- What is the difference between markup and margin?
- Markup is profit as a percentage of cost: (Price - COGS) / COGS x 100. Margin is profit as a percentage of price: (Price - COGS) / Price x 100. A 60% markup on a $25 item gives a selling price of $40 and a 37.5% margin. They are mathematically related but answer different questions.
- Which pricing mode should I use?
- Use Cost + Markup when you think in terms of margin over cost (common in retail and wholesale). Use Cost + Margin when you need to hit a specific gross margin target (common in finance and SaaS). Use Target Price when you know your market price and want to understand the implied margin and markup.
- Why can a 100% target margin not be achieved?
- A 100% gross margin would mean selling price equals pure profit with zero cost, which is mathematically impossible for a physical product. The formula for cost-plus margin (Price = COGS / (1 - margin)) divides by zero at 100%, making it undefined.
- How do I set a price that covers overhead and generates profit?
- This calculator covers product-level pricing (gross margin). To ensure the business is profitable, your gross margin must also cover operating expenses (rent, salaries, marketing) and your desired net profit margin. A common approach is to target a gross margin of 40 to 60% and then confirm it covers overhead.
