How to Calculate Markup and Set a Selling Price
Use markup to turn cost into a selling price, then check the resulting dollar profit and margin.
Markup is the percentage added to cost to produce a selling price. It is useful when cost is the number you know first and you need a repeatable pricing rule.
Markup formula
markup % = (selling price − cost) ÷ cost × 100
Set a selling price from markup
selling price = cost × (1 + markup rate)
For a $50 cost with a 40% markup: 50 × 1.40 = $70.
The resulting margin is different
The $20 profit is 40% of the $50 cost, but only 28.57% of the $70 selling price. That is the margin.
Quick markup-to-margin examples
| Markup | Approx. margin |
|---|---|
| 25% | 20% |
| 50% | 33.33% |
| 100% | 50% |
| 200% | 66.67% |
Build a useful cost figure first
If your input includes only the supplier price, the calculated profit may disappear after freight, packaging, labour, card fees, marketplace commissions, returns, or other direct costs. Decide whether your markup policy is based on landed cost, material cost, labour cost, or another clearly defined base.
Pricing is not only arithmetic
A formula can produce a mathematically consistent price, but the market still matters. Competitor pricing, perceived value, capacity, inventory turnover, and customer acquisition costs can all change the price a business can sustainably charge.