Choose actual margin or a target selling price
Select Actual margin and markup to enter selling price and cost per unit. Select Price for target margin or Price for target markup to enter cost and the target percentage. Use the same currency and unit basis. Decide which direct costs belong in your unit cost before comparing scenarios: excluding a cost changes the meaning of the reported gross profit.
Margin and markup use different denominators
Gross profit per unit = selling price − cost. Gross margin is profit divided by selling price, times 100. Markup is profit divided by cost, times 100. At a selling price of 100 and cost of 60, profit is 40, margin is 40%, and markup is approximately 66.67%. The difference comes from dividing the same 40 by 100 or by 60.
Worked example: price for a 40% margin
Choose Price for target margin, enter cost 60 and target 40. Price is cost ÷ (1 − margin as a decimal): 60 ÷ 0.60 = 100. Check: (100 − 60) ÷ 100 = 40%. In Price for target markup mode, the same cost and 40% target instead give 60 × 1.40 = 84. Profit is 24 and margin is 24 ÷ 84 × 100, approximately 28.57%. Multiplying cost by 1.40 therefore does not deliver a 40% margin.
What the result means for pricing
A selling price below cost produces negative gross profit and margin. These are per-unit arithmetic results; they do not establish a sustainable price or demand. Fixed overhead, taxes and returns are excluded. Gross margin is not net profit margin, and selling enough units to cover fixed costs is a separate question for the break-even calculator. Example prices are hypothetical, not recommended prices.
Zero-cost and target limits
Actual mode needs a positive selling price and non-negative cost. With zero cost and positive price, gross margin is 100%, but markup is undefined because its denominator is zero. A target margin must be below 100%; as it approaches 100% at positive cost, required price rises sharply. At zero cost, both target-price formulas return zero, so their margin and markup displays are undefined. Round a proposed price to your currency’s allowed increments and recheck Actual mode to see the achieved margin.
Method reference
Toronto Metropolitan University: Margins versus Markups sets out the selling-price and cost denominators.
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