Quick answer: Markup is gross profit divided by cost: Markup % = (Price − Cost) ÷ Cost × 100. An item that costs $52 and sells for $80 has a $28 profit, a 53.85% markup. To set a price from a markup, use Price = Cost × (1 + Markup).
What is markup?
Markup is the amount added to the cost of a product or service to arrive at its selling price, usually shown as a percentage of that cost. Retailers, wholesalers, contractors and restaurants use it because it starts from the one number they always know: what they paid.
Markup is not the same as gross margin. Both use the same profit, but markup measures it against cost, while margin measures it against the selling price. Our gross margin guide covers the other side.
The markup formula
Markup amount = Selling price − Cost
Markup % = (Selling price − Cost) ÷ Cost × 100
Selling price = Cost × (1 + Markup % ÷ 100)The first line gives markup in dollars. The second turns it into a percentage of cost. The third runs the formula in reverse, which is how most businesses actually use markup when they set prices.
How to calculate markup, step by step
- Find the cost of one unit, meaning what you paid to buy or make it.
- Find the selling price you charge for that same unit.
- Subtract cost from price to get the markup amount in dollars.
- Divide the markup amount by cost, then multiply by 100 to get the markup percentage.
Worked example 1: markup from price and cost
A shop buys a product for $52 and sells it for $80.
Markup amount: $80 − $52 = $28.00.
Markup %: $28 ÷ $52 × 100 = 53.85%.
The same $28 is a 35.00% gross margin, since it is divided by the $80 price instead. The Gross Margin Calculator shows both figures side by side.
Worked example 2: price from a markup
The same shop wants a flat 50% markup on the $52 product.
Selling price: $52 × (1 + 0.50) = $78.00.
Check the margin: $26 profit ÷ $78 price × 100 = 33.33%. A 50% markup gives only a one third gross margin, which is the gap that catches many new sellers out.
Worked example 3: markup for a whole quarter
The furniture maker in our COGS guide had $315,000 in COGS and $450,000 in revenue.
Markup: ($450,000 − $315,000) ÷ $315,000 × 100 = 42.86%, while the gross margin on the same sales is 30.00%.
How to convert markup to gross margin
Because the two figures use different bases, you cannot swap one for the other. Use these formulas to convert between them, with each percentage written as a decimal.
Margin = Markup ÷ (1 + Markup)
Markup = Margin ÷ (1 − Margin)| Markup | Gross margin | Price on $100 cost |
|---|---|---|
| 10% | 9.09% | $110.00 |
| 20% | 16.67% | $120.00 |
| 25% | 20.00% | $125.00 |
| 30% | 23.08% | $130.00 |
| 40% | 28.57% | $140.00 |
| 50% | 33.33% | $150.00 |
| 75% | 42.86% | $175.00 |
| 100% | 50.00% | $200.00 |
| 150% | 60.00% | $250.00 |
Common markup mistakes
- Pricing with markup when you meant margin. A 40% markup gives only a 28.57% margin, so a business planning on 40% margin comes up short on every sale.
- Dividing by price instead of cost. That gives you margin, not markup. Markup always divides by cost.
- Leaving costs out of the base. Inbound shipping, packaging and direct labor belong in cost. Missing them makes the markup look larger than it really is.
- Using one markup for everything. Products with very different costs, turnover or returns often need their own markup to stay profitable.
Keystone pricing: many retailers use a 100% markup, known as keystone, which doubles the cost to set the price. A $52 item priced at keystone sells for $104. That is a 100% markup but a 50% gross margin, which is why the two terms should never be used loosely.
Want the margin, markup and profit for your own price and cost?
Open the Gross Margin CalculatorMarkup FAQs
What is the formula for markup percentage?
Markup % = (Selling price minus Cost) divided by Cost, multiplied by 100. A product that costs $52 and sells for $80 has a markup of 53.85%.
How do I calculate selling price from cost and markup?
Multiply the cost by one plus the markup as a decimal. For a 50% markup on a $52 cost, the selling price is $52 times 1.5, which is $78.
Is a 50% markup the same as a 50% margin?
No. A 50% markup on cost gives a 33.33% gross margin. To reach a 50% gross margin, you need a 100% markup, which doubles the cost.
Can markup be more than 100%?
Yes. Markup has no upper limit, because it is measured against cost. A $10 item sold for $35 has a 250% markup, while its gross margin is about 71.43%.
What is keystone markup?
Keystone is a 100% markup, where the selling price is set at double the cost. It is common in retail and equals a 50% gross margin.
Should markup include overhead costs?
Standard markup uses the direct cost of the item only. Many businesses then choose a markup large enough to cover rent, wages and other overhead and still leave a net profit.
Related calculators and guides
Content Lead, Anchor AI Tools, California, USA. Spotted an error? Email hello@anchoraitools.com and it will be checked and corrected. See our editorial standards.