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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:

Item Cost + (Item Cost x Markup Percentage) = Price

50 + (50 x .30 = $15) = $65

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:

Markup Amount = Markup Percentage


Selling Price

$15 = 23%
$65

The calculation for setting initial price using Markup-on-Selling-Price is:

Item Cost = Price


(1.00 Markup Percentage)

$50 = $65
(1.00 .23)