What it does
Unit cost, freight, and the markup you want go in. Your retail price comes out. It marks up landed cost, not invoice cost.
Freight is a separate box for a reason
Retail pricing advice says "mark up your cost." The cost people type in is the one on the supplier's invoice. Freight, duties, and inbound handling arrive on a separate invoice, usually in a different month, so they never make it into the price.
A $40 unit with $4 to land it, marked up 150%, sells for $110.00 and keeps $66.00. Price that same product off the $40 invoice and you charge $100.00. After the $4 you still owe, you keep $56.00 — a 56% margin, on a product you set at 60%.
Two invoices, two numbers, and the four dollars is gone.
Markup to margin
| Markup on cost | Margin | Multiplier |
|---|---|---|
| 10% | 9.1% | 1.10x |
| 15% | 13.0% | 1.15x |
| 20% | 16.7% | 1.20x |
| 25% | 20.0% | 1.25x |
| 30% | 23.1% | 1.30x |
| 35% | 25.9% | 1.35x |
| 40% | 28.6% | 1.40x |
| 45% | 31.0% | 1.45x |
| 50% | 33.3% | 1.50x |
| 60% | 37.5% | 1.60x |
| 75% | 42.9% | 1.75x |
| 100% | 50.0% | 2.00x |
| 125% | 55.6% | 2.25x |
| 150% | 60.0% | 2.50x |
| 175% | 63.6% | 2.75x |
| 200% | 66.7% | 3.00x |
| 250% | 71.4% | 3.50x |
| 300% | 75.0% | 4.00x |
| 400% | 80.0% | 5.00x |
Margin = markup ÷ (100 + markup) × 100. Going the other way, markup = margin ÷ (100 − margin) × 100.
Margin sits under markup at every value, because one divides by cost and the other by price. A 100% markup is a 50% margin. To hit a 100% margin your markup would have to be infinite, which is why "we want 100% margin" is a sign somebody means markup.
What a discount takes out
A 150% markup gives a 60% margin on a $110.00 shelf price. Run 20% off and the customer pays $88.00. Landed cost is still $44.00, so profit falls from $66.00 to $44.00 and margin from 60% to 50%.
Twenty percent off the price, a third off the profit. That can be a deliberate trade for volume. It can also be a season of 20%-off promotions that nobody ever subtracted from the annual margin. The discount calculator runs the same numbers from the price side.
Working back from a price
Cost = price ÷ (1 + markup ÷ 100). At $110.00 and 150% that is $110 ÷ 2.5 = $44.00, which is landed cost. Subtract freight to get back to what the supplier invoiced.
The markup calculator goes the other direction — give it a cost and a price and it reports the markup you're already getting. Once you have a shelf price, profit margin and contribution margin split it into what covers overhead and what is left over.