Markup Calculator

How to Calculate Markup and Margin

Understanding markup and margin is crucial for businesses to price their products effectively and ensure profitability. This guide will walk you through the process of calculating these important financial metrics.

Markup and Margin Formulas

The key formulas for markup and margin calculations are:

Markup Formula:

$$\text{Markup (%)} = \frac{\text{Selling Price} - \text{Cost}}{\text{Cost}} \times 100$$

Margin Formula:

$$\text{Margin (%)} = \frac{\text{Selling Price} - \text{Cost}}{\text{Selling Price}} \times 100$$

Where:

• Selling Price: The price at which a product or service is sold
• Cost: The cost to produce or acquire the product or service

Calculation Steps

1. Determine the cost of the product or service.
2. Determine the selling price of the product or service.
3. Calculate the markup using the markup formula.
4. Calculate the margin using the margin formula.

Example Calculation

Let's calculate the markup and margin for a product with the following details:

• Cost: $80
• Selling Price: $100

Step 1: Calculate Markup

$$\text{Markup (%)} = \frac{100 - 80}{80} \times 100 = 25\%$$

Step 2: Calculate Margin

$$\text{Margin (%)} = \frac{100 - 80}{100} \times 100 = 20\%$$

Therefore, for this product:

• The markup is 25%
• The margin is 20%

Visual Representation

This diagram illustrates the relationship between cost, selling price, and profit. The light blue section represents the profit, while the dark blue section represents the cost. The total height of the bar indicates the selling price.