Estimate payment costs with the Stripe fee and reverse-fee calculator, then enter them once in the selling-cost field here.
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Gross margin and markup use different denominators
Both start with gross profit: selling price minus the landed cost assigned to the item sold. Gross margin divides that profit by selling price. Markup divides it by landed cost. Entered marketplace fees, fulfillment charges, outbound shipping, and ads appear only in contribution, not in gross profit.
Formula
Gross margin = Gross profit ÷ Selling price × 100
Markup = Gross profit ÷ Landed product cost × 100
- Gross profit = selling price − landed product cost
- Gross margin = gross profit ÷ selling price × 100
- Markup = gross profit ÷ landed product cost × 100
- Contribution = gross profit − variable selling costs you enter
Worked example
At a $100 selling price with $60 landed product cost, gross profit is $40. Gross margin is 40% ($40 ÷ $100); markup is 66.7% ($40 ÷ $60). If you enter $8 in variable selling costs, contribution is $32, while gross profit and gross margin stay the same.
| Measure | Calculation | Result |
|---|---|---|
| Gross profit | $100 − $60 | $40 |
| Gross margin | $40 ÷ $100 | 40% |
| Markup | $40 ÷ $60 | 66.7% |
| Contribution with $8 variable selling costs | $40 − $8 | $32 |
Find a price for a target
For a target gross margin m, divide landed product cost C by one minus the target margin: price = C ÷ (1 − m). For a $60 landed cost and a 40% target, the suggested price is $100. For a target markup u, use price = C × (1 + u). The calculator rounds target prices upward to the next cent so the displayed price meets the selected target.
Cost scope and limits
Use a landed product cost that matches the inventory cost you want to analyze, including purchase cost and applicable inbound freight or other costs included in your inventory records. Do not add outbound shipping or marketplace fees to this field. Add the variable selling costs you want to analyze in their separate field. Contribution is an estimate from the amounts entered; it is not net accounting profit, a payout estimate, or a quote of marketplace fees.
Margins and markups can be negative when a sale loses money. Markup is unavailable when product cost is zero. A selling price of zero cannot produce a margin ratio, and a target gross margin must be below 100%. Money inputs use USD cents, with no fractional cents; target percentages accept up to two decimal places. Target markup is capped at 1,000,000%, and calculated prices are limited to $1 billion. Money inputs are limited to $1 million per item.
Questions sellers ask
What is the difference between gross margin and markup?
Both start with gross profit: selling price minus the landed cost assigned to the item sold. Gross margin divides that profit by selling price. Markup divides it by landed cost.
How do I find the price for a target margin?
For a target gross margin m, divide landed product cost C by one minus the target margin: price = C ÷ (1 − m). For a $60 landed cost and a 40% target, the suggested price is $100. For a target markup u, use price = C × (1 + u).
Are marketplace fees and shipping part of gross profit?
No. Entered marketplace fees, fulfillment charges, outbound shipping, and ads appear only in contribution, not in gross profit. Do not add outbound shipping or marketplace fees to the landed product cost field.
Can margin or markup be negative or unavailable?
Margins and markups can be negative when a sale loses money. Markup is unavailable when product cost is zero. A selling price of zero cannot produce a margin ratio, and a target gross margin must be below 100%.
Sources and next steps
The gross profit and gross margin definitions follow OpenStax Principles of Accounting. For cost-plus pricing, OpenStax gives retail price = cost × (1 + markup rate) in its markup formula explanation. Inventory cost treatment depends on your accounting method and records; this calculator does not make that determination.
Use your marketplace statements and inventory records to confirm the amounts you enter. See Taxomate’s seller tools for more calculators and templates, or review the supported marketplace integrations to see how Taxomate helps sellers record marketplace activity in their accounting software.