What this calculator measures
Gross profit is the amount left after subtracting the direct cost you entered from revenue. Gross margin expresses that profit as a percentage of revenue. Markup expresses the same profit as a percentage of cost. Because the percentages use different denominators, markup and margin are not interchangeable.
Formulas
- Gross profit = revenue − direct cost
- Gross margin = gross profit ÷ revenue × 100
- Markup = gross profit ÷ direct cost × 100
- Target price = direct cost ÷ (1 − target margin)
Worked example
A product sells for 1,000 and has 575 of direct cost. Gross profit is 425. Gross margin is 425 ÷ 1,000, or 42.50%. Markup is 425 ÷ 575, or 73.91%. If the same cost needs a 40% margin, the target price is 575 ÷ 0.60, or 958.33.
Edge cases
Revenue must be greater than zero. A zero direct cost can still produce a margin, but markup is undefined because division by zero has no finite result. When cost is higher than revenue, the calculator shows a negative profit and margin so the loss is visible. A target margin of 100% or more has no finite target price.
What the result does not include
The calculation knows only the values you enter. Refunds, discounts, labor, shipping, payment fees, overhead, financing, tax and timing effects are excluded unless you include them in direct cost or adjust revenue. Use net sales rather than a headline list price when returns or discounts materially affect the period.
Frequently asked questions
Is a 50% markup a 50% margin?
No. A cost of 100 with a 50% markup sells for 150, which creates a 33.33% margin.
Which costs belong in direct cost?
Include costs that belong to the product, order or service being measured. Keep the scope consistent between comparisons and document whether labor, fulfillment and transaction fees are included.
Can I use any currency?
Yes. The calculator does not convert currencies; enter revenue and cost in the same currency.