How to Calculate Markup
Markup is the percentage added to the cost of a product to determine its selling price. It is fundamental to retail and wholesale pricing.
The Formula
Markup % = ((Selling Price - Cost) / Cost) x 100Where:
MarkupMarkup Percentage — Percentage added above cost priceSPSelling Price — Final price charged to customersCostCost — Original purchase or production costStep-by-Step Example
Here's how to calculate markup step by step:
- 1Find the difference: Subtract the cost from the selling price.
- 2Divide by cost: Divide that difference by the original cost.
- 3Convert to percentage: Multiply by 100 to get the markup percentage.
Following these 3 steps gives you the final markup value.
Skip the Math
A retailer buys a shirt for $20 and sells it for $35. The markup is (($35-$20) / $20) x 100 = 75%.
Use the Free CalculatorWhy You Need This Calculation
- Markup helps businesses set prices that cover costs and generate desired profit levels.
Common Mistakes
Confusing markup with profit margin.
Markup is based on cost; margin is based on selling price.
Setting markup too low to cover overhead.
Ensure markup accounts for all indirect costs, not just product cost.
Applying the same markup to all products.
Adjust markup by product category based on demand and competition.