120% Markup to Margin: a 120% markup is a 54.5% margin
If you add 120% to your cost, you are keeping 54.5% of every sale as gross profit. That gap between 120 and 54.5 is the single most common pricing mistake we see in small-business spreadsheets.
Check any cost at 120% markup
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The formula
120 ÷ 220 × 100 = 54.5%
Markup and margin use different bases. Markup divides profit by cost, margin divides the same profit by price, and because price is always larger than cost the margin percentage is always the smaller number. At 120% markup, $77.70 of profit on a $64.75 cost is 120% of cost but only 54.5% of the $142.45 price.
Price table at 120% markup
Every row adds 120% to the cost. The margin column is the same on every line, 54.5%, because margin depends only on the percentage, not on the amount.
| Cost | Price at 120% markup | Gross profit | Margin |
|---|---|---|---|
| $5.00 | $11.00 | $6.00 | 54.5% |
| $10.00 | $22.00 | $12.00 | 54.5% |
| $25.00 | $55.00 | $30.00 | 54.5% |
| $50.00 | $110.00 | $60.00 | 54.5% |
| $100.00 | $220.00 | $120.00 | 54.5% |
| $250.00 | $550.00 | $300.00 | 54.5% |
| $500.00 | $1,100.00 | $600.00 | 54.5% |
| $1,000.00 | $2,200.00 | $1,200.00 | 54.5% |
| $2,500.00 | $5,500.00 | $3,000.00 | 54.5% |
| $10,000.00 | $22,000.00 | $12,000.00 | 54.5% |
Markups near 120%
From 110% to 130% markup the margin moves from 52.4% to 56.5%: each two-point step in markup is worth less than two points of margin at this level, and the gap widens as the markup grows. The multiplier column is what you type into a spreadsheet to price a cost list.
Worked example
Take a $64.75 item. At 120% markup the ticket price is $142.45, which leaves $77.70 after paying for the item. That $77.70 is 120% of what you paid but 54.5% of what you charged, and only the second number tells you how much of the sale is yours to spend on overheads.
Why the two percentages differ
When you compare suppliers, make sure both quote the same measure. One quoting 120% markup and another quoting 54.5% margin are offering the identical deal; one quoting 120% margin is offering a much richer one.
When to use markup, when to use margin
Use 120% markup when you price from cost upward: a tradesperson adding a handling charge to parts, a reseller applying a standard uplift to a supplier price list, or a café pricing a $64.75 ingredient cost to a $142.45 menu item. Switch to margin, 54.5%, when you report to anyone who reads a profit and loss statement.