< Back to Glossary# Difference between margin and markup

Margin and markup are two terms that are often used interchangeably, but they refer to slightly different concepts. Margin is the difference between the selling price of a good or service and the cost of producing it. It is calculated by dividing the difference by the selling price and expressing the result as a percentage. For example, if a company sells a product for $100 and it costs $75 to produce, the margin would be 25% ($25 / $100). Markup, on the other hand, is the amount added to the cost of a product to determine the selling price. It is calculated by dividing the difference between the selling price and the cost by the cost and expressing the result as a percentage. Using the same example as above, if a company sells a product for $100 and it costs $75 to produce, the markup would be 33.33% ($25 / $75). In summary, margin and markup are similar in that they both express the difference between the selling price and the cost of a product as a percentage. However, margin is calculated based on the selling price, while markup is calculated based on the cost.

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