Pricing & Profit formula

Markup Formula

Calculate how much selling price exceeds cost, expressed as a percentage of cost.

The equation

How the formula works

Formula

Markup (%) = (Selling price − Cost) ÷ Cost × 100
Selling price = Cost × (1 + Markup ÷ 100)

What each term means

Cost: The amount paid to produce, purchase, or deliver the item or service.
Selling price: The amount charged to the customer before any deductions not included in the figures.
Markup: Profit as a percentage of cost.

How to calculate it

1
Subtract cost from selling price to find gross profit.
2
Divide gross profit by cost.
3
Multiply by 100 to express markup as a percentage.

Worked example

Put the formula into practice

An item costs $80 and sells for $100.

($100 − $80) ÷ $80 × 100 = 25%

The item has $20 of gross profit and a 25% markup on cost.

Apply the markup formula

Run this formula with your own numbers in the Markup Calculator.

Related decisions often need the Profit Margin Calculator, Selling Price Calculator, and Discount Calculator. Browse more in Pricing & Profit calculators.

How to interpret the result

A 25% markup means the selling price is 25% above cost; it does not mean the sale has a 25% margin.

Markup is useful for setting a price from cost, but the resulting margin should still be checked against the business's other expenses.

Markup versus margin

Markup uses cost as its denominator; margin uses selling price. A 25% markup on $80 creates a $100 price and a 20% margin.

Assumptions and limitations

Cost is greater than zero.
Cost and selling price refer to the same unit or scope.
The cost basis is defined consistently across products or periods.

Common mistakes

Using markup and margin interchangeably.
Applying a target margin percentage directly as a markup.
Leaving freight, labor, or transaction costs out of the cost basis without documenting that choice.

Frequently asked questions

Convert markup to a decimal, add 1, and multiply by cost. For 25% markup on $80: $80 × 1.25 = $100.

Yes. A 100% markup doubles cost, and a 150% markup sets price at 2.5 times cost.

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Related business formulas

Pricing & Profit

Profit Margin Formula

Calculate the percentage of selling price that remains after subtracting cost.

Profit margin (%) = (Selling price − Cost) ÷ Selling price × 100

Learn the formula