5% Markup to Margin: a 5% markup is a 4.8% margin
Cost times 1.05 is a 5% markup, and on that price the gross margin works out to 4.8%. Use the calculator below to check any cost, or read the table for the usual price points.
Check any cost at 5% markup
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The formula
5 ÷ 105 × 100 = 4.8%
The reason 5% turns into 4.8% is the denominator. Profit stays the same, $0.62 on a $12.50 item, but markup measures it against the $12.50 you paid while margin measures it against the $13.12 the customer paid. A bigger denominator makes a smaller percentage.
Price table at 5% markup
Every row adds 5% to the cost. The margin column is the same on every line, 4.8%, because margin depends only on the percentage, not on the amount.
| Cost | Price at 5% markup | Gross profit | Margin |
|---|---|---|---|
| $5.00 | $5.25 | $0.25 | 4.8% |
| $10.00 | $10.50 | $0.50 | 4.8% |
| $25.00 | $26.25 | $1.25 | 4.8% |
| $50.00 | $52.50 | $2.50 | 4.8% |
| $100.00 | $105.00 | $5.00 | 4.8% |
| $250.00 | $262.50 | $12.50 | 4.8% |
| $500.00 | $525.00 | $25.00 | 4.8% |
| $1,000.00 | $1,050.00 | $50.00 | 4.8% |
| $2,500.00 | $2,625.00 | $125.00 | 4.8% |
| $10,000.00 | $10,500.00 | $500.00 | 4.8% |
Markups near 5%
From 1% to 15% markup the margin moves from 1% to 13%: 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.
| Markup | Margin | Price multiplier |
|---|---|---|
| 1% | 1% | 1.01× |
| 3% | 2.9% | 1.03× |
| 5% | 4.8% | 1.05× |
| 7% | 6.5% | 1.07× |
| 9% | 8.3% | 1.09× |
| 11% | 9.9% | 1.11× |
| 13% | 11.5% | 1.13× |
| 15% | 13% | 1.15× |
Worked example
Numbers first: cost $12.50, markup 5%, price $13.12, profit $0.62, margin 4.8%. If the same item had to earn a 5% margin instead, the price would have to be $13.16, a markup of 5.3%.
Why the two percentages differ
Discounts hit margin faster than markup suggests. At 5% markup you can cut the price by at most 4.8% before selling at cost, not 5%. A "5% off" promotion on a 5%-markup product sells below cost.
When to use markup, when to use margin
Markup is the shop-floor number and margin is the boardroom number. If you are setting shelf prices from a cost sheet, 5% markup is the figure you apply. If you are working out whether a 4.8% margin covers rent, wages and marketing, margin is the figure you need.
The reverse question comes up just as often: what markup produces a 5% margin? The answer is 5.3% (from 5 ÷ (100 − 5)). At 5% markup you are 0.2 points short of that.
See the mirror page: what markup gives a 5% margin.