One difference, two bases
Suppose a product sells for 100 currency units and costs 60. The difference is 40 units. Margin expresses that difference as a share of the selling price: 40 / 100 × 100 = 40%.
Markup compares the same difference with cost: 40 / 60 × 100 = 66.67% after rounding. The percentages differ because their denominators differ.
Calculate a price from a target margin
If cost is 60 and the target margin is 40%, divide cost by 1 − 0.40: 60 / 0.60 = 100. Simply adding 40% to cost would give a price of 84 and a margin of about 28.57%, not 40%.
The formula requires a positive selling price and a target margin below 100%. When cost is zero, percentage markup using cost as the divisor is undefined.
What the simple calculation leaves out
The difference between price and stated cost is not necessarily net profit. Fees, delivery, returns, taxes, advertising and fixed expenses can reduce the result. The definition of cost depends on which expenses are included.
To check your own figures, open the MoneyRadar calculator and select “Margin and markup”. Then assess fixed costs and break-even volume in our guide to unit economics.