How to Calculate Markup Price

Updated on April 25, 2016

What Is Markup Percentage?

A markup percentage is the amount of the cost of an item that you add on to create the selling price. Many retailers use markups to set their selling price. However, some confusion comes in when there is a reference to margin along with markup. A margin is different from a markup. To explain a markup, lets use an example.

You purchase a box of paper that cost one dollar. You aim for a profit of 50%. By multiplying the cost by 50%, you get 50 cents. Add that to the cost that you paid to purchase the box of paper, now the total is one dollar 50 cents. This is the selling price of the box of paper. Therefore, your markup percent is 50%.

To look at a margin, let's use the same example. A 50% margin means that half of the selling price is your profit. Therefore, using the example above, to get a 50% margin on the box of paper we would have to sell it for two dollars. Margin is defined as the percent of the final selling price that is profit.

Again, markup is the amount over the cost of the goods that you add to make the selling price. As seen above a 50% markup is less than a 50% margin. The margin works somewhat backwards, taking the selling price times the margin to reach the cost of the item.

In general, retailers use markup to set the selling price of an item but investors look at the profit margin at a total level, not an individual level. The amount of profit that a company is making overall generally determines the success of the business. Therefore, using the easier method of markup to set selling price on items and calculating an overall profit margin as a whole on total sales works well.

Calculating Selling Price using Markup Percentage

Before you get the selling price or target price, first you need to determine product cost and markup percentage. Then using below formula you can get the selling price. This mark up formula is based on product cost.

Selling Price = (Markup / 100% * Product Cost) + Product Cost

Example 1:

Question:
Suppose a cost to make a bag is $20. What is the selling price, if we want to markup the price by 30%?

Answer:
Product Cost:$20
Markup: 30%

Selling Price = (30% / 100% * $20) + $20 = $6 + $20 = $26

So selling price would be $26 and markup price $6.

Example 2:

Question:
You purchase an item for $10, and you want to markup the price 40%. At what price you should sell that item?

Answer:
Product Cost: $10
Markup: 40%

Selling Price = (40% / 100% * $10) + $10 = $4 + $10 = $14

This example gives you a price markup of $4.

Calculating Markup Percentage - Faster Way

To calculate markup percentage in faster way you can use this formula:

Selling price = (100% + Markup) x Product Cost

Example 1:
Product Cost: $20
Markup: 30%

Selling Price = (100% + 30%) x $20 = 130% x $20 = $26

Example 2:
Product Cost: $10
Markup: 40%

Selling Price = (100% + 40%) x $10 = 140% x $10 = $14

Calculating Percentage Markup

To calculate percentage markup, you need determine product cost and selling price. Then using below formula, you can get the percentage markup. This mark up formula is based on product cost.

Markup = (Selling Price - Product Cost) / Product Cost * 100%

Example 1:

Question:
If you purchase an item for $15 and sell it for $20. Calculate your percentage markup!

Answer:
Markup = ($20 - $15) / $15 * 100% = $5 / $15 * 100% = 33.33%

So your percentage markup would be 33.33%

Example 2:

Question:
Product cost is $10, and you markup the price by $3. Calculate your percentage markup!

Answer:
Markup = $3 / $10 * 100% = 30%

Video: How to Calculate Markup Percentage

Comments

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    • profile image

      ANNABELE 

      2 months ago

      A retailer wants to sell an item that cost $200 at a marked price less 15% discount that will give him a 28% markup based on cost. Calculate

      A.the actual selling price

      B.the list price

    • profile image

      me 

      3 months ago

      If i have something that costs $2.75 but were marked up by 12%, how much does the item cost?

    • profile image

      me 

      3 months ago

      if something cost me $120 last year but this year cost me $140 - what % is the increase

    • profile image

      Jane 

      4 months ago

      the market price of jeans is fixed at $28 above the cost of production. What is percentage of discount may be allowed so that the gain may be 12%?

    • profile image

      Jaida 

      6 months ago

      Question 19

      You bought donuts for $0.60 each. In order to make a profit, you mark up the donuts 25%. What will you charge a customer for a donut?

    • profile image

      RAR 

      7 months ago

      The store bought a shirt at a wholesale price of 150 pesos and sells the shirt for 250. What is the amount of the markup?

    • profile image

      RAR 

      7 months ago

      The store bought a shirt at a wholesale price of 150 pesos and sells the shirt for 250. What is the amount of the markup?

    • profile image

      7 months ago

      hi bruh

    • profile image

      katie 

      11 months ago

      What is the price per item if you purchase a $12.99 item on sale for buy 3, get 2 free?

    • profile image

      Bill 

      11 months ago

      Question 1: In selling a sewing machine, a person loses 5%. If he has sold it for $120 more, he would have got a profit of 10%. What is its cost price?

    • profile image

      avarela04 

      22 months ago

      @gramacin - If the pasta maching costs $50 and is marked up to $75 for retail, then the mark up model is a 33% mark up. Basically a third mark up. Correct me if I'm wrong, but that's how I understand it.

    • profile image

      gramacin 

      22 months ago

      I am not getting this. if a pasta machine that cost 50.00 and is marked up to 75.00 find the % of markup.

      This is not helping me. If someone can start the problem for me I will get the hand of it. Any takers?

    • erorantes profile image

      Ana Maria Orantes 

      2 years ago from Miami Florida

      Thank you for sharing your hub. It is good to know the correct value of items we consume. Some people raise their prices too hight. Sometimes, they thing; they are doing the right prices on their goods. They are so wrong. Your hub, it is an enligment to people who do not know.

    • profile image

      Johnf0 

      4 years ago

      My brother recommended I may like this website. He used to be totally right. This post truly made my day. You can not consider simply how so much time I had spent for this info! Thanks! befdefffebga

    • profile image

      jessa mhae avelino 

      5 years ago

      i wish that this calculating has other language like filipino language :)

      but the video helps me

    • profile image

      i am who i am 

      6 years ago

      no comment

    • profile image

      Anonymous 

      6 years ago

      I think you're being verbose to the point of confusion on how to calculate mark up. There's no need for the first method. I liked the description though, thanks.

    • christian78 profile image

      christian78 

      6 years ago

      This stuff can be confusing but nice hub. Well put together, Thanks

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