Difference Between Margin And Markup

Difference Between Margin And Markup

The main dissimilarities or difference between margin and markup can be described as follows:

1. Introduction

Margin: It is the difference between total sales revenue and total cost of goods sold

Markup: It is the ratio between cost price and selling price of the products

2. It Indicates

Margin: Profit according to the % of total sales

Markup: Profit according to the % of cost of the product

3. Function Of 

Margin: It is a function of sales

Markup: It is a function of cost

   Also Read: 

Difference Between Sales And Revenue

4. Determination

Margin: It can be determined by using the following formula

Margin = (SP -CP)/SP

Where, SP = Selling Price and CP = Cost Price

Markup: It can be determined by using following formula

Markup = (SP-CP)/CP

5. Preferable

Margin: It is less preferable than markup because it understates the profitability as it is less than markup

Markup: It is more preferable than margin because it overstates the profitability as it is higher than margin.

Margin Vs Markup (Comparison Chart)

Basis For Difference	Margin	Markup
Introduction	Difference between sales and cost of goods sold	Ratio between cost price and selling price
Indicates	Profit according to the percentage of sales	Profit according to the percentage of cost
Function Of	Sales	Cost
Determination	(SP - CP)/SP	(SP - CP)/CP
Preferable	Less	More

I hope this post is helpful to understand the difference between margin and markup and to make comparison between them.