Margin and markup are important concepts for any business selling a product. It is a number that defines the amount of gross profit you are making off of each product. You can use the values of margin and markup as guides for setting the prices of your products.
Markup can be calculated based on price or cost. Using the example above, the markup based on cost is 25%. The markup based on price is 20%.
Margin is simply the difference between the cost of a product and the price you sell it for. If you had a widget that cost $8.00 to produce and you sold it for $10.00, you would have a $2.00 margin in that product.
This simple calculator gives you the markup, calculated both ways:
When you know the markup of all the products you sell, you will know which products are making you money and which aren't. You will want to change the pricing or eliminate the product that is not making you money. Your adjustments should bring all of your products up to a level where they are profitable and are worth your effort.