Log In Markup calculator
FreshBooks markup calculator
Follow these steps to effortlessly calculate your markup:
- Enter the total cost incurred to produce, acquire, or provide the product or service.
- Enter the Markup Percentage. Specify the percentage you want to add to the cost price to determine the selling price. If you don’t know your markup percentage, read the section “How to find markup percentage.“
- Instantly see your calculated margin, revenue, and profit, empowering informed pricing decisions.
What is markup?
Markup is the difference between the cost of a product or service and its selling price. It is added to the total cost of a product to arrive at a selling price.
Markup formula
The markup formula is:
Markup = Selling Price – Cost Price
This formula helps businesses determine the additional amount they need to add to their cost price to set a profitable selling price.
How to calculate markup?
Understanding the Basics
- Cost Price: This is the amount you pay to acquire or produce a product.
- Selling Price: This is the price you charge customers for the product.
- Markup: This is the difference between the selling price and the cost price. It’s the amount you add to the cost to determine the selling price.
- Markup Percentage: This expresses the markup as a percentage of the cost price.
Steps to Calculate Markup Percentage
- Determine the Cost Price:
- Identify the exact cost of your product. This includes all direct costs associated with bringing the product to sale.
- Determine the Selling Price:
- Decide on the price you want to charge your customers.
- Calculate the Markup Amount:
- Subtract the cost price from the selling price:
- Markup Amount = Selling Price – Cost Price
- Subtract the cost price from the selling price:
Example:
- Let’s say a product costs you $50 to make.
- You want to sell it for $75.
- Cost price: $50
- Selling price: $75
- Markup amount: $75 – $50 = $25
Therefore, your markup amount is $25
How to find markup percentage
To calculate markup percentage, use the following formula:
Markup Percentage = (Markup / Cost) x 100
This percentage is crucial for evaluating profitability and comparing pricing strategies.
Example:
In the previous section, we calculated the markup amount now let’s calculate the markup percentage, using the formula we just learned:
- Markup amount: $25
- Markup percentage: ($25 / $50) x 100 = 50%
Therefore, your markup percentage is 50%.
Markup vs margin: key differences
Don’t mix up markup and margin! While they’re sometimes used as synonyms, they’re not the same. Understanding their distinct calculations is key to accurate pricing and really knowing your profit picture.
| Markup: A Percentage of Cost | Margin: A Percentage of Revenue | |
| Definition | Markup is the percentage increase added to the cost of a product or service to determine its selling price. | Margin is the percentage of the selling price that represents your profit. |
| Formula | (Selling Price – Cost Price) / Cost Price x 100 | (Selling Price – Cost Price) / Selling Price x 100 |
| Focus | How much you’re adding on top of your costs. | How much of your revenue remains after covering costs. |
| Example | If a product costs $50 and you sell it for $75, your markup is 50%. | Using the same example, your margin is 33.3% ($25 profit / $75 selling price). |
Markup examples
Markup is used across various industries. For example:
- Retail: A clothing store might add a 50% markup to the cost of a t-shirt.
- Wholesale: A distributor might add a 20% markup to the cost of goods sold to retailers.
- Service-based businesses: A consultant might add a markup to their hourly rate to cover overhead costs and profit.
Benefits of using a markup calculator
Using a markup calculator offers several benefits for businesses:
- Saves time by automating calculations.
- Increases accuracy in pricing.
- Helps in making informed pricing decisions.
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Frequently Asked Questions
Gross profit markup is calculated by subtracting the cost of goods sold from revenue, then dividing by the cost of goods sold, and multiplying by 100.
A good markup percentage varies by industry, but generally, a higher markup percentage that covers all costs and contributes to the profit margin is considered good.
To calculate the selling price, multiply the cost by the markup percentage, add the result to the cost
Yes, the markup price calculator can be used for services by considering the cost of providing the service.
You should adjust your markup rate periodically based on changes in costs, market conditions, competitive pricing and business goals.
Yes, the FreshBooks markup calculator is free to use.