Markup refers to the amount added to the cost of a product or service to determine its selling price. It is usually expressed as a percentage. For example, if something costs $100 to produce and you apply a 33% markup, the selling price would be $133. The markup is what helps cover additional expenses and contribute to the profit of the builder or contractor.
Margin, on the other hand, is the percentage of the selling price that represents profit after accounting for the cost of production. In our example with a 33% markup, the selling price is $133, and the cost of production is $100. The margin, in this case, would be 25%, which means that 25% of the selling price ($133) is the profit, and the remaining 75% ($100) covers the cost of building the home.
The markup is the additional amount added to the cost of building to determine the selling price, while the margin is the percentage of profit that the builder makes after accounting for the production cost. In our project management software, it shows a 33% markup, which translates to a 25% margin in the contract, indicating the builder’s profit once the variation costs are considered.
Markup vs. Margin Examples Table
|Margin Percentage||Markup Percentage|
In this table, you can see the margin percentages and their corresponding markup percentages. This shows that a 100% markup results in a 50% margin, indicating that the profit is equal to half of the selling price. The table demonstrates the relationship between margin and markup as the margin percentage increases in 5% increments.