margin is not necessarily net profit margin
This calculator uses the revenue and cost values you provide. If that cost represents only cost of goods sold, the result is closer to gross margin than to net margin.
Operating expenses, interest, taxes, and other costs can reduce net profitability and need a broader financial statement analysis.
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.
How is profit margin calculated?
Subtract cost from revenue to get profit, then divide profit by revenue and multiply by 100. The result is the margin percentage under the entered cost definition.
Why is markup higher than margin for the same sale?
They use different denominators. Markup divides profit by cost, while margin divides profit by the higher selling price or revenue.
Gross-margin calculation only. It does not represent net business profit.