How to Calculate Markup
Markup is the amount added to a product's cost to arrive at its selling price, usually expressed as a percentage of cost. It is the basis of cost-plus pricing used by retailers, wholesalers, contractors, and manufacturers.
Selling price = Cost × (1 + Markup% ÷ 100)
Markup% = (Price − Cost) ÷ Cost × 100
Margin% = (Price − Cost) ÷ Price × 100
Worked Example
An item costs $50 and you apply a 40% markup:
- Selling price = $50 × 1.40 = $70.00
- Gross profit = $70 − $50 = $20.00
- Gross margin = $20 ÷ $70 = 28.57%
Markup vs. Margin
Markup and margin use the same profit but different bases. Markup divides profit by cost; margin divides profit by selling price. Because price is always larger than cost, margin is always the smaller percentage. Mixing them up is a common pricing mistake: a 30% markup produces only a 23.08% margin.
- Margin = Markup ÷ (1 + Markup), using decimals
- Markup = Margin ÷ (1 − Margin), using decimals
| Markup | Equivalent Margin |
|---|---|
| 20% | 16.67% |
| 25% | 20.00% |
| 50% | 33.33% |
| 100% | 50.00% |
| 200% | 66.67% |
Choosing a Markup
Your markup must cover operating costs (rent, payroll, shipping, payment fees) and leave a profit. Compare the result against competitor prices and use a break-even analysis to check how many units you need to sell at that price.
Frequently Asked Questions
How do I calculate a 30% markup?
Multiply the cost by 1.30. For example, a $40 cost with a 30% markup sells for $52, giving $12 of profit.
What is the difference between markup and margin?
Markup is profit divided by cost; margin is profit divided by selling price. A product that costs $50 and sells for $70 has a 40% markup but a 28.57% margin.
How do I convert margin to markup?
Markup = margin ÷ (1 − margin). A 25% margin equals 0.25 ÷ 0.75 = 33.33% markup.
Can markup be more than 100%?
Yes. A 100% markup doubles the cost (keystone pricing), and higher markups are common for low-cost items. Margin, however, can never reach 100%.
How do I find the cost from the selling price and markup?
Divide the selling price by (1 + markup). A $70 price with a 40% markup means the cost was $70 ÷ 1.40 = $50.