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Margin vs. markup: What's the difference?

Asked 3 years ago

When it comes to profit margin vs. markup, I know that they both involve the use of revenue and the cost of goods in order to do the calculations. What is confusing me, is which calculation requires which value. In which instance are we to use the selling price, and in which instance the retail price? Do the values of these calculations tell us different things or are there similarities?

Donnell Cash

Saturday, October 16, 2021

Calculating the profit margin and markup can be quite confusing. Markup is used when deciding the correct selling price to make the maximum profit while margin helps to evaluate the product’s performance. The profit margin is calculated on the basis of the sale price while markup is on the basis of cost price. The profit margin is equal to the (revenue- cost of goods sold)/ revenue * 100. For markup take (revenue-costs)/ costs *100.

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