How to use the markup calculator
The calculator works from cost to price. You tell it what one unit costs and how much markup you want, and it finds the list price. For a plain cost-plus price, enter your cost, set fixed costs, fees and discount to zero, and choose to keep the exact price.
The extra fields are there because a markup on paper often isn't the markup you keep. A 3% card fee and a 10% coupon both come out of the price, so the calculator raises the list price until your markup amount is still there after them.
- Enter the product or service cost per unit and any other cost per unit, like packaging or shipping.
- Enter expected units and the fixed costs you want this product to cover. Use zero to leave overhead out.
- Type the markup you want on that cost, such as 40 or 100.
- Add the selling and payment fee percentage and any discount you plan to offer.
- Pick how to round the list price, then calculate.
- Check the realized markup and margin, which are worked out from the rounded price.
Markup formula
Markup is profit as a percentage of cost. That's the whole definition, and it's why markup percentages look bigger than margins: cost is smaller than price, so the same profit is a bigger share of it.
When fees and discounts are involved, divide instead of adding. A fee charged on the sale price is covered by dividing by 1 minus the fee rate. A planned discount is covered by dividing by 1 minus the discount rate.
Markup % = (selling price - cost) / cost x 100Selling price = cost x (1 + markup %)Margin % = markup % / (100 + markup %) x 100Markup % = margin % / (100 - margin %) x 100Price before fees = full cost x (1 + markup %), then / (1 - fee rate), then / (1 - discount rate)
Worked example: 40% markup on a $60 cost
A product costs $50, plus $5 per unit for packaging. $500 of fixed costs spread over 100 units adds $5 more, so the full cost is $60. A 40% markup on $60 is $24, which puts cost plus profit at $84.
Now add a 3% selling fee and a 10% discount. $84 / 0.97 is about $86.60, the price the customer needs to pay. $86.60 / 0.90 gives a list price of about $96.22. After the discount the customer pays $86.60, the fee takes about $2.60, and you keep about $24. That's still a 40% markup, but only a 27.71% margin.
| Step | Calculation | Result |
|---|---|---|
| Full cost per unit | $50 + $5 + $500 / 100 | $60.00 |
| Markup amount | $60 x 40% | $24.00 |
| Price after discount | ($60 + $24) / 0.97 | $86.60 |
| List price | $86.60 / 0.90, rounded up | $96.22 |
| Realized markup | $24 / $60 | 40% |
| Realized margin | $24 / $86.60 | 27.71% |
Markup vs margin table
Markup divides profit by cost. Margin divides the same profit by the selling price. They're never equal when there's a profit, and the gap gets wider as the percentage climbs. A 100% markup, which retailers call keystone pricing, doubles the cost and gives a 50% margin.
Use the table to convert either way. The last column shows the selling price for an item that costs $20.
| Markup on cost | Multiply cost by | Margin on price | Price for a $20 cost |
|---|---|---|---|
| 10% | 1.10 | 9.09% | $22.00 |
| 20% | 1.20 | 16.67% | $24.00 |
| 25% | 1.25 | 20% | $25.00 |
| 30% | 1.30 | 23.08% | $26.00 |
| 40% | 1.40 | 28.57% | $28.00 |
| 50% | 1.50 | 33.33% | $30.00 |
| 60% | 1.60 | 37.50% | $32.00 |
| 75% | 1.75 | 42.86% | $35.00 |
| 100% | 2.00 | 50% | $40.00 |
| 150% | 2.50 | 60% | $50.00 |
| 200% | 3.00 | 66.67% | $60.00 |
Why you divide for fees and discounts
Say you need $86.60 after a 10% discount. Adding 10% gives $95.26, and 10% off $95.26 is only about $85.73. You're short. Dividing by 0.90 gives about $96.22, and 10% off that lands right back on $86.60.
Fees work the same way. A 3% marketplace fee is 3% of the sale price, not of your cost, so adding 3% of cost leaves you a little short every time. Flat per-order charges belong in the other cost field instead.
How volume and rounding change the price
Fixed costs get spread over the units you expect to sell. In the example, $500 over 100 units adds $5 per unit. Expect only 50 units and it adds $10, which pushes the list price up. Be careful with optimistic volume, because a price built on sales that don't happen won't cover the overhead.
The list price is rounded up, never down, so you don't fall below your target. The calculator then recalculates the markup and margin from the rounded price. Rounding the $96.22 example up to $97 lifts the markup to about 41.1%.
| Expected units | Fixed cost per unit | Full cost per unit | List price |
|---|---|---|---|
| 50 | $10.00 | $65.00 | $104.24 |
| 100 | $5.00 | $60.00 | $96.22 |
| 200 | $2.50 | $57.50 | $92.21 |
When to double-check the price
A markup tells you whether a price covers your costs. It can't tell you whether customers will pay it, what competitors charge or how many units you'll sell. Treat the result as a floor and test it against the market.
Use costs and prices without VAT or sales tax when that tax goes to the government. If you advertise a discount from a list price, make sure the list price is genuine. The FTC's guides on deceptive pricing cover former-price claims in the US.
Sources
These references define markup, keystone pricing and gross margin, and cover the pricing rules mentioned above.