Margin VS Markup in Quoting

Margin and Markup are two different ways of looking at the profit on a sale. They both focus on the same amount of money – the difference between your buying and selling prices. However, they express that amount as a percentage in different ways.

Margin Percentage: Margin refers to the revenue a company makes after paying the cost of goods sold (COGS). The margin percentage is calculated by taking revenue minus the cost of goods sold, and the difference is shown as a percentage of revenue.

For example, if a product sells for $100 and it costs $70 to manufacture, its margin is $30. The profit margin, stated as a percentage, is 30%.

Markup Percentage: Markup shows how much more a company’s selling price is than the amount the item costs the company. Markup is the retail price for a product minus its cost, but the markup percentage is calculated differently. The formula for markup percentage is:
\(\left( \frac{\text{Selling Price} - \text{Cost}}{\text{Cost}} \right) \times 100\)

Using the same numbers as above, the markup percentage would be 42.9%.

Note that \(\text{Selling Price} - \text{Cost}\) can also be written as \(\text{profit}\) or \(\text{margin}\).

In summary, while both margin and markup deal with the difference between the selling price and the cost of a product, they express this difference as a percentage of different bases: margin uses the selling price as the base, while markup uses the cost as the base.