Pricing & margin
Markup
Formula reviewed by Tahir Asif, CMA
Profit expressed as a percentage of cost, not of the selling price — the most common source of margin/markup confusion.
Markup is the amount added to cost to arrive at a selling price, expressed as a percentage of that cost. A 50% markup on a $10 cost sets the price at $15 — but that $5 of profit is only 33% of the $15 selling price, not 50%.
That gap between markup and margin percentages, calculated on different bases, causes real pricing mistakes: setting a target margin and mistakenly applying it as a markup percentage (or vice versa) systematically under- or over-prices a product.
Markup %
(Price − Cost) ÷ Cost
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