Profit Margin Calculator

About this tool

Gross margin and markup are the two most important profitability ratios in retail, e-commerce, and product businesses — and they are frequently confused. Margin is profit divided by selling price; markup is profit divided by cost. The same $20 profit on a $40 cost item represents a 50% markup but only a 33.33% margin. Enter a cost price and a selling price and this calculator shows the gross profit per unit, the margin percentage and the markup percentage together, updating as you type, so you never mix the two up. A negative profit and negative percentages tell you the item is sold at a loss. To find the price needed for a target margin, use Price = Cost ÷ (1 − Margin) and enter the result to confirm it. Results are shown to two decimal places, work in any currency, and are calculated in your browser.

Why use it

• Margin and Markup — Both at Once: Gross margin (profit ÷ price) and markup (profit ÷ cost) are always displayed together so you never confuse the two. Finance teams typically speak in margin; retail buyers typically speak in markup — this tool bridges both.

• Absolute Profit per Unit: Alongside the percentages, the calculator shows the monetary profit per unit — the actual money you keep on each sale.

• Spot Loss-making Prices: If the selling price is below cost, profit, margin and markup all turn negative, making an under-priced item obvious.

• Fast What-if Pricing: Results update on every keystroke, so you can nudge the selling price until the margin reaches your target.

• Currency-agnostic: All calculations are purely numerical — no currency selection is required. Works equally well for pricing in dollars, euros, pounds, rupees, or any other currency.

How to use

1. Enter what one unit costs you in the Cost price field
2. Enter what you sell it for in the Selling price field
3. Read the Gross profit per unit
4. Compare the Margin and Markup percentages, which update as you type

When it helps

• When checking whether a new product's planned selling price meets your gross margin target
• When reviewing a supplier quote and you need to verify that the proposed cost leaves enough margin at your standard selling price
• When preparing a P&L or financial model and you need the gross margin on each SKU in your catalogue
• When comparing two products with different price points and cost structures to see which delivers more profit per unit
• When a price increase or cost change occurs and you need to recalculate whether target margins are still being met

Examples

Tips

• Margin = profit ÷ price; Markup = profit ÷ cost — they differ because the denominators differ. A 50% markup is only a 33.33% margin
• When setting prices, always use the Price = Cost ÷ (1 − Target Margin) formula rather than adding a markup percentage and assuming the margin is equivalent
• Bake every variable cost — packaging, payment fees, platform commission, return rate — into the 'cost' input before calculating margin; otherwise you will overstate profitability
• Finance teams and investors speak in margin; retail buyers and merchandisers often speak in markup. Know which metric your audience expects and convert appropriately
• Track margin per SKU or product line rather than blended overall margin — blended figures hide loss-leaders and high-performer products that should inform pricing strategy

Frequently Asked Questions

Glossary

Gross Margin

The percentage of revenue remaining after subtracting the cost of goods sold. Gross Margin = (Revenue − COGS) ÷ Revenue × 100. It measures basic product profitability before operating expenses.

Markup

The percentage added to cost to arrive at the selling price. Markup = (Price − Cost) ÷ Cost × 100. Unlike margin, markup uses cost as the denominator, so the same profit dollar represents a higher markup percentage than margin percentage.

Cost of Goods Sold (COGS)

The direct variable costs attributable to producing or acquiring one unit of a product, including materials, manufacturing labour, and inbound shipping. COGS is the cost figure used in margin and markup calculations.

Selling Price

The price at which a product is offered to customers. Revenue equals selling price multiplied by units sold. Margin is calculated as a percentage of the selling price.

Profit

The monetary difference between selling price and cost per unit: Profit = Price − Cost. Expressed as a percentage of price it is the margin; as a percentage of cost it is the markup.

Break-even Point

The sales volume at which total revenue equals total costs — fixed plus variable. Below break-even, the business incurs a loss; above it, a profit. Gross margin per unit determines how many units must be sold to cover fixed overhead.