What Is Markup?
Marcus owns a coffee shop in Austin and buys coffee beans for $8 per pound. He wants to sell a pound of roasted beans for $14. The difference is $6, which is 75% of his cost. That 75% is his markup. Markup is the amount added to the cost of a product to arrive at the selling price, expressed as a percentage of the cost. It is one of the most common pricing methods used by retailers, wholesalers, and service businesses because it is simple to calculate and easy to apply consistently across a product catalog.
While markup is straightforward, it is often confused with margin. A 75% markup on an $8 cost produces a $14 selling price, but the gross margin on that sale is only 42.86%. The difference matters because margin tells you what percentage of revenue is profit, while markup tells you how much you added to the cost. For a deeper look at the distinction, see our Margin Calculator.
What This Calculator Does
This markup calculator takes your cost and desired markup percentage and instantly computes the markup amount, selling price, and gross margin. It also provides a full breakdown so you can see exactly how each figure is derived.
- Inputs: Cost of goods sold and markup percentage
- Outputs: Markup amount, selling price, gross margin percentage, and full breakdown
How the Calculation Works
Markup Amount = Cost x (Markup % / 100)
Selling Price = Cost + Markup Amount
Gross Margin = Markup Amount / Selling Price x 100
For example, if a product costs $60 and you apply a 50% markup, the markup amount is $60 x 0.50 = $30. The selling price is $60 + $30 = $90. The gross margin is $30 / $90 = 33.33%. Notice that a 50% markup does not produce a 50% margin. This is the single most common pricing mistake small businesses make.
How to Use the Calculator
- Enter the cost of your product or service
- Enter the desired markup percentage, or click a quick preset
- Review the selling price, markup amount, and gross margin
- Use the breakdown card to verify each step of the calculation
Example Calculation
Example: A furniture maker in Portland builds a dining table for $320 in materials and labor. She applies a 120% markup to cover overhead and profit. The markup amount is $320 x 1.20 = $384. The selling price is $320 + $384 = $704. The gross margin is $384 / $704 = 54.55%. If she had instead wanted a 55% gross margin, she would need to price the table at $320 / (1 - 0.55) = $711.11, which is a markup of 122.2%. For break-even analysis on volume, try our Break Even Calculator.
Common Mistakes to Avoid
- Confusing markup with margin: A 50% markup yields a 33.3% margin. A 100% markup yields a 50% margin. Always confirm which metric your accountant or pricing spreadsheet is referencing.
- Ignoring overhead costs: Markup must cover not just the cost of goods sold but also rent, utilities, marketing, and labor. A markup that only covers direct costs will lead to net losses.
- Using a flat markup for all products: Different products have different price sensitivities and cost structures. A flat 50% markup across a diverse catalog can leave money on the table for high-demand items and price you out of the market for competitive ones.
Limitations of This Calculator
This calculator computes gross margin from a single cost and markup percentage. It does not account for operating expenses, taxes, volume discounts, or multi-tier pricing. For businesses with complex cost structures, consult a CPA or use dedicated accounting software. For percentage-based calculations in general, see our Percentage Calculator.