01
How to calculate profit margin
Subtract cost from selling price or revenue to find profit. Divide that profit by selling price—not cost—and multiply by 100. The calculator accepts a single unit, a transaction, or matching business totals as long as price and cost use the same scope.
Profit = Selling Price − Cost
Profit Margin = Profit ÷ Selling Price × 100
Markup = Profit ÷ Cost × 100
When selling price is below cost, profit and margin are negative. A zero selling price makes margin unavailable, and a zero cost makes markup unavailable, because each case would divide by zero.
02
Profit margin vs markup
Margin measures profit relative to selling price or revenue. Markup measures the same profit relative to cost. For a $100 sale with $60 cost, $40 profit is a 40% margin but a 66.67% markup. Treating those percentages as interchangeable leads to the wrong price.
Markup from margin = Margin ÷ (1 − Margin)
Margin from markup = Markup ÷ (1 + Markup)
- 20.00% margin → 25.00% markup
- 20.00% margin → 25.00% markup
- 50.00% margin → 100.00% markup
03
How to calculate selling price from target margin
Choose Find Selling Price, enter cost and a target profit margin below 100%, then calculate. The formula divides cost by one minus the target margin as a decimal.
Required Selling Price = Cost ÷ (1 − Target Margin)
This is a mathematical target price, not a prediction that customers will accept it. Costs omitted from the input are not covered by the result.
04
How to calculate maximum cost from a target margin
Choose Find Maximum Cost when selling price is fixed. Multiply that price by one minus the target margin to find the cost ceiling. For a $100 price and 35% target margin, maximum cost is $65 and target profit is $35.
Maximum Cost = Selling Price × (1 − Target Margin)
“Maximum” applies only to the costs represented by the input. Define whether that means acquisition cost, direct unit cost, or a broader fully loaded amount before using the result.
05
How margin changes when costs increase
If price stays fixed while cost rises, profit falls dollar for dollar and margin falls with it. If the goal is to preserve a target margin, required price must be recalculated from the higher cost. The Target Margin Table makes this sensitivity visible across several margins without rounding one displayed result into the next calculation.
Use consistent cost definitions across scenarios. Comparing a direct-cost case with a fully loaded cost case can look like a margin change even when the underlying business did not change.
06
Using target margin for pricing decisions
Target margin can translate a documented cost into a price or translate a fixed market price into a cost limit. It does not select the right margin, estimate demand, or account for fees, returns, taxes, overhead, and capacity unless those amounts are included in cost.
For a wider business view, Calculate Margin retains an optional P&L breakdown for operating expenses, interest, taxes, and other expenses. Keep the primary margin and markup comparison tied to price and direct cost, then review operating and net profit separately.
07
Worked profit margin and pricing examples
- Margin from price and cost: a $100.00 selling price minus $60.00 cost leaves $40.00 profit, 40.00% margin, and 66.67% markup.
- Selling price from target margin: $75.00 cost at a 25% target margin requires $100.00.
- Maximum cost: a $120.00 selling price at a 40% target margin allows $72.00 maximum cost and $48.00 target profit.
These displayed examples are generated by the same calculation functions used by the interactive tool.
08
Frequently asked questions
What is profit margin?
Profit margin is profit divided by selling price or revenue, multiplied by 100. It shows the share of each sales amount left after the cost included in the calculation.
What is the difference between margin and markup?
Margin divides profit by selling price or revenue. Markup divides the same profit by cost. Because the denominators differ, the percentages usually differ too.
How do I calculate selling price from a target margin?
Convert the target margin to a decimal, subtract it from 1, and divide cost by the result. A $60 cost and 40% target margin produce a $100 required selling price.
How do I calculate maximum cost for a target margin?
Multiply selling price by one minus the target margin as a decimal. At a $100 selling price and 35% target margin, maximum cost is $65.
Is a 50% markup the same as a 50% margin?
No. A 50% markup means price is 1.5 times cost and produces a 33.33% margin. A 50% margin requires price to be twice cost, which is a 100% markup.
Can profit margin be negative?
Yes. In Calculate Margin mode, selling price below cost produces negative profit and a negative margin. Reverse target-margin modes require a nonnegative target below 100%.
Why does a higher target margin increase required selling price?
With cost held constant, a larger share of the final price must remain as profit. That makes one minus margin smaller, so cost divided by that amount produces a higher required price.
What markup equals a 20% profit margin?
A 20% margin equals a 25% markup. The conversion is margin divided by one minus margin, using decimal values.
Why does the calculator show N/A?
Margin is unavailable when selling price or revenue is zero, and markup is unavailable when cost is zero, because those formulas would divide by zero.
Does changing currency change the calculation?
No. Currency changes only the display symbol. It does not convert amounts or change any formula.