Margins, Markups & Consecutive Discounts
Cost 60 and price 100 produce a profit of 40. The margin is 40/100 = 40%, while markup is 40/60 = 66.67%. The denominator explains the difference.
Price for a target margin
A 40% target margin on cost 60 needs price 60/(1−0.4) = 100. Adding 40% to cost instead gives 84: that is 40% markup but only about 28.57% margin.
Discounts multiply
Taking 20% off 100 gives 80. Taking another 10% off 80 gives 72, a 28% overall discount. Adding the percentages would incorrectly produce 70.
Check the costs behind the percentage
Shipping, packaging, sales fees and tax may reduce actual profit. Include the costs your model supports and track those it leaves out. A gross margin on merchandise is not automatically a net business profit.