Markup (business)

For the US legislative term, see Markup (legislation).

For other uses, see Markup.

Margin = 1 (1 / (Markup + 1))

Markup is the dierence between the cost of a good or

service and its selling price.[1] A markup is added onto the
total cost incurred by the producer of a good or service
in order to cover the costs of doing business and create
a prot. The total cost reects the total amount of both
xed and variable expenses to produce and distribute a
product.[2] Markup can be expressed as a xed amount
or as a percentage of the total cost or selling price.[1]
Retail markup is commonly calculated as the dierence
between wholesale price and retail price, as a percentage
of wholesale. Other methods are also used.

Margin = 1 (1 / (1 + 0.42)) = 29.5%

or Margin = Markup/(Markup + 1)

or Margin = ($1.99 $1.40) / $1.99 = 29.6%

Another method of calculating markup is based on percentage of cost. This method eliminates the two-step process above and incorporates the ability of discount pricing.
For instance cost of an item is 75.00 with 25%
markup discount.
75.00/(1 .25) = 75.00/.75 = 100.00

Price determination

1.1

Comparing the two methods for discounting:

Prot margin

Assume: Sale price is 2500, Product cost is 2000

75.00 (1 + .25) = 93.75 sale price with a 25%

discount

Prot margin = Sale price Cost[3]

500 = 2500 2000

1.2

93.75 (1 .25) = 93.75 .75 = 70.31(25)

cost was 75.00 and if sold for 70.31 both the
markup and the discount is 25%

Markup

Below shows markup as a percentage of the cost added to

the cost to create a new total (i.e. cost plus).

75.00 /(1 .25) = 100.00 sale price with a 25% discount

Cost (1 + Markup) = Sale price

100.00 (1 .25) = 100.00 .75 = 75.00

cost was 75.00 and if sold for 75.00 both the
markup and the discount is 25%

or solved for Markup = (Sale price / Cost) 1

or solved for Markup = (Sale price Cost) /
Cost

These examples show the dierence between adding a

percentage of a number to a number and asking of what
number is this number X% of. If the markup has to include more than just prot, such as overhead, it can be
included as such:

Assume the sale price is $1.99 and the cost is $1.40

Markup = ($1.99 / 1.40) 1 = 42%
or Markup = ($1.99 $1.40) / $1.40 = 42%

cost 1.25 = sale price

To convert from markup to prot margin:

or

Sale price Cost = Sale price Prot margin

therefore Prot Margin = (Sale price Cost) /
Sale price

cost / .75 = sale price

1

1.3

Aggregate supply framework

P = (1+) W. Where is the markup over costs. This is

the pricing equation.
W = F(u,z) Pe . This is the wage setting relation. u is
unemployment which negatively aects wages and z the
catch all variable positively aects wages.
Sub the wage setting into the price setting to
get the aggregate supply curve.
P = Pe(1+) F(u,z). This is the aggregate supply curve.
Where the price is determined by expected price, unemployment and z the catch all variable.

See also
Administered prices
Cost-plus pricing
Marketing
Markup rule
Pricing

References

[1] Ingels, Jack (2009). Ornamental Horticulture: Science,

Operations, & Management. Cengage Learning. p. 601.
ISBN 978-1-4354-9816-7.
[2] Pradhan, Swapna (2007). Retailing Management. Tata
McGraw-Hill. ISBN 978-0-07-062020-9.
[3] Farris P.W., Bendle N.T., Pfeifer P.E. and Reibstein D.J.
(2010). Marketing metrics : The Denitive Guide to Measuring Marketing Performance, Pearson Education.

External links
Markup Calculator - a simple web application which
calculates markup.

EXTERNAL LINKS

Text and image sources, contributors, and licenses

5.1

Text

Markup (business) Source: https://en.wikipedia.org/wiki/Markup_(business)?oldid=695133843 Contributors: Michael Hardy, Ehn, Mydogategodshat, Ruakh, Michael Devore, Mike Rosoft, Maurreen, Pearle, LutzL, Ynhockey, CINCABF, Bkwillwm, JubalHarshaw, RexNL,
Wavelength, RussBot, RobertRFreeman, Babij, SmackBot, Chris the speller, Joerite, James084, Fireswordght, Kuru, GhostInTheMachine,
Hu12, Vanisaac, CmdrObot, Dcm684, Alphachimpbot, XyBot, Murgh, Professor marginalia, Fabrictramp, MartinBot, Jim.henderson, SoniaZ, Ruleof3, Barkeep, SieBot, Phe-bot, Sun2009, Mygolfretailguru, Muszek, GioCM, ClueBot, Drmies, Singularity42, HCHR, DumZiBoT, Maximus1973, Addbot, Fluernutter, Jim1138, Prunesqualer, Awayls, Meaghan, TobeBot, Hypopotamus, Dinamik-bot, J36miles,
EmausBot, ClueBot NG, CocuBot, Delusion23, Helpful Pixie Bot, Ziracote, Wdaviesedwards, Mrt3366, Edutoit, Makecat-bot, MohamedAhmed-FG, Mielectric1, Institutionalist, Heynav135 and Anonymous: 83

5.2

Images

5.3

Content license

Creative Commons Attribution-Share Alike 3.0