*Gross margin* or gross profit is defined as sales minus cost of goods sold. If a retailer sells a product for $10 which had a cost of $8, the gross profit or *gross margin is $2.* The gross profit ratio or the gross margin ratio expresses the gross profit or gross margin amount as a percentage of sales. In our example the *gross margin ratio* is 20% ($2 divided by $10).

*Markup* is used several ways. Some retailers use markup to mean the difference between a product's cost and its selling price. In our example, the product had a cost of $8 and it had a *markup of $2* resulting in a selling price of $10. The $2 markup is the same as the $2 gross profit. However, the markup percentage is often expressed as a percentage of cost. In our example the $2 markup is divided by the cost of $8 resulting in a markup of 25%. (Some retailers may use the term markup to mean the increase in the original selling. For example, if the $10 selling price was increased to $11 because of high demand and limited supply, they would say the markup was $1.)

In general the calculation for cost is

(SalePrice - CostPrice) ÷ SalePrice = Gross Profit/Margin %

If you wish to work backwards the calculation is

CostPrice ÷ (1 - Gross Profit %) = SalePrice

In counterpoint the store minimuns are based on profit not markup. If you wish to see exactly what the margin is for an item, press the suggestion button next to an item and you can play around with the margin amount