Profit has two percentage bases
Markup and margin describe the same gross profit with different denominators. Markup answers how much is added to cost; margin answers what share of the selling price remains after the unit cost. They cannot use the same percentage except at zero profit, so quoting one while intending the other changes a price.
From cost markup to selling margin
Price = cost × (1 + markup ÷ 100). Gross profit = price − cost. Margin = gross profit ÷ price × 100. To reverse the calculation from a desired margin, price = cost ÷ (1 − margin ÷ 100); that reverse formula is why a 40% margin needs a 66.67% markup.
A $42 unit priced from a 65% markup
With a $42 cost and 65% markup, the added amount is $27.30. Price is $69.30. Divide $27.30 by $69.30 to get 0.3939, or 39.39% margin. A manager asking for a 65% margin would need $120 price, because $42 is then 35% of price.
Checking a price list
Use it when preparing a price list, checking wholesale pricing, or explaining why a supplier cost increase needs more than the same percentage added to retail price. Compare items on the same cost basis: landed cost, not just the supplier invoice.
Gross profit is not the whole business result
Rent, salaries, returns, payment processing, taxes, discounts, shipping charged to the seller, and inventory write-offs are not unit cost unless you add them before calculating. Gross margin is not net profit.
Cost and margin labels that reverse the answer
Do not enter the selling price as cost or call a 65% markup a 65% margin. Keep tax-exclusive and tax-inclusive prices separate. If shipping is charged to the customer but costs you more than collected, include the shortfall in cost.
Pricing one item versus recovering fixed overhead
This page converts a cost-based pricing rule into a gross margin. A break-even calculation adds fixed costs and sales volume, so it answers how many units must sell rather than what one unit should be priced at.
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