📐 Margin Calculator (Cost & Margin Calculator)

Margin and markup are both related to "profit," but they use different denominators. Margin rate is profit divided by the sale price, while markup rate is profit divided by the cost. For the same dollar profit, these two rates are always different — markup rate is always higher than margin rate (when profit is positive). For example, with a cost of $80 and a sale price of $100, profit is $20; margin rate is 20/100 = 20%, while markup rate is 20/80 = 25%.


When setting pricing policy, "I want a 20% margin" and "I want a 20% markup" produce different sale prices, so it is essential to be explicit about which basis you mean.

Profit = Sale price − Cost
Margin rate = Profit ÷ Sale price
Markup rate = Profit ÷ Cost

To find sale price from cost and margin rate: Sale price = Cost ÷ (1 − Margin rate). For example, at a cost of $80 with a 20% margin rate, sale price = 80 ÷ 0.8 = $100, profit is $20, and markup rate is 25%.

To find cost from sale price and margin rate: Cost = Sale price × (1 − Margin rate). At a sale price of $100 with a 20% margin rate, cost = 100 × 0.8 = $80.

A reasonable margin rate varies widely by industry, competitive landscape, and cost structure. Retail commonly runs 20-50% margin, food service 60-70%, and manufacturing 10-30% — but these are not hard rules. When setting a margin rate, consider: (1) your break-even point including both fixed and variable costs, (2) competitor pricing and what the market will accept, (3) inventory turnover — faster turnover can make a lower margin rate still profitable in total, and (4) whether payment processing fees, shipping, and other overhead are already reflected in your cost basis. Raising margin rate alone increases the sale price and can reduce volume, so it is safer to simulate target total profit alongside expected sales volume.