Formula and method
Profit = revenue − costs. Profit margin = profit ÷ revenue × 100.
Solve from any two values
Cost, revenue (selling price), profit, margin and markup are tied together by three relations: profit = revenue − cost, margin = profit ÷ revenue and markup = profit ÷ cost. Knowing any two of them fixes the other three, except margin with markup, which are two ratios and fix no amount.
From cost and a target margin, revenue = cost ÷ (1 − margin). From revenue and margin, cost = revenue × (1 − margin). From profit and margin, revenue = profit ÷ margin. From cost and markup, revenue = cost × (1 + markup).
| You know | Formula used | Result |
|---|---|---|
| Revenue 100, cost 60 | margin = (100 − 60) ÷ 100 | 40% margin, 66.67% markup |
| Cost 60, margin 40% | revenue = 60 ÷ (1 − 0.40) | Price 100 |
| Cost 60, markup 66.67% | revenue = 60 × 1.6667 | Price 100 |
| Revenue 100, margin 40% | cost = 100 × (1 − 0.40) | Cost 60 |
| Profit 40, margin 40% | revenue = 40 ÷ 0.40 | Price 100, cost 60 |
Worked example
Revenue of 10,000 and costs of 7,000 produce profit of 3,000 and a margin of 30%.