Mark up and Margin are two different way to look at a profit in a business.
Mark up is the percentage added to the cost of the product to determine the selling price. Margin is the percentage of profit made on the product.
Here are the two calculations for each:
Mark up: A product costs $8 and is marked up $2 for a sale price of $10. The markup percentage is a percentage of cost. For example, $2 markup is divided by the cost of $8 resulting in a markup of 25%.
Margin: sale price minus cost of goods. Product costs $8 and sold at $10, the gross margin is $2. The gross profit margin would be 20% ($2 divided by $10) or gross margin/sale price.
Which percentage do you look more closely to and why?
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