Margin and markup use the same unit profit but different denominators.
Margin = (price − cost) ÷ priceMarkup = (price − cost) ÷ cost
A product costing $60 and selling for $100 has $40 profit. Its markup is 66.67%, while its gross margin is 40%.
Why the distinction matters
Applying a desired 40% margin as a 40% markup would price the item at $84, producing only a 28.57% margin. That error can make pricing rules and break-even advertising targets materially wrong.
Use markup when building price from cost. Use margin when assessing how much revenue remains after cost. Always state which costs are included.
Sources
This guide is educational and does not provide financial, accounting, tax or legal advice.