The denominator changes the answer
With a unit cost of 80 and a selling price of 100, profit is 20. Divide by sales for a 20% margin, or by cost for a 25% markup.
Why it matters for pricing
Adding a percentage to cost does not create the same percentage margin on sales. Across products, simple averages can hide differences in volumes and costs.
Use consistent costs
Define which costs belong in the unit cost before comparing products. Separate recoverable taxes from the revenue and costs being analyzed.
Try the example
Open the profit margin calculator, enter cost 80 and price 100, then change the inputs to explore a discount or cost increase.
