Both of these terms are closely related.

Markup bases its measurement on the cost of a product / service.

Margin bases its measurement of the sale price / revenue of the product / service.

As many businesses don’t fully understand the difference this can lead to a detrimental impact on profit and competitiveness.

For example, if you mark up a product or service that costs you $100 by 30% this is not the profit you will make.

A mark up of 30% gives to a selling price of $130.

The profit of the sale is $30.

However, the profit on the sale is not 30% it is 23%.

To get a 30% margin you would have to sell the product or service for $143 or buy it for $91.

McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au

Please refer to disclaimer at the bottom of the page.