Verified Mathematical Model & Formulation
Gross Profit = Revenue - Cost Profit Margin (%) = (Profit / Revenue) × 100 Markup (%) = (Profit / Cost) × 100
Clarifies the critical business distinction between profit margin (percentage of total revenue that is profit) and markup (percentage added on top of cost).
Configurable Parameters & Standard Units
- Item Cost ($): (Default: 30 usd)
- Selling Price ($): (Default: 60 usd)
Standard Worked Example & Practical Verification
Scenario: Buying an item for $25.00 and selling it for $50.00.
Calculated Solution
$25.00 Profit (50.0% Margin, 100.0% Markup)
Practical Takeaway: Doubling your cost represents a 100% markup, but yields a 50% profit margin.
Frequently Asked Questions
What is the difference between margin and markup?
Margin is profit divided by selling price (what percentage of the cash in your register is profit). Markup is profit divided by cost (what percentage you marked up your cost).