Whats the difference between margin and mark-up?
• Profit Margin = Selling Price – Variable Costs • Margin Percentage = Profit Margin / Selling Price • Mark-Up = New Selling Price – Old Selling Price • Mark-Up Percentage = Mark-Up / Old Selling Price Let’s say it costs you $80 to produce an item, and you sell it for $100. Your profit margin is $20 ($100 – $80), or 20% ($20 / $100). You decide to raise the price to $115-a mark-up of 15% ($15 / $100). Your variable costs haven’t changed, so your profit margin is now $35 ($115 – $80), or 30% ($35 ¸ $115). If, on the other hand, you maintain your $100 selling price, but you are faced with a 20% mark-up in your variable costs, then it now costs you $96 ($80 x 120%) to produce the item. That reduces your profit margin to $4 ($100 – $96), or 4% ($4 / $100).
