What is Markup?
Markup is the percentage added to the cost price of a product or service to determine its selling price. It represents the gross profit relative to the cost of goods sold (COGS).
How to Calculate Markup (Formula)
The formula for calculating markup percentage is straightforward:
Markup (%) = ((Selling Price - Cost) / Cost) * 100
Difference Between Markup and Profit Margin
While both metrics measure business profitability, they are based on different values:
- Markup is calculated as a percentage of the Cost Price.
- Profit Margin is calculated as a percentage of the Selling Price.
For example, if an item costs $50 and sells for $100, the markup is 100%, but the profit margin is 50%.