Calculate the total markup on an item, or the desired markup of an item. Enter the cost, revenue, and profit to calculate markup.
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Markup Formula
The markup on an item can be calculated with the following formula.
Markup = 100 * p/c
- Where p is profit ($)
- c is cost ($)
Multiplying the profit divided by the cost represents the markup as a percentage, however, it can be displayed as a decimal as well. Markup is not the same as margin. Margin is a representation of the revenue to cost, so it will be slightly different than markup.
Markup Definition
Markup is defined as the ratio of the profit to the total cost of a product or service.
How to calculate Markup
The first step in calculating the markup on an item is determining the cost of goods sold, or more simply just the costs. As an example, let’s assume our product has a cost of $200.00.
Next, we need to calculate the profit on that item. This can be done by subtracting the cost from the revenue. Let’s say the revenue was $500.00. That gives us a profit of $300.00.
Finally, we need to plug both the profit and cost into either the calculator above or the formula. This gives us a markup of 150%.
FAQ
There are only two ways one can increase their markup. Either reduce cost or increase revenue. The different ways you can do that are infinite. An example of a good way to reduce cost is to review your sources of raw material and get competitive bids from competing companies. Then you can go back to your current supplier and try to have them bring the cost down. The best-case scenario is these two companies get into a bidding war.
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