What is Profit Margin (vs Markup)?

Profit margin is the share of the selling price kept as profit. Two calculations exist: margin (share of the selling price) and markup (share of cost). Unit price = variable cost ÷ (1 − margin); the same percentage as markup gives a lower price.

Example: At a cost of 10 with 20% margin → 10 ÷ 0.80 = 12.50; with 20% markup → 10 × 1.20 = 12.00.