This Markup Calculator is a key tool for setting effective pricing based on desired profitability margins. The logic correctly differentiates markup (based on cost) from gross margin (based on revenue).
Welcome to the **Markup Calculator**. Markup is the difference between a product’s cost and its selling price, expressed as a percentage of the *cost*. This tool helps businesses determine the appropriate selling price, analyze cost limits, or calculate the resulting markup percentage. Input any three of the four variables—Cost (C), Selling Price (S), Markup Amount (A), or Markup Percentage (M)—to solve for the missing value.
Markup Calculator
Markup Formula
The core relationship is based on two simple equations:
(1) A = S – C
(2) M = A / C
1. Solve for Markup Percentage (M):
M = ( S – C ) / C
2. Solve for Selling Price (S):
S = C × ( 1 + M )
3. Solve for Cost (C):
C = S / ( 1 + M )
4. Solve for Markup Amount (A):
A = S – C
Formula Source: Investopedia – Markup
Variables Explained
- C – Cost: The total cost to produce or acquire the product (Cost of Goods Sold).
- S – Selling Price: The price at which the product is sold (Revenue).
- A – Markup Amount: The difference between the Selling Price and the Cost (Gross Profit Amount).
- M – Markup Percentage: The Markup Amount expressed as a percentage of the Cost (A / C).
Related Calculators
What is Markup?
Markup is a pricing strategy used by businesses to add a certain percentage to the cost of their goods to determine the selling price. The key feature of markup is that the percentage is calculated based on the *cost* of the product, not the revenue. It is a fundamental calculation for retailers and manufacturers who need to ensure their selling prices cover both the cost of goods sold and operating expenses.
For example, if a product costs $10 to make and is sold for $15, the markup is $5. Since the markup percentage is calculated relative to the cost ($5 / $10), the markup percentage is 50%. This is often confused with gross margin, which would be calculated relative to the selling price ($5 / $15 = 33.33%).
The calculated markup percentage must be high enough to cover all overhead costs (like rent, salaries, marketing) in addition to the cost of the product itself, while still providing a target net profit.
How to Calculate Selling Price (Example)
Suppose your **Cost (C)** for a shirt is **$20.00**, and you want to apply a **75% Markup (M)**:
- Convert Markup to Decimal: $M = 75\% = 0.75$.
- Calculate Markup Amount (A): $A = C \times M = \$20.00 \times 0.75 = \$15.00$.
- Apply Selling Price Formula: $S = C + A = \$20.00 + \$15.00$.
- Determine Required Selling Price: $S = \$35.00$. The shirt must be sold for **$35.00** to achieve a 75% markup on cost.
- **Verify Markup:** Markup Amount ($A$) is $\$15.00$. Markup %: $\$15.00 / \$20.00 = 75\%$.
Frequently Asked Questions (FAQ)
Markup is calculated as a percentage of the **cost** ($A/C$). Gross Margin is calculated as a percentage of the **selling price** ($A/S$). A 100% markup is equivalent to a 50% gross margin.
Can Markup be negative?Yes, if the selling price (S) is lower than the cost (C). A negative markup (or loss) occurs when a business sells a product at a price lower than what it cost to acquire or produce.
What is a common Markup percentage?Common markups vary significantly by industry. Retail often sees 50% to 100%, while luxury goods may have much higher markups. Businesses should use a markup that covers all expenses and target profits.
If I know the Gross Margin, how do I find the Markup?If Margin (G) is known, Markup (M) can be calculated as: $M = G / (1 – G)$. For example, a 25% margin (0.25) converts to a 33.33% markup ($0.25 / (1 – 0.25) = 0.3333$).