Asked Jan 7, 2019

explain the difference between margin and markup


Expert Answer

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Step 1

Margin can be defined as the amount that is derived by deducting Cost of goods sold from sales. that is Sales - Cost of Goods sold.

whereas Markup is the amount by which the cost of a product is increased in order to get selling price.

Step 2

For example: Margin is calculated as

If a product is  sold for $10 and the cost of the product is  $7 , its margin is $3. Or,  to state it as a percentage, the margin percentage is 30% (calculated as the margin divided by sales).

Carrying forward the above example Markup is calculated as: $3 from the $7 cost yields the $10 price. Or, it could be stated as a percentage, the markup percentage is 42.9% (calculated as the markup amount divided by the product cost).

Step 3

In today's environment these two terms are used interchangeably, but these two are not the same.  The meaning and Accounting for both are different. 

If we explain both the term...

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