Business formula
Markup Formula
Learn the markup formula and why markup percentage is different from profit margin.
Formula
Markup % = ((selling price − cost) ÷ cost) × 100What the formula means.
Subtract cost from selling price to find the amount added above cost, then divide that amount by cost and convert it to a percentage.
Markup uses cost as the denominator.
A 50% markup does not create a 50% margin.
Selling price can be derived from a target markup by multiplying cost by 1 + markup rate.
Variables.
CCost
The amount the item or service costs before markup.
SSelling price
The price charged to the customer.
MMarkup
The amount added above cost.
Worked example.
Cost $80, selling price $120
- $120 − $80 = $40
- $40 ÷ $80 = 0.50
- 0.50 × 100 = 50%
Try your own numbersMarkup Calculator
↗Common mistakes.
- Using revenue as the denominator.
- Assuming markup and margin percentages are interchangeable.
- Leaving indirect costs out when they matter to pricing decisions.
Quick questions.
What margin does a 50% markup produce?
A 50% markup on cost produces a 33.33% margin on selling price.
How do I price from a target markup?
Multiply cost by 1 plus the markup rate expressed as a decimal.