Case Math · Interview Question
A product costs $40 to make and sells for $50. Is that a 25% markup or a 20% margin?
How to answer
Both - they describe the same $10 spread from different bases. Markup is profit over cost: $10 / $40 = 25%. Margin is profit over price: $10 / $50 = 20%. I always confirm which base the client means, because conflating them overstates profitability.
Key idea: Reflexively calling the $10 a '25% margin' - that's the markup; margin is computed on the selling price, giving 20%.
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