The difference between margin and markup
Markup is calculated relative to purchase cost. Margin is calculated relative to selling price excluding VAT. A 50% markup therefore does not equal a 50% margin.
Margin = profit / net selling price · Markup = profit / purchase cost
Calculate the selling price
With a purchase cost of 100 and a 50% markup, the net selling price is 150. Gross profit is 50 and margin is 50 / 150 = 33.33%.
VAT example
At 25% VAT, the gross selling price is 187.50. VAT is 37.50 but does not affect margin because margin is calculated from the net price.
Common mistakes
Do not confuse percentages with percentage points. Check whether purchase cost includes freight, customs, rebates and other costs affecting true gross profit.
Calculate your own scenario
Use the free PurchaseKPI calculator and get the result immediately.
Price, margin and markup calculator