Margin vs Markup: Formula, Difference & Table
Definition
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A product costing ₹800 sold at ₹1,000 has a 25% markup but a 20% margin.
| Term | Margin vs markup |
|---|---|
| In Hindi | मार्जिन और मार्कअप |
| Area | Accounting |
| Search phrase | margin vs markup |
| Try it | Contribution margin |
मार्जिन और मार्कअप — हिंदी में अर्थ
मार्कअप लागत पर लाभ का प्रतिशत है; मार्जिन बिक्री मूल्य पर लाभ का प्रतिशत है। ₹800 लागत वाली वस्तु ₹1,000 में बेचने पर मार्कअप 25% पर मार्जिन केवल 20% है।
Formulas and conversion
Markup % = (Price − Cost) ÷ Cost × 100. Margin % = (Price − Cost) ÷ Price × 100. To convert: Margin = Markup ÷ (1 + Markup); Markup = Margin ÷ (1 − Margin).
Quick table — markup 10% = margin 9.1%; 20% = 16.7%; 25% = 20%; 33.3% = 25%; 50% = 33.3%; 100% = 50%. Margin can never reach 100%; markup can be any figure.
Pricing for a target margin
If you want a 25% margin, divide cost by 0.75 — do not add 25%. A job costing ₹7,50,000 must be quoted at ₹10,00,000 for a 25% margin; adding 25% would give ₹9,37,500, a margin of only 20%. Many quotation mistakes in small factories come from mixing up the two.
Price and cost here are before GST. GST is collected on top and passed to the government; it is neither cost nor profit for a registered business that takes input tax credit.
Example
Fabricated frame: material and labour ₹8,000, quoted at ₹10,000 + 18% GST. Markup = 2,000 ÷ 8,000 = 25%. Margin = 2,000 ÷ 10,000 = 20%.
Related tools and guides
Frequently asked questions
What is the difference between margin and markup?
Markup is profit on cost; margin is profit on selling price. The same rupee profit gives a higher markup percentage than margin.
Is 25% markup the same as 25% margin?
No. 25% markup is a 20% margin. A 25% margin needs a 33.3% markup.
How do I calculate selling price from margin?
Selling price = Cost ÷ (1 − margin). For cost ₹600 and a 40% margin: 600 ÷ 0.6 = ₹1,000.
Which one should a business track?
Margin, because it relates profit to revenue and matches the P&L. Use markup only as a pricing shortcut.
Related terms
- Accounts receivableAccounts receivable is the money customers owe a business for goods or services already supplied on credit. It is shown as trade receivables (debtors) under current assets.
- Accrual vs cash basis of accountingUnder the accrual (mercantile) basis, income and expenses are recorded when they are earned or incurred, whatever the payment date. Under the cash basis, they are recorded only when cash is actually received or paid.
- Balance sheetA balance sheet is a statement of what a business owns (assets) and what it owes (liabilities and owners' equity) on a particular date. Total assets always equal total equity plus liabilities.
- Cash conversion cycleThe cash conversion cycle (CCC) is the number of days between paying for raw material and collecting cash from the customer for the finished goods: days inventory outstanding plus days sales outstanding minus days payables outstanding.
- Contra entryA contra entry is a transaction between cash and bank accounts of the same business — such as cash deposited into the bank or cash withdrawn for office use — where both the debit and the credit side are cash or bank.
- Contribution marginContribution margin is selling price minus variable cost. It is the amount each sale contributes first towards fixed costs and then to profit; as a percentage of sales it is called the contribution margin ratio or P/V ratio.