Markup vs Margin: How To Calculate Markup

Quick Answer

Markup is how much you add to an item's cost to set its price, written as a percentage of the cost. Cost $60, price $100: the $40 of profit is a 66.7% markup. The formula is markup% = profit ÷ cost × 100.

Markup Is Not Margin

This is the mistake that costs businesses money. Markup measures profit against cost; margin measures the same profit against the selling price. They describe the same sale with different denominators, so they are never the same number.

Sell that $60 item for $100 and you have a 66.7% markup but only a 40% margin. Mixing them up when pricing means you either leave money on the table or undercharge and miss your target profit.

Pricing From A Target Markup

Cost plus pricing works the other way: start from the cost price and apply the mark up you want. This is how you get a price from markup. The formula is price = cost × (1 + markup ÷ 100). A $60 cost at a 50% markup becomes $90. Switch the calculator to "Selling price from target markup" to do this directly, and it also shows the margin that price produces.

Examples

How to calculate markup from cost and price. For example, cost price $60 and selling price $100 leave $40 of profit, so the markup is 40 ÷ 60 × 100 = 66.7%.

Price from markup. For example, a $60 cost with a target 50% mark up sets the price at 60 × 1.5 = $90, which is cost plus pricing in one step.

Markup vs margin on the same sale. For example, that $60 to $100 sale is a 66.7% markup but only a 40% margin, the same profit measured against two different bases.

A Common Trap

"Double the price" sounds like a 100% return, and it is, as a markup. But doubling the price is only a 50% margin, because half of the selling price is still cost. If a report or supplier quotes a percentage, always confirm whether it is markup or margin before you rely on it.