Markup vs. Margin Difference: Optimise Inventory Profitability

Margin, in the context of products, is the percentage of their selling price left over after cost considerations. Unlike cost-based markup, which is based on, the margin is computed with regard to revenue. For pricing policies, financial analysis, and general company health, this is, therefore, an absolutely vital statistic.

Businesses use margins to assess profitability, compare performance among several items, and ensure that pricing plans complement financial objectives. While a low margin may indicate the need for pricing changes, cost cuts, or process improvements, a large margin shows great profitability.

For instance, if a product is priced at $200 and its production cost is $120, the margin indicates how much of that revenue constitutes real profit.