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Markup (calculation)

What is Markup (calculation)?

Markup is a simple yet essential calculation used to set the selling price of products based on their purchasing cost. It refers to the difference between the product's cost and its selling price, usually expressed as a percentage of the cost.

To calculate markup, you first subtract the cost price from the selling price:

Markup = Selling Price – Cost Price

You then convert this markup into a percentage to more clearly express the difference in pricing:

Markup Percentage = (Markup / Cost Price) × 100

For example, if you purchase a product for $40 and sell it for $60, your markup is $20. To express this as a percentage:

  • Markup Percentage = ($20 / $40) × 100 = 50%

This indicates you added a markup of 50% above your cost price when selling your product.

This approach ensures profitability by systematically accounting for product costs when pricing. Markup calculation is straightforward, widely used across industries, and consistently helps businesses maintain healthy profit margins on their goods or services.

Understanding markup helps businesses set competitive yet profitable pricing strategies, a crucial element for sustainable growth and financial health.

What is markup in pricing?

Markup refers to the difference between a product's selling price and its cost price, usually expressed as a percentage of the cost.

How do you calculate markup?

Markup is calculated by subtracting the cost price from the selling price. Markup = Selling Price - Cost Price. The markup percentage is then calculated as (Markup / Cost Price) × 100.

What's an example of markup calculation?

If you buy a product for $40 and sell it for $60, your markup is $20. The markup percentage would be ($20 / $40) × 100 = 50%.