40% Markup to Margin: a 40% markup is a 28.6% margin
Marking a product up by 40% gives you a 28.6% margin, not a 40% margin. This page shows the arithmetic, a price table at 40% markup, and what the same product would need to carry a true 40% margin.
Check any cost at 40% markup
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The formula
40 ÷ 140 × 100 = 28.6%
Here is the whole relationship in one sentence: margin = markup ÷ (100 + markup). Put 40 in and you get 28.6. Put the margin back through markup = margin ÷ (100 − margin) and you return to 40. The two figures are locked together; only the label changes.
Price table at 40% markup
Every row adds 40% to the cost. The margin column is the same on every line, 28.6%, because margin depends only on the percentage, not on the amount.
| Cost | Price at 40% markup | Gross profit | Margin |
|---|---|---|---|
| $5.00 | $7.00 | $2.00 | 28.6% |
| $10.00 | $14.00 | $4.00 | 28.6% |
| $25.00 | $35.00 | $10.00 | 28.6% |
| $50.00 | $70.00 | $20.00 | 28.6% |
| $100.00 | $140.00 | $40.00 | 28.6% |
| $250.00 | $350.00 | $100.00 | 28.6% |
| $500.00 | $700.00 | $200.00 | 28.6% |
| $1,000.00 | $1,400.00 | $400.00 | 28.6% |
| $2,500.00 | $3,500.00 | $1,000.00 | 28.6% |
| $10,000.00 | $14,000.00 | $4,000.00 | 28.6% |
Markups near 40%
From 30% to 50% markup the margin moves from 23.1% to 33.3%: 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
Worked example. A product costs $79.00. Add 40%: $79.00 × 1.4 = $110.60. The gross profit is $110.60 − $79.00 = $31.60. As a share of cost that is 40% (the markup); as a share of price it is $31.60 ÷ $110.60 = 28.6% (the margin).
Why the two percentages differ
When you compare suppliers, make sure both quote the same measure. One quoting 40% markup and another quoting 28.6% margin are offering the identical deal; one quoting 40% margin is offering a much richer one.
When to use markup, when to use margin
Use 40% 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 $79.00 ingredient cost to a $110.60 menu item. Switch to margin, 28.6%, when you report to anyone who reads a profit and loss statement.
Do not confuse this with the 40% margin page. To keep 40% of the price you need a 66.7% markup; the 40% markup on this page keeps only 28.6%.
See the mirror page: what markup gives a 40% margin.