February 23, 2022
Margin and markup are terms that often get confused. They are both financial terms that use the same inputs: sale price and cost.
The industry usually determines whether margin or markup is used to calculate sale price from cost of goods sold.
Margin or profit margin is the difference between revenue, or sale price, and cost of goods sold, or COGS. Margin is typically shown as a percentage of revenue, calculated by dividing the profit by the sale price.
Markup is a term used commonly in retail. Markup shows the difference between selling price and the cost of goods. Markup is the sale price minus cost of goods, dividedby the cost.
While margin and markup use the same inputs. The main difference is margin shows profit relative to sale price or revenue. Markup shows profit relative to the cost of goods.