How is margin calculated, and why is it not the same as markup?

The short answer

Margin is profit divided by revenue. A product bought for 60 and sold for 100 makes 40 of profit on 100 of revenue, so the margin is 40%.

Markup is the same profit divided by the cost: 40 on 60, so 66.7%. Same product, same money, two numbers that are nearly twenty-seven points apart. Merchgain reports margin, and prints the definition under the report so nobody has to guess which one they are looking at.

What WooCommerce actually does

Nothing, in this case. The core stores the cost and the line totals; it computes no margin at all, and it takes no position on which definition is the right one. Every report you install picks one, and the good ones say which.

Both are in daily use, which is why the confusion is so durable: suppliers and wholesalers usually quote markup — “we sell at cost plus fifty” — while accountants, tax returns and anybody comparing your shop to another shop mean margin.

What to do about it

Convert rather than argue. With margin m and markup u, both as fractions:

u = m / (1 - m)        markup from margin:  0.40  ->  0.667
m = u / (1 + u)        margin from markup:  0.50  ->  0.333

So “cost plus 50%” is a 33.3% margin, and a 50% margin means selling at double the cost. If you price by markup and report by margin, that gap is where the surprise lives.

The margin and markup calculator does both at once from a cost and a price.

How Merchgain reports it

Margin is profit divided by revenue, always, on every screen and in the CSV export. The report prints the definition under the table and repeats it on the summary card, because a percentage without its definition is not a number — it is a guess about which convention the author used.

Profit and margin are calculated only on the items whose cost is known. An item with no cost recorded still counts towards revenue, so it lowers coverage, but it never quietly inflates the margin by being treated as free goods.