What is Margin Vs Markup

  • Accounting

While both measure profitability, you might be wondering how to differentiate between margin vs markup.

Margin helps you understand profit as a portion of your selling price:

  • Shows what percentage of revenue becomes profit
  • Used for financial statements and comparing profitability
  • Easier to evaluate financial health
  • Example: A 25% margin means $25 profit from each $100 sale

Markup shows how much you’ve increased cost to set prices:

  • Reveals the multiplier applied to your costs
  • Used for pricing decisions and inventory valuation
  • Better for quick price calculations
  • Example: A 33.33% markup on $75 cost creates that same $100 sale price
Quick tip: Higher markup percentages yield smaller margins than you might expect. A 50% markup only produces a 33.33% margin – a common source of pricing errors.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.