Markup Percentage Calculation

See Also:
Margin vs Markup
Margin Percentage Calculation
Retail Markup
Gross Profit Margin Ratio Analysis
Operating Profit Margin Ratio Analysis

Markup Percentage Definition

The markup percentage can best be defined as the increase on the original selling price. The markup sales are expressed as a percentage increase as to try and ensure that a company can receive the proper amount of gross or profit margin. Markups are normally used in retail or wholesale business as it is an easy way to price items when a store contains several different goods.

How to Calculate Markup Percentage

By definition, the markup percentage calculation is cost X markup percentage, and then add that to the original unit cost to arrive at the sales price. The markup equation or markup formula is given below in several different formats. For example, if a product costs $100, the selling price with a 25% markup would be $125.

Gross Profit Margin = Sales Price – Unit Cost = $125 – $100 = $25.

Markup Percentage = Gross Profit Margin/Unit Cost = $25/$100 = 25%.

Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100 = $125.

Markup Percentage Example

Glen works has started a company that specializes in the setup of office computers and software. Glen has decided that he would like to earn a markup percentage of 20% over the cost of the computers to ensure that he makes the proper amount of profit. Glen has recently received a job to set up a large office space. He estimates that he will need 25 computers at a cost of $600 a piece. Plus, Glen will need to set up the company software in the building. The cost of the software to run all the computers is around $2,000. If Glen wants to earn the desired 20% markup percentage for the job what will he need to charge the company?

Step 1

Glen must calculate the total cost of the project which is equal to the cost of software plus the cost of the computers.

$2,000 + ($600*25) = $17,000
Step 2

Glen must find his selling price by using his desired markup of 20% and the cost just calculated for the project.The formula to find the sales price is:

Sales Price = (Cost * Markup Percentage) + Cost
Sales Price = ($17,000 * 20%) + $17,000 = $20,400

This means that to earn the return desired Glen must charge the company $20,400. This is the equivalent of a profit margin of 16.7%. For a list of markup percentages and their profit margin equivalents scroll down to the bottom of the Margin vs Markup page, or they can be found using the above markup formula.

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10 Responses to Markup Percentage Calculation

  1. Drew December 26, 2014 at 9:48 am #

    Your example of markup % for Glen at the computer company is wrong. He will not earn a 20% markup over cost.

    The correct amount would be $21,250 – NOT $20,400.

    The proper formula would be:

    Computers (15,000) + Software (2,000) / (1 – .20 (Markup %) = $21,250.

    • Patel January 19, 2015 at 4:55 am #

      Yes, the correct ans is $21,250.

      the Calculation on Calculator is $2000+ $600*25 = $17000/.80 =$21250.

    • Clint May 4, 2015 at 2:06 pm #

      Drew isn’t actually correct.

      The article is talking about how markup of costs to price.
      Drew is talking about what percentage of sale price is then profit.

      A 20% markup only gives 16.7% profit on the sale price.

      Or to rephrase, the article is saying 20% markup is 20 cents on the dollar, whereas Drew would have you charge 32 cents on the dollar to have your profit be 20% of what you charge, rather than 20% of your costs.

  2. Peggy January 14, 2015 at 2:57 pm #

    Drew is absolutely right. If you subtract 20% from 20,400, you get a net of %16,320. Glen would be losing profit! Not sure I can trust any of your other calculations – this is a gold standard.

  3. jodi January 25, 2015 at 10:31 am #

    How do u calculate the mark up if u are given the cost of sales and sales amounts

    As well as how do u calculate the cost of sales if sales n mark up given

    • Ajit March 14, 2015 at 8:37 am #

      All of you are right.

      Glenn is correct as he will get 20% mark up on cost but will get only 16.66 on sales.

    • Sylwia April 7, 2015 at 3:22 pm #

      Gross profit/Cost of sales= mark up %

      Sales- Cost of Sales = Gross Profit

  4. Paul March 8, 2015 at 7:34 pm #

    You are all in fact wrong

    $20,400 is 20% mark up
    $21,250 is 20% margin

  5. Jess March 23, 2015 at 3:36 pm #

    Whenever I must calculate price given the mark up I use a formula that is easiest for me to remember which is
    cost*(1+20%)=price excel calculates it best but if that isn’t possibly it’s the order I do the math which would be 1+20%= .20 (or just move the decimal over to the left 2 spaces) then multiple cost by .20

    Though, I must say your formula may be a little easier to remember, and although your calcualtion is incorrect the formula still works……:
    Sales Price = ($17,000 * 20%) + $17,000 = $20,400

    It appears that your markup in this scenario is actually 19.99999%, didn’t know .00001% makes a difference on 17000.00

  6. Tony May 8, 2015 at 1:18 pm #

    This is all nonsense. In the real world, It’s a lot easier to calculate how much gross sales is needed to cover COGS and variables, then price my product at the market rate. If I can’t make sufficient cash flow based on the market price charged by competitors, and can’t lower my COGS and/or variables to make a profit, then the business model isn’t viable.

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