Calculate your selling price, profit, and profit margin based on cost price and markup percentage.
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The markup formula is: Selling Price = Cost + (Cost × Markup % ÷ 100). For example, a product costing 50 with a 40% markup has a profit of 50 × (40 ÷ 100) = 20, giving a selling price of 70.
Markup is profit calculated as a percentage of cost price, while margin is the same profit amount calculated as a percentage of selling price, a different base number. In the example above, a 40% markup on a 50 cost produces a selling price of 70, but the profit margin is only 20 ÷ 70 ≈ 28.6% of the selling price, not 40%. Confusing these two is a common pricing mistake.
Confusing markup and margin percentages, as the worked example shows, a 40% markup on a $50 cost is only about a 28.6% margin, using one figure where the other is meant is a very common pricing error.
Setting a markup percentage based purely on desired profit without checking whether the resulting selling price is still competitive in the market.
Forgetting to fold all costs, shipping, packaging, payment processing fees, overhead, into the cost price before applying markup, which understates true profit per sale.
Markup is profit expressed as a percentage of cost price, while margin is profit expressed as a percentage of selling price. They use the same profit amount but different bases, so a 40% markup is not the same as a 40% margin.
Markup is often used when setting prices from cost, while margin is often used when analyzing profitability of sales. Many businesses track both.
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