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# Resellers differ in how they use markup pricing with some using the Markup-on-Cost

method and others using the Markup-on-Selling-Price method. In the next two sections we
cover each option. We will demonstrate each using an item that costs a reseller (US) \$50 to
purchase from a supplier and sells to customers for (US) \$65.

## Markup-on-Cost Pricing Method

Using this method, markup is reflected as a percentage by which initial price is set above product cost as
reflected in this formula:

## Markup Amount = Markup Percentage

Item Cost

\$15 = 30%
\$50

The calculation for setting initial price is determined by simply multiplying the cost of each item by a
predetermined percentage then adding the result to the cost:

## Markup-on-Selling-Price Pricing Method

Many resellers, and in particular retailers, discuss their markup not in terms of Markup-on-Cost but as a
reflection of price. That is, the markup is viewed as a percentage of the selling price and not as a
percentage of cost as it is with the Markup-on-Cost method. For example, using the same information as
was used in the Markup-on-Cost, the Markup-on-Selling-Price is reflected in this formula:

Selling Price

\$15 = 23%
\$65

## Item Cost = Price

(1.00 Markup Percentage)

\$50 = \$65
(1.00 .23)