The core formula
If an item costs 80 and is sold for 100, markup is 25% because profit of 20 is divided by cost of 80. Margin is 20% because profit is divided by selling price of 100.
Worked example
$50 cost with 40% markup gives a $70 selling price.
How to calculate markup
- Subtract cost from selling price to get unit profit.
- Divide profit by cost, not by selling price.
- Multiply by 100 to express markup as a percentage.
- To price from a target markup, multiply cost by one plus the markup rate as a decimal.
Markup is a cost-based pricing measure
Markup describes how much profit is added relative to cost. Because the denominator is cost, markup is always higher than the equivalent margin percentage for a profitable sale.
Markup is useful for building a selling price from a cost base. Margin is usually better for understanding how much of revenue remains after the selected costs.
Common mistakes
- Dividing profit by revenue and calling the result markup.
- Assuming a 40% markup produces a 40% margin.
- Using an incomplete cost base when the pricing decision should include additional variable costs.
Use the calculator
Work out selling price and markup percentage from your unit cost.
Open Markup CalculatorMarkup and margin use different bases
If an item costs 80 and is sold for 100, markup is 25% because profit of 20 is divided by cost of 80. Margin is 20% because profit is divided by selling price of 100.
Plan prices with all relevant costs
Product cost alone may exclude shipping, returns, payment processing and overhead. Decide which costs should be recovered before choosing a target markup.
Frequently asked questions
What is the difference between markup and margin?
Markup divides profit by cost; margin divides profit by selling price or revenue.
What selling price gives 40% markup on a $50 cost?
$50 × 1.40 = $70.
Can markup exceed 100%?
Yes. A selling price more than double cost produces markup above 100%.
What should I verify about plan prices with all relevant costs?
Product cost alone may exclude shipping, returns, payment processing and overhead. Decide which costs should be recovered before choosing a target markup.