Gross Margin Calculator

Turn cost and price into margin %, markup % and profit per unit.

Margin and markup describe the same gap between cost and price, measured against different denominators — and confusing them is the most expensive arithmetic error in retail and distribution. A 50% markup is a 33% margin. Pricing as though they were the same quietly removes a third of your intended profit.

Gross margin

—

Share of the selling price that is profit.

Markup —

Profit per unit —

Updates as you type · nothing leaves your browser

Your numbers

Unit cost

per unit

Ideally the landed cost.

Selling price

per unit

The formula

Margin % = (Price − Cost) ÷ Price · Markup % = (Price − Cost) ÷ Cost

Margin and markup are not the same — this shows both from your numbers.

What it means

Gross Margin — full definition

Read in the glossary

How to use it

1
Use landed cost, not invoice price, or the margin you calculate will not be the margin you bank.
2
Read margin against the selling price and markup against the cost — the numerator is identical, only the base changes.
3
Compare the result to the margin your category actually needs to cover operating costs, not to a habitual "we always do keystone".

Where it goes wrong

Discounting cuts margin faster than intuition suggests. On a 33% margin, a 10% price cut removes about 30% of the gross profit on that sale.
Gross margin is not contribution. Picking, packing, delivery and payment fees all sit below it, and on small orders they can consume the whole of it.

Worked example

The 50/33 trap

Cost 18, price 30. Profit is 12 per unit: a 40.0% margin and a 66.7% markup. A buyer told to "add 40%" prices the item at 25.20 and delivers a 28.6% margin instead of the 40% the plan assumed — a shortfall of nearly a third of the intended profit on every unit sold.

Common questions

How do I convert markup to margin?

Margin% = Markup% ÷ (100 + Markup%). A 66.7% markup is a 40% margin; a 100% markup is a 50% margin.

Which should I set targets in?

Set targets in margin, because margin is what reconciles to the income statement. Give buyers the markup equivalent if that is how they price — just never mix the two words in one policy.

Why is my actual margin below the calculated one?

Usually settlement discounts, freight-out, shrinkage or returns. Each is real gross profit leaving after the sale is priced.

Let AWRA do this on your live data

This calculator works on one set of numbers. AWRA OpsHub keeps gross margin calculator results current across every item, supplier and location — automatically.

Book a demo See pricing

More free tools

All 18 calculators