Margin divides profit by revenue; markup divides the same profit by cost — so on $100 of revenue and $70 of cost, the $30 profit is a 30.00% margin but a 42.86% markup. Add $10 of operating expenses and the net profit is $20, a net margin of 20.00%. Same dollars, different denominators, different percentages.
Gross margin — what COGS includes and excludes
Gross profit is revenue minus the cost of goods sold: what the things you sold cost to buy or make. For a retailer that is the wholesale cost of the goods; for a maker it is materials and direct production cost; for a service business it is the direct cost of delivering the work. What COGS is not is everything the business spends. Rent, marketing, software, insurance, and payroll outside production sit below the gross line as operating expenses — they are real costs, but they are not the cost of the goods, and mixing them into COGS makes the gross margin incomparable from one period to the next. Gross margin therefore measures the pricing-and-production step on its own: of each revenue dollar, how much survives the direct cost of what was sold?
Margin vs markup — the page's centerpiece
Margin and markup describe the same profit dollars with two different denominators. Margin divides by revenue, the selling side: $30 ÷ $100 = 30.00%. Markup divides by cost, the buying side: $30 ÷ $70 = 42.86%. Because cost is the smaller number whenever profit is positive, markup is always the larger percentage — and the two are never interchangeable, however often they are used as if they were. The classic expensive version of the confusion: a business that “adds 30%” to a $70 cost expects a 30% margin, but $70 × 1.30 is $91 of revenue, the profit is $21, and the actual margin is $21 ÷ $91 = 23.08% — nearly seven points short of what was intended, on every sale, until someone checks. The reverse error overstates just as reliably: quoting a 42.86% markup figure as if it were margin claims profit the dollars do not contain. The contrast line above the results exists so both numbers are always visible on the same dollars at the same time.
Worked example — $100 revenue, $70 cost, $10 expenses
The calculator is pre-filled with exactly this case:
- Gross profit: $100.00 − $70.00 = $30.00
- Gross margin: $30.00 ÷ $100.00 × 100 = 30.00%
- Markup: $30.00 ÷ $70.00 × 100 = 42.86%
- Net profit: $100.00 − $70.00 − $10.00 = $20.00
- Net margin: $20.00 ÷ $100.00 × 100 = 20.00%
The sanity check the page states: the same $30 of gross profit is 30.00% measured against revenue and 42.86% measured against cost — quoting one when you mean the other misstates the business by nearly 13 points on identical dollars.
Gross vs net margin
Net margin takes one more step down: subtract operating expenses as well as COGS, then divide by revenue. In the worked example that is ($100 − $70 − $10) ÷ $100 = 20.00% net against 30.00% gross — the ten points between them are exactly the operating expenses as a share of revenue. Adding the optional expenses field is what brings the net outputs onto this page; leaving it blank hides them rather than presenting a second figure identical to gross. Two things this page's net figure still leaves out, named plainly: interest and tax. A full income statement runs further down than this calculator does, and a margin from here should never be presented as the business's final bottom line.
Per item or per period — pick one basis
The same formulas price a single product or summarize a month, a quarter, or a product line. What they cannot do is mix the two: a per-item price against a month of costs produces a percentage that describes nothing. Keep every figure on the same basis — one item's price with that item's cost, or a period's total revenue with that period's total COGS and expenses. Period totals are where this page differs from per-unit calculators: a month's figures absorb discounts, returns, and product mix automatically, because they are already inside the revenue and cost you enter. Re-running the same basis period after period is also what makes two margins comparable: a change between them then reflects the business, not a change in what was counted.
Negative margins, and markup past 100%
A negative margin is arithmetic, not an error: when cost exceeds revenue, the profit and both percentages are negative — $100 of revenue against $130 of cost is a −$30.00 profit, a −30.00% margin, and a −23.08% markup. A negative margin means the cost exceeds the revenue; the calculator shows the loss signed and unhidden rather than zeroing it, because a zero would claim a break-even that did not happen. At the other end, markup can run well past 100% and that too is ordinary: a $10 cost sold at $30 is a $20 profit, which is a 200.00% markup on cost and a 66.67% margin on revenue. Margin, by contrast, cannot exceed 100% on positive revenue — one more way the denominators announce themselves.