Margin and markup are different numbers

Use the right denominator when setting a selling price.

Buy an item for $20 and sell it for $30 with no other costs. The $10 difference is a 50% markup on cost, but a 33.33% margin on revenue. Markup divides by cost; margin divides by selling revenue. A 50% markup does not create a 50% margin.

A real order may also incur shipping, packaging, fees and advertising. Our contribution margin subtracts these entered variable expenses before dividing by revenue. Allocated overhead appears separately. Do not compare it directly with a margin metric that uses a different set of costs.

For the example order in the calculator, revenue is $55 and contribution is $20.05. Dividing 20.05 by 55 gives a contribution margin of about 36.45%. After the $2 overhead allocation, the remaining amount is $18.05.

If revenue is zero, margin is undefined. A zero cost basis also makes markup undefined. The calculator explains this instead of showing an infinite percentage. Enter all amounts excluding tax and use the same currency throughout.