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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
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Share of the selling price that is profit.
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Your numbers
Ideally the landed cost.
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 glossaryUse landed cost, not invoice price, or the margin you calculate will not be the margin you bank.
Read margin against the selling price and markup against the cost — the numerator is identical, only the base changes.
Compare the result to the margin your category actually needs to cover operating costs, not to a habitual "we always do keystone".
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
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.
Margin% = Markup% ÷ (100 + Markup%). A 66.7% markup is a 40% margin; a 100% markup is a 50% margin.
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.
Usually settlement discounts, freight-out, shrinkage or returns. Each is real gross profit leaving after the sale is priced.
This calculator works on one set of numbers. AWRA OpsHub keeps gross margin calculator results current across every item, supplier and location — automatically.
Set a price from cost plus markup, and see the margin it really delivers.
Find the sales volume where contribution finally covers your fixed costs.
Work out the true per-unit cost once freight, duties and fees are in.