Quick answerA markup calculator converts an item's cost and markup percentage into gross profit and selling price. It also shows gross margin, making the difference between profit as a percentage of cost and profit as a percentage of selling price immediately visible.
Markup and margin answer different questions
Markup measures profit relative to cost. If an item costs $80 and receives a 25 percent markup, profit is $20 and selling price is $100. Gross margin measures that same $20 profit relative to the $100 selling price, so the margin is 20 percent—not 25 percent.
Confusing the two percentages can produce a price below the intended target. To achieve a 25 percent margin, price must leave profit equal to one quarter of revenue. That requires dividing cost by 1 minus the margin rate, which produces a 33.33 percent markup on cost. This page starts from markup and displays the resulting margin for comparison.
Choosing the cost used for pricing
The formula is only as useful as the cost entered. A retailer may use acquisition cost, landed cost, or a fuller cost that allocates freight, packaging, payment processing, labor, spoilage, returns, and overhead. Decide which expenses the selling price must recover before applying a percentage.
Sales tax is normally added according to the transaction and jurisdiction, rather than treated as business revenue in a basic markup calculation. Discounts also change the realized price and margin. If a list price will regularly be discounted, calculate the effective selling price after the discount and check whether it still covers the intended cost.
How to use this markup calculator
- Enter the full per-item cost used by your pricing decision.
- Enter markup as a percentage of cost.
- Use the displayed gross margin to avoid confusing a markup target with a margin target.
Formula and method
The result is per item and before sales tax. Cost must already include every expense you intend to recover; discounts, overhead allocation, payment fees, returns, and income tax are not inferred.
Markup and margin example
A product has a landed cost of $48 and a markup target of 40 percent. Profit before other unallocated costs is $48 × 0.40, or $19.20. Adding that profit to cost produces a selling price of $67.20.
The corresponding gross margin is $19.20 divided by $67.20, about 28.57 percent. If the product is sold at a 10 percent discount, actual revenue becomes $60.48 and gross profit falls to $12.48. The original markup no longer describes the completed sale.
Common mistakes to avoid
- Using margin and markup as interchangeable percentages.
- Applying markup to an incomplete cost figure.
- Including sales tax in revenue without matching the accounting treatment.
- Ignoring discounts, fees, and returns when reviewing realized profitability.
Accuracy and practical limits
The calculation is exact for one cost and one markup rate, with display rounding applied afterward. It reports gross profit rather than net profit and does not allocate overhead or taxes. Businesses should use consistent accounting definitions and review actual transaction data when pricing decisions have material financial consequences.
Method basis: Standard mathematical definitions and the assumptions stated above. See our editorial and testing standards.
Frequently asked questions
Are markup and margin the same?
No. Markup divides profit by cost, while margin divides profit by selling price.
What margin comes from a 25% markup?
A 25% markup produces a 20% gross margin because $20 profit is 20% of the $100 selling price.
Does selling price include sales tax?
No. Sales tax is normally applied separately according to the transaction and jurisdiction.