zmVault/markup-vs-margin.md

id, aliases, tags, title, dg-publish

id	aliases	tags	title	dg-publish
		authorship/original destiny/permanent type/encyclopedia status/complete type/encyclopedia-entry	Markup vs. Margin	true

Markup vs. Margin

Markup and margin are both terms to describe the percent profit of a sold good or service. Markup describes an item's profit relative to its cost to the merchant. Margin describes an item's profit relative to its cost to the customer.

\text{Profit} = \text{Sell Price} - \text{Cost}, \quad
\text{Markup} = \frac{\text{Profit}}{\text{Cost}}, \quad
\text{Margin} = \frac{\text{Profit}}{\text{Sell Price}}

Suppose a product that

• costs $80 to produce
• is sold for $100

\text{Profit} = 100 - 80 = 20, \quad
\text{Markup} = \frac{20}{80} = 25\%, \quad
\text{Margin} = \frac{20}{100} = 20\%

Because of *waves hands* finance reasons, contractors (and sellers of products and services in general) almost exclusively talk about profit in terms of margin. Even if someone says "15% markup" they may still be talking about margin.