How to Calculate Markup Price, Markup Percentage, and Margin

Updated on June 15, 2020
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Learn how margin differs from markup and how to calculate both using simple formulas.
Learn how margin differs from markup and how to calculate both using simple formulas. | Source

What Is Markup Percentage?

Markup percentage is the amount of the cost paid for 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, let's use an example: Let's say you purchase a box of paper that costs one dollar. You aim for a profit of 50%. By multiplying the cost by 50%, you get $0.50. This is your markup price. Add that to the price that you paid to purchase the box of paper, and now the total is $1.50. This is the selling price of the box of paper. Therefore, your markup percentage is 50%.

What Is Margin?

Margin is defined as the percentage of the final selling price that is profit. To look at margin, let's use the same example: A 50% margin means that half of the selling price is profit. Therefore, using the example above, to get a 50% margin on the box of paper, we would have to sell it for $2.00. If you sold it for $1.50, like in the example above, your margin would only be 33.33% because only 33.33% of the $1.50 sale price would be coming back to you as profit (since you paid $1.00 for the box of paper initially).

How Do Markup and Margin Relate to One Another?

Again, markup is the amount of the cost of the goods you're reselling that you add on to create the selling price. As seen above, a 50% markup is less money than a 50% margin. If you multiply an item's margin by its selling price, you can determine the cost paid for the item. Using the example above, for instance, if we multiply the selling price of $2.00 by the margin of 50%, we arrive at the original cost: $1.00.

In general, retailers use markup to set the selling price of an item, while investors look at profit margin (usually at a total level across all products, not at an individual, product-specific level). The amount of profit that a company is making overall generally determines its success. Therefore, using markup to set the selling price for individual items while calculating an overall profit margin as a whole on total sales works well for many businesses.

How to Calculate Selling Price using Markup Percentage

Before you can determine selling price, or "target price," you must first know your product cost and markup percentage. Then, using the formula below, you can determine the selling price.

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

Example 1

Question:

Suppose the cost to make a bag is $20. What is the selling price, if you want a markup of 30%?

Answer:

Product Cost: $20
Markup: 30%

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

In this case, the selling price would be $26, and the markup price would be $6.

Example 2

Question:

You purchase an item for $10, and you want to mark up the price by 40%. At what price you should sell that item?

Answer:

Product Cost: $10
Markup: 40%

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

In this case, the selling price would be $14, and the markup price would be $4.

How to Calculate Selling Price the Faster Way

To calculate selling price the faster way, you can use this formula:

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

Example 1

Product Cost: $20
Markup: 30%

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

Example 2

Product Cost: $10
Markup: 40%

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

How to Calculate Markup Percentage Using Product Cost and Selling Price

To calculate markup percentage, you need to know the product cost and selling price. Then, using the formula below, you can determine the markup percentage.

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

Example 1

Question:

If you purchase an item for $15 and sell it for $20, what is the markup percentage?

Answer:

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

In this case, the markup percentage would be 33.33%.

Example 2

Question:

If a product costs $10, and you want to sell it for $13, what is the markup percentage?

Answer:

Markup = ($13 - $10) / $10 *100% = $3 / $10 * 100% = 30%

In this case, the markup percentage would be 30%.

Video: How to Calculate Markup Percentage

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Comments

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    • profile image

      Nun ya 

      7 weeks ago

      Find the selling price.

      Cost to store: $75

      Markup: 20%

      what is the selling price? I need help

    • profile image

      A Homo sapien 

      8 weeks ago

      Find the selling price.

      Cost to store: $75

      Markup: 20%

      what is the selling price?

    • profile image

      FILIPINOBITCHFUCKPEOPLEWHOSAYSWEEATDOGSBITCH 

      5 months ago

      good work

    • profile image

      Kpopfangirl 

      6 months ago

      Markup $26 by7%

    • profile image

      none 

      6 months ago

      No help

    • profile image

      none 

      7 months ago

      No Help

    • profile image

      none 

      8 months ago

      this did not answer my question - how do you calculate percent between two prices.

    • profile image

      Grocery store has 60% mark up on the can of soup the cans of soup cost to store one dollar 50 Cent what is the selling price for the canna soup 

      8 months ago

      Grocery store has 60% mark up on the can of soup the cans of soup cost to store one dollar 50 Cent what is the selling price for the canna soup

    • profile image

      student 

      9 months ago

      The store bought a basketball for $4 and sold it for $22. What was the percent mark up (rounded to the nearest tenth of a percent)?

    • profile image

      carl 

      13 months ago

      A store buys a product for $22 and then marks it up 32%. What is the final price?

    • profile image

      Student 

      15 months ago

      A store pays $44 for arug. The store marks up the price by

      10% . What is the new price?

    • profile image

      vincent 

      17 months ago

      Original price: $64; Markup: 20%

    • profile image

      NOmi kkk 

      19 months ago

      a loan of 408280 on a markup of 18% per anum, will grow to how much at the end of 22 years?

    • profile image

      Annonymous 

      20 months ago

      It is a common practice for the 2316 department store to add a 30% markup to the wholesale price. If a pair of shoes wholesale price costs P3,500.00 is on sale for 20% off, how much would a customer pay for it ?

    • profile image

      ANNABELE 

      2 years 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 

      2 years ago

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

    • profile image

      me 

      2 years ago

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

    • profile image

      Jane 

      2 years 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 

      2 years 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 

      2 years 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 

      2 years 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

      2 years ago

      hi bruh

    • profile image

      katie 

      2 years 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 

      2 years 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 

      3 years 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 

      3 years 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 

      4 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 

      5 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 

      6 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 

      8 years ago

      no comment

    • profile image

      Anonymous 

      8 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 

      8 years ago

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

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