Use this markup calculator to easily calculate your markup, gross profit, or the revenue required to achieve a given markup percentage. Enter the cost and either the (desired or actual) the gross profit, the total revenue, or the markup percentage to calculate the remaining two. The revenue coincides with the markup price if calculating for a single unit of sales.
Quick navigation:
- How to use the Markup Calculator?
- What is markup?
- Markup formula
- How to calculate your markup?
- How to calculate a markup price?
- Markup vs margin
How to use the Markup Calculator?
This versatile markup calculator will help you calculate:
- profit, markup, and profit margin (given cost and gross revenue)
- revenue (or markup price), markup, and margin (given cost and gross profit)
- revenue, profit, and margin (given the cost and the markup)
Simply enter the cost and the other business metric depending on the desired output and press "Calculate". You can copy/paste the results easily using the clipboard icon next to each value.
What is markup?
In business, markup is the ratio between the cost of a good or service and its final selling price. Known also as a markup rate, it is usually expressed as a percentage increase over the cost. There is markup in every transaction as this is the sum from which the producer or reseller needs to cover their costs of doing business as well as create a profit. Usually when calculating the markup one takes as cost the total amount of fixed and variable expenses to produce and distribute the product or service. For example, in retail businesses the markup is calculated as the percentage difference between the retail price, also known as the markup price, and the wholesale price.
Markup figures are often used in political campaigns aimed at increasing regulation for certain businesses or industries, with claims often made against the absolute or relative value of the markup. What these campaigns often "forget" to mention is that the markup is not how much the business makes in profit. In fact, even a business with a very high markup may not be able to cover its expenses ones taxes, interest rates on debts and other expenses are included. Oftentimes the markup cited will only include variable costs and not include costs such as rent, depreciation, maintenance, and others. Keep that in mind when interpreting the results from the calculator.
Markup formula
The formula to calculate markup in a price is:
Markup = Revenue / Cost
Revenue stands for your total sales. Both input values of the equation are in the relevant currency while the resulting markup is a ratio which can be converted to a percentage by multiplying the result by 100. This markup percentage formula and its derivatives are the basis of our markup calculation tool.
How to calculate your markup?
Knowing the formula above, you should start with estimating the cost of production, which includes all variable and fixed costs of producing the goods or services the business sells. When calculating for a past period, you already know the gross revenue that was made by selling the goods or services so simply plug in the numbers in formula. For example, if the costs are $100,000 and the revenue is $120,000 the equation becomes: Markup = (120,000 - 100,000) / 100,000 - 1 = 20,000 / 100,000 = 1/5 which is the markup ratio. To convert to percentage, multiply by 100: 1/5 * 100 = 20% markup. Such a markup rate results in a margin such that for every 5 dollars in sales the business pockets 1 dollar in after accounting for costs.
If you know only the cost and the profit, simply add the two together to get the revenue, then substitute in the same equation. If what you want to calculate is the profit and/or revenue required to achieve a given markup, then simply input the cost and the markup percentage in our price markup calculator.
How to calculate a markup price?
There are four main practical scenarios of calculating a selling price, depending on what is taken as known or given:
- If the percentage markup is known, it is a simple percentage increase calculation. Simply add the cost of goods to the result of multiplying the cost of goods / services by the markup rate. For example, with a rate of 40% and a cost of $100, the markup price is simply $100 + $100 + 40% = $100 + $100 * 0.4 = $100 + $40 = $140 which is the price with markup included.
- If the dollar amount of markup is known, it is a straightforward addition. If the cost is $100 and the markup is $50, simply add $50 to $100 to get the marked up price.
- If the required dollar amount of profit is known, e.g. one wants to make $10 in profit for every unit sold, if the unit costs $50 to make, then the selling price is simply equal to the cost plus the dollar profit, or $50 + $10 = $60 while the markup percentage is $60 / $50 - 100% = 120% - 100% = 20%.
- If the required profit margin is known (calculating markup rate via margin rate), then things get a bit more complicated. To calculate a markup price via the margin percentage one needs to solve the equation: Price with markup = Cost / (1 - Margin(%)). For example, to get a profit margin of 20% with a cost of $200, one needs to sell at a price of $200 / (1 - 20%) = $200 / 80% = $250 which implies a markup of $50 or 25 percent of the cost of goods or services. Use our margin calculator for such kinds of problems.
Markup vs margin
The two metrics are sometimes confused, but there is quite the difference between markup and margin. Whereas the markup is the percentage difference between your costs and your revenue, the margin is the percentage difference between your profits and your revenue. Markup is useful when you need to estimate how much you are charging over costs, while margin is useful to estimate what proportion of your revenue ends up as profit (net income).
