Understanding Markup

Markup is a pricing strategy where you add a percentage to your cost to determine the selling price. It’s a fundamental concept in business that helps ensure profitability and covers overhead expenses beyond direct costs.

Why is it important?

• Profitability: Ensures you’re pricing products/services to generate adequate profit margins.
• Pricing Strategy: Helps maintain consistent pricing across your product line.
• Competitive Positioning: Allows you to balance profitability with market competitiveness.

How it’s Calculated

The calculation uses these formulas:

Profit = Cost × (Markup % / 100)

Revenue (Selling Price) = Cost + Profit

Where:

• Cost: The base cost of producing or acquiring your product/service.
• Markup Percentage: The percentage you add to the cost to determine your selling price.
• Revenue: The final selling price to your customers.
• Profit: The amount you earn above your cost.

Using the Calculator

1. Enter Cost: Input the base cost of your product or service.

2. Enter Markup Percentage: Input the percentage markup you want to apply.

   • Example: If your cost is $100 and you apply a 50% markup, your selling price will be $150 with a $50 profit.

The calculator will instantly show your selling price (revenue) and profit amount.

Common Markup Percentages by Industry

• Retail Clothing: 50-100%
• Restaurants: 200-400% (on food costs)
• Electronics: 20-50%
• Jewelry: 50-200%
• Furniture: 100-200%

Remember that markup is different from margin. While markup is based on cost, margin is based on selling price.