Use this markup calculator to calculate markup percentage from cost and target profit, find a selling price from cost and markup, check gross margin, or work backward to a cost limit from price and target margin. Markup measures the amount added to cost, expressed as a percentage of that cost.
How to use the markup calculator
Choose an option from the Calculate menu, then enter the requested values:
- Markup by cost and target profit: Enter Cost and Profit in dollars. Profit means the dollar difference between selling price and the cost entered. If you know the selling price instead, subtract cost from price first.
- Selling price by cost and markup: Enter Cost in dollars and Markup as a percentage. The result labeled Markup price is the full selling price, not just the amount added.
- Gross margin using selling price and cost: Enter Price and Cost in dollars to calculate the percentage of the selling price remaining after that cost.
- Cost using selling price and target margin: Enter Price in dollars and your target Margin as a percentage. The result is the cost that would produce that margin at the specified price.
Enter percentages as whole percentage values: use 50 for 50%, not 0.50. Keep the basis consistent—for example, compare cost per item with price per item, or hourly cost with hourly billing rate.
Markup formulas and calculations
In the formulas below, C is cost, P is selling price, G is profit in dollars, U is markup percentage, and M is margin percentage. For a given sale, G = P − C.
| Calculation | Formula |
|---|---|
| Markup percentage | U = (G ÷ C) × 100 |
| Selling price from markup | P = C × (1 + U ÷ 100) |
| Gross margin percentage | M = ((P − C) ÷ P) × 100 |
| Cost from price and target margin | C = P × (1 − M ÷ 100) |
When you already know selling price and cost, the markup formula is equivalently ((selling price − cost) ÷ cost) × 100.
Worked example: $100 cost and $50 target profit
Suppose a retailer buys an item for $100 and wants to earn $50 above that cost.
- Markup: ($50 ÷ $100) × 100 = 50%.
- Selling price: $100 × (1 + 50 ÷ 100) = $150.
- Gross margin: (($150 − $100) ÷ $150) × 100 = approximately 33.33%.
To work backward from a target margin, suppose the selling price is fixed at $150 and you want a 40% margin. The cost calculation is $150 × (1 − 40 ÷ 100) = $90. Your cost must be $90 or less to achieve at least that margin, assuming the selling price remains unchanged.
Markup vs. margin: why the percentages differ
Markup and gross margin describe the same price-and-cost relationship using different denominators. Markup divides profit by cost; margin divides profit by selling price. They are related, but they are not interchangeable.
| Markup on cost | Equivalent gross margin |
|---|---|
| 25% | 20% |
| 50% | 33.33% |
| 100% | 50% |
| 150% | 60% |
For example, an item costing $4 and selling for $10 earns $6 above cost. Its markup is ($6 ÷ $4) × 100 = 150%, while its margin is ($6 ÷ $10) × 100 = 60%. Dividing $10 by $4 gives 250%, but that expresses price as a percentage of cost—not the markup.
If your pricing policy calls for a 40% margin, adding a 40% markup will fall short: a 40% markup produces a margin of about 28.57%.
What costs should you include?
The calculator uses only the cost you enter. If that cost is cost of goods sold, the difference between selling price and cost is gross profit—not net profit. A positive markup does not establish that your entire business is profitable.
- Retail goods: Use a consistent unit cost that accounts for relevant acquisition costs, such as purchase price, inbound freight, and duties. Check separately whether the resulting gross profit can cover operating expenses.
- Services: Match hourly billing rates with hourly costs. Wages alone may omit employer payroll costs, benefits, software, and nonbillable time.
- Transaction expenses: Consider payment processing, marketplace fees, delivery subsidies, and returns. These reduce the amount left from a sale even if they are not included in your chosen cost figure.
For example, charging $60 per hour against a $40 hourly cost creates a 50% markup and a 33.33% margin on that cost basis. The $20 difference is not necessarily net profit.
Use consistent tax treatment
When tax collected from customers is not your revenue, calculate markup using the tax-exclusive selling price. If a price includes tax at rate t%, the price before tax is tax-inclusive price ÷ (1 + t ÷ 100)—not the inclusive price minus t% of itself.
A $24 price including 20% tax contains $20 of sales revenue and $4 of tax. With a $5 cost, the markup on the tax-exclusive price is 300%. Use the net and gross calculator to work between tax-exclusive and tax-inclusive amounts, or the reverse tax calculator to remove included sales tax.
How to apply your result to pricing decisions
There is no universally good markup percentage. A workable rate depends on your costs, sales volume, customer demand, and competitive position. Use the result as a pricing input, not a guarantee that customers will buy or that all expenses are covered.
- Set an initial cost-plus price: Apply your proposed markup, then compare the resulting price with customer expectations and alternatives.
- Review supplier increases: Recalculate the price needed to preserve your markup when unit costs rise.
- Negotiate purchasing costs: Use selling price and target margin to establish a maximum cost before agreeing to a supplier quote.
- Test promotions: Use the Margin After Discount Calculator to check how a sale price changes profitability.
- Check required sales volume: Use the Break-Even Point Calculator to assess how many sales are needed to cover fixed and variable costs.
For company-level earnings analysis, measures such as EBIT and EBITDA provide a broader view than a single product’s markup, though neither is the same as net profit or cash flow.
Keep cost above zero when calculating markup and price above zero when calculating margin. For a positive selling price and positive cost, margin is below 100%, while markup can exceed 100%. Keep full precision during calculations and round the final price to your currency’s smallest unit.
Build a pricing calculator for your customers
If your prices depend on product options, quantities, or service requirements, Calcopolis lets you build a custom product pricing calculator for your website, helping visitors estimate costs and submit more specific quote requests.