Profit Margin & Markup Formula

Finance Formula • Published on July 30, 2026 • Last updated July 30, 2026

Mathematical Equation

$$\text{Gross Margin (\%)} = \frac{\text{Revenue} - \text{COGS}}{\text{Revenue}} \times 100, \quad \text{Markup (\%)} = \frac{\text{Revenue} - \text{COGS}}{\text{COGS}} \times 100$$

Variable Definitions

Revenue

Total selling price / income generated

COGS

Cost of Goods Sold (direct production cost)

Detailed Explanation

In-Depth Guide

Profit margin evaluates profitability as a percentage of total selling revenue, while cost markup calculates profit as a percentage of purchase/production cost.

How to Calculate: Step-by-Step

1. Gross Profit = Selling Revenue - Cost of Goods Sold. 2. Margin % = (Gross Profit / Selling Revenue) × 100. 3. Markup % = (Gross Profit / Cost of Goods Sold) × 100.

Worked Calculation Example

Cost = $80, Selling Price = $100: - Profit = $20. - Margin = (20 / 100) × 100 = 20%. - Markup = (20 / 80) × 100 = 25%.

Common Use Cases

  • Retail product pricing
  • E-commerce profit tracking
  • Corporate financial accounting

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