Markup Calculator

Understanding Markup vs. Margin

Markup and margin are both profitability metrics, but they're calculated differently. Understanding the distinction is crucial for proper pricing.

Markup Formula

Markup = (Selling Price - Cost) ÷ Cost × 100

Selling Price = Cost × (1 + Markup%)

Margin Formula

Margin = (Selling Price - Cost) ÷ Selling Price × 100

Example: $100 Cost, $150 Selling Price

• Markup: ($150 - $100) ÷ $100 = 50%
• Margin: ($150 - $100) ÷ $150 = 33.33%

Typical Markup Percentages by Industry

• Restaurants: 300% (food cost to menu price)
• Retail Clothing: 100-150%
• Jewelry: 200-300%
• Furniture: 200-400%
• Electronics: 10-30%
• Grocery: 10-25%
• Automotive Parts: 30-50%
• Pharmaceuticals: 30-80%

Markup Conversion to Margin

• 25% markup = 20% margin
• 50% markup = 33.33% margin
• 100% markup = 50% margin
• 200% markup = 66.67% margin
• 300% markup = 75% margin

When to Use Markup vs. Margin

• Use Markup for: Pricing products (adding % to cost)
• Use Margin for: Analyzing profitability and comparing to benchmarks

Factors Affecting Markup

• Competition and market conditions
• Perceived value and brand positioning
• Product lifecycle stage
• Operating expenses and overhead
• Target profit goals
• Volume discounts and economies of scale

Keystone Pricing

Keystone pricing is a common retail strategy of using a 100% markup (doubling the cost). For example, if an item costs $50, it sells for $100.

Psychological Pricing Tips

• Use charm pricing ($9.99 vs $10.00)
• Prestige pricing for luxury items (round numbers)
• Price anchoring (show original vs. sale price)
• Bundle pricing to increase perceived value

Note: Always consider your target market, competition, and overall business strategy when setting markup percentages. A higher markup isn't always better if it prices you out of the market.