Stepwise.

Markup Calculator

Apply a markup percentage to a cost to get the selling price, and see the profit margin that markup actually produces.

How to use this calculator

  1. 1Enter the cost of the item.
  2. 2Enter the markup you want to apply, or the price you are charging to find the implied markup.
  3. 3Check the margin figure — that is the number your accounts will report.

How the calculation works

Price = Cost × (1 + Markup) Markup % = (Price − Cost) / Cost × 100
Cost
What you paid or what it cost to produce
Markup
The uplift, as a share of cost
Price
What you charge

Markup has no ceiling — a 300% markup is perfectly ordinary in some sectors. Margin can never reach 100%.

To convert between them: margin = markup / (1 + markup), and markup = margin / (1 − margin).

Worked example

A $50 item with a 60% markup

  1. 1.Price = 50 × (1 + 0.60) = $80.
  2. 2.Profit is $30 per unit.
  3. 3.Margin = 30 ÷ 80 = 37.5%, noticeably less than the 60% markup.

Result: $80 selling price, 37.5% margin

What markup is and where it fits in pricing

Markup is the simplest way many businesses set a price: take what something costs, add a percentage on top, and charge that. It is the basis of "cost-plus" pricing, one of the oldest pricing methods there is, because it only requires knowing a number the business already has — its own cost — rather than researching what the market will bear.

Because markup is calculated against cost rather than price, it behaves differently from margin even though both describe the same profit. A markup of 100% simply doubles the price; there is no equivalent ceiling the way there is for margin, which mathematically can never reach 100%.

What actually belongs in "cost"

Getting markup right depends entirely on what is counted as cost in the first place — leave something out and every sale quietly underprices itself.

  • Direct materials — the raw inputs or wholesale goods that go directly into what is sold.
  • Direct labour — time spent making or preparing the specific item, as opposed to general staff time.
  • Landed costs — shipping, duties and handling required to get inventory ready to sell — easy to forget when pricing straight off a supplier invoice.
  • Allocated overhead — a share of rent, utilities and admin, if the business wants markup to cover more than just the direct cost of the item.

Why markup and margin pull apart as the number grows

At small percentages the two measures are close — a 10% markup and a roughly 9.1% margin describe almost the same pricing. But the gap widens quickly: a 100% markup is only a 50% margin, and a 300% markup — ordinary in some sectors, like jewellery or hospitality minibars — is still just a 75% margin. Relying on markup alone can make a business feel more profitable than its margin, the figure that actually determines the bottom line, will show.

Markup conventions that show up across industries

Different sectors have settled on rough, informal markup norms, shaped by how much handling, risk and shelf time a product typically carries.

  • Keystone pricing — doubling the wholesale cost — a 100% markup — has been a standard rule of thumb in general retail for generations, though it is a starting point rather than a rule.
  • Restaurants — menu prices are often set at several times the direct ingredient cost, since the markup also has to cover kitchen labour, rent and spoilage.
  • Wholesale and distribution — markups tend to be far thinner, often in the low tens of percent, because volume rather than margin per unit drives the profit.
  • Services — markup is harder to define since "cost" is mostly time, so many service businesses price by the hour or the project instead of applying a formal markup at all.

The limits of pricing by markup alone

Cost-plus pricing is easy to calculate and guarantees a margin on paper, but it answers "what do I need to charge to cover my costs and make a profit" rather than "what will someone actually pay." A business that prices purely on markup can leave money on the table for something customers would happily pay more for, or price itself out of a sale on something customers see as only worth a little more than its parts. Many businesses use a markup as a floor price, then adjust upward for demand, competition and positioning — value-based pricing layered on top of a cost-plus foundation.

What this assumes, and where it stops

Assumptions

  • Cost covers everything you want the markup to sit on top of.
  • Price excludes sales tax or VAT.

Limitations

  • Cost-plus pricing ignores what customers are willing to pay and what competitors charge. It guarantees a margin only if you sell the unit.
  • It does not account for volume discounts, shrinkage, or returns.

Common questions

How do I convert markup to margin?

Margin = markup ÷ (1 + markup). A 60% markup is 0.6 ÷ 1.6 = 37.5% margin. Going the other way, markup = margin ÷ (1 − margin), so a 40% margin needs a 66.7% markup.

What is keystone pricing?

Doubling the wholesale cost — a 100% markup, which is a 50% margin. It is a traditional retail rule of thumb, not a rule; it works when it happens to match what the market will bear.

Sources

Formula and content last reviewed on .

Results are estimates for information only, not professional advice.

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