Understand why markup and margin give different selling prices

Markup and margin describe the same difference between selling price and cost, but divide that difference by different amounts. Mixing them can make a quote lower than intended even when the percentage looks familiar.

Calculate markup on cost

For an illustrative cost of $800, a 25% markup adds $200 and produces a selling price of $1,000. Gross profit is $200. As a percentage of the selling price, that is a 20% margin: 200 ÷ 1,000.

Calculate a target margin

To obtain a 25% margin on that same $800 cost, divide cost by 1 − 0.25. The resulting price is $1,066.67 when rounded to cents. Profit is approximately $266.67, which is 25% of the selling price. It requires a markup of about 33.33% on cost.

Define what the cost includes

Materials alone are not necessarily the complete cost of a job. Identify whether labour, delivery, equipment and allocated overheads are included before comparing margins. These examples explain arithmetic; they do not recommend a target profit or commercial pricing strategy.

Keep tax on a consistent basis

Compare costs and selling prices on a clearly stated tax-inclusive or tax-exclusive basis. The Job Totals tax calculator applies a supplied percentage; it does not determine which tax treatment applies to your work. Resolve that separately and preserve the chosen basis in the quote.

Found a measurement or calculation issue? Send the example and your correction.