Direct answer: Learn the denominator that makes margin and markup different, with worked examples.
Margin uses revenue
Profit margin equals profit divided by revenue. If an item costs $60 and sells for $100, profit is $40 and margin is 40%.
Markup uses cost
Markup equals profit divided by cost. For the same $60 cost and $100 price, markup is 66.67%. The profit is unchanged; only the comparison base changes.
Why the distinction matters
If a business needs a 40% margin and adds a 40% markup to cost, it will miss the target. A $60 cost with 40% markup gives an $84 price and a margin of only 28.57%.
Keep cost definitions consistent
A gross margin may include direct product costs but exclude operating expenses. A net margin includes a wider cost set. Label the cost scope so readers can compare like with like.
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