How do you calculate markup percentage?

Subtract cost from selling price to find markup amount, divide that amount by cost, then multiply by 100.

What is a 50% markup on a $40 cost?

A 50% markup on $40 is $20, so the selling price is $60.

Is 50% markup the same as 50% margin?

No. A 50% markup means markup equals half of cost. On a $40 cost, the $60 selling price has a 33.33% gross margin.

How do I calculate selling price from markup?

Multiply cost by 1 plus the markup rate expressed as a decimal. For example, $80 at a 25% markup is $80 × 1.25 = $100.

Can markup be more than 100%?

Yes. A markup above 100% means the markup amount exceeds the underlying cost. Whether that price is commercially appropriate depends on costs, market conditions, and the value offered.

How to Calculate Markup

Markup is a pricing measure that compares the amount added to a product or service with its cost. This guide explains the markup formula, how to calculate selling price from a target markup, how to work backward from a selling price, and why markup should not be confused with profit margin.

Last reviewed: 2026-09-11

Markup formula

Markup is the difference between selling price and cost, measured relative to cost. Start by finding the markup amount, then divide by cost.

Markup Amount = Selling Price − Cost
Markup % = ((Selling Price − Cost) ÷ Cost) × 100

For a quick calculation, use the Markup Calculator.

Example: calculate markup from cost and selling price

Suppose a product costs $80 and sells for $120. The markup amount is $40.

Markup Amount = $120 − $80 = $40
Markup % = ($40 ÷ $80) × 100 = 50%

The product has a 50% markup because the $40 added to the price equals 50% of the $80 cost.

How to calculate selling price from a target markup

If you know cost and the markup percentage you want to apply, convert the percentage to a decimal and multiply cost by one plus that rate.

Selling Price = Cost × (1 + Markup Rate)
$80 × (1 + 0.50) = $120

This formula is useful for price lists and initial pricing models, but the resulting price should still be checked against taxes, transaction fees, overhead, discounts, returns, and market conditions.

How to find cost from selling price and markup

You can also reverse the calculation when you know the selling price and markup rate.

Cost = Selling Price ÷ (1 + Markup Rate)
$150 ÷ 1.50 = $100

A $150 selling price at a 50% markup therefore corresponds to a $100 cost.

Markup vs profit margin

Markup and margin both describe the relationship between price and cost, but their denominators are different. Markup divides profit by cost; gross margin divides gross profit by selling price.

Markup % = Gross Profit ÷ Cost × 100
Gross Margin % = Gross Profit ÷ Selling Price × 100

Using the earlier $80 cost and $120 selling price, markup is 50%, while gross margin is 33.33%. See Markup vs Margin for a detailed comparison or use the Profit Margin Calculator.

Why markup and margin are easy to confuse

The same dollar profit produces a higher markup percentage than margin percentage because cost is lower than selling price whenever a sale is profitable. Treating a target margin as if it were a markup can therefore produce a selling price that is too low for the intended margin.

For example, a $100 cost with a 30% markup gives a $130 selling price. The resulting gross margin is about 23.08%, not 30%.

Markup with discounts

A listed price may have an attractive markup but produce a much lower realized markup after promotions. If a $100-cost item is priced at $150 and then discounted by 20%, the customer pays $120. The realized markup is only 20%.

Discounted Price = $150 × 0.80 = $120
Realized Markup = (($120 − $100) ÷ $100) × 100 = 20%

This is why businesses should model expected selling prices rather than relying only on list-price markup.

What costs should you use?

The appropriate cost base depends on the decision you are making. Product businesses may start with unit acquisition or production cost, while a fuller pricing model can include freight, packaging, marketplace fees, payment processing, or other variable costs. Service businesses may use direct labor and other delivery costs. Keep the cost definition consistent when comparing products or periods.

Common markup calculation mistakes

Dividing by selling price. That calculates margin, not markup.
Using 50% markup when you need 50% margin. These targets require different selling prices.
Ignoring discounts. Promotions can materially reduce realized markup.
Using an incomplete cost base. Excluded variable costs can make pricing appear more profitable than it is.
Assuming markup equals net profit. Markup does not automatically account for overhead, tax, financing costs, or other expenses.

Using markup for practical pricing decisions

Markup is most useful as one input in a pricing system. Calculate a candidate selling price from cost, then test the resulting gross margin, expected discounts, fees, demand, and competitive position. For broader profitability analysis, read How to Calculate Profit Margin.