Glossary · Profit and analysis
Markup vs margin
Markup and margin are two ways to express the same profit on a sale. Markup is profit divided by cost; margin is profit divided by selling price. A $50 item sold for $100 has a 100% markup and a 50% margin. Mixing them up is a common cause of underpricing.
Glossary / Markup vs margin · Also called Markup, Margin, Markup percentage
How it works
Markup starts from cost: how much do I add to what I paid? Margin starts from price: what share of the price do I keep? Because price is always bigger than cost, margin is always the smaller percentage.
The trouble comes when someone wants a 30% margin and adds 30% to cost. That gives a 30% markup, which is only a 23% margin. To hit a target margin, divide the cost by one minus the margin: $70 ÷ (1 − 0.30) = $100.
Converting between them: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin).
Retailers and distributors often talk in markup because they price from supplier cost. Accountants, lenders and financial statements use margin, because the profit and loss divides by sales. Pick one for your price list and say which it is, so staff quoting prices all mean the same thing.
Worked example: The same items, two percentages
Each row is one product.
| Cost | Price | Profit | Markup | Margin |
|---|---|---|---|---|
| $70 | $91 | $21 | 30% | 23.1% |
| $70 | $100 | $30 | 42.9% | 30% |
| $50 | $100 | $50 | 100% | 50% |
| $40 | $100 | $60 | 150% | 60% |
In AcboBooks
In AcboBooks, items carry both a cost and a sales price, and inventory sales post cost of goods sold at average cost, so the profit and loss shows the margin you actually earned. The price itself is set by you.
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Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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