How to Calculate Markup: Formula, Examples, and Pricing Guide
By Shihab Mia June 20, 2026 7 min read
Quick answer
To calculate markup, subtract the cost from the selling price, divide by the cost, then multiply by 100. The formula is markup percent = (selling price minus cost) / cost x 100. Example: an item that costs 40 and sells for 60 has a markup of (60 minus 40) / 40 x 100, which equals 50 percent.
Markup is one of the most important numbers in any business that buys or makes something and then resells it. It tells you how much you add on top of your cost to arrive at a selling price. Get it right and you cover your expenses and earn a profit. Get it wrong and you either scare off customers with high prices or quietly lose money on every sale. This guide walks through the formula, gives you worked examples, hands you a reference chart, and clears up the single most common point of confusion: the difference between markup and margin.
What does markup mean in pricing?
Markup is the difference between what an item costs you and the price you charge for it, expressed as a percentage of the cost. It answers one question: how much did you add on top of cost to set the price? The dollar amount you add is your gross profit per unit, and the markup percentage is that profit shown relative to cost.
If you buy a phone case for 8 dollars and sell it for 20 dollars, you have added 12 dollars on top of your cost. As a percentage of that 8 dollar cost, the markup is 150 percent. Markup is the engine behind cost plus pricing, the most common pricing method for retailers, wholesalers, restaurants, and trades. You start with your cost, apply a markup percentage, and the result is your selling price. Because the math is anchored to cost, markup is intuitive for anyone who already knows what they pay for inventory.
What is the markup formula?
The markup formula is (selling price minus cost) divided by cost, times 100. There are three versions depending on what you already know. Use the first to find a markup percentage, the second to find a selling price from a target markup, and the third to find the raw dollar profit per unit.
- Find the markup percent: markup percent = (selling price minus cost) / cost x 100
- Find the selling price: selling price = cost x (1 plus markup percent / 100)
- Find the dollar markup: dollar markup = selling price minus cost
Notice that every version divides by, or multiplies from, the cost. That is the defining feature of markup. The moment you start dividing by the selling price instead, you are calculating margin, which is a different number entirely. We cover that distinction below, and you can practice the underlying math with our percentage calculator or read the deeper walk through in how to calculate percentage.
How do you calculate markup step by step?
To calculate markup step by step, subtract cost from price, divide the result by cost, then multiply by 100. Suppose you run a small coffee shop and buy bags of beans for 12 dollars each, and you want to sell each bag for 21 dollars. Here is how to find the markup percentage.
- Write down the cost: 12 dollars.
- Write down the selling price: 21 dollars.
- Subtract cost from price to get the dollar markup: 21 minus 12 equals 9 dollars.
- Divide the dollar markup by the cost: 9 divided by 12 equals 0.75.
- Multiply by 100 to convert to a percentage: 0.75 x 100 equals 75 percent.
Your markup is 75 percent. Now reverse it. Say you instead decide every product should carry a 60 percent markup. A pastry costs you 2.50 to make. Multiply 2.50 by 1.60 (that is 1 plus 60 divided by 100) to get a selling price of 4 dollars. Cost plus pricing in one quick multiplication.
Markup vs margin: what is the difference?
Markup and margin use the same two numbers, cost and selling price, but they divide by different things, so they are never equal. Markup divides the profit by cost. Margin divides the profit by selling price. Because the selling price is always larger than the cost, the margin percentage is always smaller than the markup percentage for the same sale.
Take the coffee bean example again: cost 12, price 21, profit 9. Markup is 9 / 12, which is 75 percent. Margin is 9 / 21, which is about 43 percent. Same sale, two very different looking numbers. Confusing the two is one of the fastest ways to underprice a product, so always be clear about which one you mean. If margin is what you care about, see our companion guide on how to calculate profit margin.
Markup percentage and the margin it produces
| Markup | Resulting margin | Price on a 100 cost |
|---|---|---|
| 10 percent | 9.1 percent | 110.00 |
| 25 percent | 20.0 percent | 125.00 |
| 50 percent | 33.3 percent | 150.00 |
| 75 percent | 42.9 percent | 175.00 |
| 100 percent | 50.0 percent | 200.00 |
| 150 percent | 60.0 percent | 250.00 |
| 200 percent | 66.7 percent | 300.00 |
To convert between the two without a chart, use these shortcuts: margin = markup / (1 plus markup), and markup = margin / (1 minus margin), where both are written as decimals. A 50 percent markup becomes 0.5 / 1.5, which is 0.333, or a 33.3 percent margin. Keep the pair of formulas handy and you will never mistake one for the other again.
What is a typical markup by industry?
There is no single correct markup. The right number depends on your costs, competition, how fast inventory turns, and how much service or risk you carry. Fast moving, easy to compare goods carry thin markups, while specialty items with high perceived value carry fat ones. These ranges are common starting points, not rules.
Common markup ranges by category
| Industry | Typical markup | Why |
|---|---|---|
| Grocery and food retail | 10 to 50 percent | High volume, fierce price competition |
| Restaurants (food cost) | 200 to 300 percent | Covers labor, rent, spoilage, and waste |
| Apparel and fashion | 100 percent or more | Classic keystone doubling of cost |
| Electronics | Under 25 percent | Shoppers compare prices instantly |
| Jewelry and specialty | 100 to 300 percent | High perceived value and low turnover |
Government price data shows how thin retail can get once competition and overhead are factored in, which is why grocers lean on volume rather than fat per-item markups (see the U.S. Bureau of Labor Statistics Producer Price Index for how wholesale and retail prices move over time). The takeaway: benchmark against your own category, not a single rule of thumb.
What are the most common markup mistakes?
The most common markup mistakes are confusing markup with margin and forgetting hidden costs. Pricing math is simple, but small slips are expensive when repeated across thousands of sales. Watch for these.
- Mixing up markup and margin. A 50 percent markup is only a 33.3 percent margin. Treating them as equal silently shrinks your profit.
- Forgetting hidden costs. Shipping, payment fees, packaging, and returns all eat into your real cost. Build them into the cost figure before applying markup.
- Ignoring discounts. A markup that looks healthy can evaporate after a sale. Model your discounted price before you commit, ideally with a discount calculator.
- Pricing only on cost. Cost plus pricing ignores what customers will actually pay. Check competitor prices and perceived value too.
- Rounding too early. Round only at the final selling price, not at each intermediate step, to avoid drift.
Good to know about markup
Keystone pricing simply means a 100 percent markup, or doubling your cost. It became the retail default because it is fast mental math and historically left enough room for overhead and profit. Many sellers now treat it as a floor for some categories and a ceiling for others rather than a universal rule.
Markup also interacts with volume. A low markup on a fast selling item can out earn a high markup on something that sits on the shelf, so always think in total profit, not just percentage. And watch how markup compounds down a supply chain: a distributor marks up the maker, a retailer marks up the distributor, and the shopper pays for every layer. If you want to test how a price holds up after a promotion, the tool below makes it quick.
๐ท๏ธ Try the free tool Discount Calculator Free discount calculator finds your sale price, dollars saved, and effective percent off. Stack two coupons, reverse a discount, and add sales tax in seconds.Master the markup formula and you have the foundation for confident, profitable pricing. Start with your true cost, choose a markup that fits your industry and goals, double check whether you actually mean margin, and always model discounts before they hit. With those habits, every price you set will pull its weight. For more money math, explore percent change to track how your prices move over time.