Margin and mark-up calculator

A shopkeeper buys a mug for £8 and sells it for £10. The profit is £2, but what percentage is that? It depends on what you measure it against. The margin is the profit as a share of the selling price, here $2÷10=20$%. The mark-up is the profit as a share of the purchase price, $2÷8=25$%. It is the same £2 each time, just measured against a different amount.

People mix these up, and in practice it costs them money. Someone who wants a 25% margin and adds 25% to the purchase price actually only gets a 20% margin. The mark-up is always bigger than the margin, because the purchase price is smaller than the selling price.

Enter the purchase and selling prices either both with VAT or both without; do not mix them.

How it works

The calculator uses the formulas

$$\text{margin}=\frac{p-n}{p}\cdot 100\mathrm{\%}\text{mark-up}=\frac{p-n}{n}\cdot 100\mathrm{\%}$$

where n is the purchase price and p is the selling price.

The profit is the difference between the selling and purchase prices: 10 − 8 = 2, so £2. The margin is found by dividing the profit by the selling price:

$$\frac{2}{10}=0.2=20\mathrm{\%}$$

The mark-up is found by dividing the profit by the purchase price:

$$\frac{2}{8}=0.25=25\mathrm{\%}$$

The two figures can also be converted into each other without knowing the prices. A 20% margin means that out of every £100 of sales, £80 is the purchase price and £20 is profit, and $20÷80$ gives a 25% mark-up. A 50% margin corresponds to a 100% mark-up, that is, selling for double the purchase price. A margin can never reach 100%, because that would mean the goods were free.