Calculate profit margin and calculate profit markup
with this Profit Calculator.
Input product cost and sales price to calculate profit.
What is Profit Markup?
Profit markup is a simple fractional addition to the cost of a product, or service. So, if you have a cost of $100 and you put a 20% markup on it, you multiply the $100 by 1.2. This results in a sales price of $120 and from a profit markup of 20%.
What is Profit Margin?
Profit margin is a little more complicated than profit markup. Unlike markup, margin is a percentage comparison of the profit in comparison to the total sales price. So, if you have a sales price of $120 and the cost of the product was $100, the profit is $20. The profit in comparison to the sales price would be $20 divided by $120. In this case the profit margin would be 16.67%.
What is profit and how do you calculate profit?
Profit is the leftover amount of revenue after costs are taken out.
To calculate profit margin and calculate profit markup, use these profit
formulas:
Profit Margin % = [ ( Sales Price - Cost ) / Sales Price ] x 100
Profit Markup % = [ ( Sales Price / Cost ) - 1 ] x 100
Example: With a cost of $8.57, and a sales price of $12.84:
Profit Margin % = [ ( 12.84 - 8.57) / 12.84 ] x 100
Profit Margin % = 33.26%
Profit Markup % = [ ( 12.84 / 8.57 ) - 1 ] x 100
Profit Markup % = 49.82%
More on Profit.
A few things to remember when calculating margin and markup. Many times, profit is actually referred to as the amount of money that is the difference between sales price and cost. In our first two examples, we looked at a sales price of $120 and a cost of $100. The profit is $20. The markup and margin are different ways of comparing the profit to the cost, or sales price, based on a percentage.
Many times, profit is referred to as net profit, or gross profit. Net profit is the pure profit remaining after all possible costs are removed from the revenue. Gross profit is usually just a pure cost of the goods sold (COGS) taken from the revenue. Once you calculate the COGS, and gross profit, you can get to net profit by taking other costs into consideration. This might be costs like insurance, facility rent, employee wages, utilities, etc. Many of these costs may be referred to as "overhead".
More Resources...
More information on profit margin.
Profit markup vs. profit margin.