How markup is calculated
- Markup % = (price − cost) ÷ cost × 100. It measures your profit as a slice of the cost — the way most buyers and sellers instinctively talk about pricing.
- Selling price = cost × (1 + markup ÷ 100). A $60 cost with a 50% markup prices at $90.
- Margin equivalent = markup ÷ (100 + markup) × 100. That 50% markup is only a 33.3% margin — margin is always the smaller number, and confusing the two is how shops underprice.
Markup, margin and price together
The table below is the one worth bookmarking. It converts a markup into the margin it actually produces and shows what a $60 cost sells for at each level.
| Markup | Gross margin | $60 cost sells for | Profit per unit |
|---|
| 10% | 9.09% | $66.00 | $6.00 |
| 15% | 13.04% | $69.00 | $9.00 |
| 20% | 16.67% | $72.00 | $12.00 |
| 25% | 20.00% | $75.00 | $15.00 |
| 30% | 23.08% | $78.00 | $18.00 |
| 33.33% | 25.00% | $80.00 | $20.00 |
| 40% | 28.57% | $84.00 | $24.00 |
| 50% | 33.33% | $90.00 | $30.00 |
| 60% | 37.50% | $96.00 | $36.00 |
| 66.67% | 40.00% | $100.00 | $40.00 |
| 75% | 42.86% | $105.00 | $45.00 |
| 80% | 44.44% | $108.00 | $48.00 |
| 100% (keystone) | 50.00% | $120.00 | $60.00 |
| 125% | 55.56% | $135.00 | $75.00 |
| 150% | 60.00% | $150.00 | $90.00 |
| 200% | 66.67% | $180.00 | $120.00 |
| 300% | 75.00% | $240.00 | $180.00 |
Read the top of the table closely. A 10% markup leaves a 9.09% margin, and a 20% markup leaves only 16.67%. Small markups produce disproportionately small margins — which is why a business that "adds 20%" to its costs and then wonders where the profit went has usually just discovered this table.
Markup conventions by industry
| Term | Markup | Implied margin | Where you see it |
|---|
| Keystone pricing | 100% | 50% | Traditional retail — the price is double the wholesale cost |
| Wholesale | 25% – 50% | 20% – 33% | Distributors selling to retailers |
| Restaurant food cost | 200% – 300% | 67% – 75% | Menu pricing, where food is about a third of the plate price |
| Grocery | 15% – 30% | 13% – 23% | High volume, thin per-unit margin |
| Jewellery and fashion | 200% – 400% | 67% – 80% | Low unit volume, high markdown risk |
These are conventions rather than rules, and the spread is enormous. A grocery item at keystone pricing would be unsellable; a hand-made piece of jewellery at grocery margins would not cover its own display space. Benchmark against close competitors, not against retail as a whole.
What belongs in the cost
The markup percentage is only as good as the cost figure under it. Include everything it takes to get one unit into a customer's hands:
- Product cost — what you paid the supplier, plus inbound freight and duty.
- Direct labour — for anything you make or assemble, the time that goes into the unit.
- Packaging and outbound shipping — if you pay it and it scales with the unit, it belongs here.
- Payment processing — 2.9% of the sale price is real money, and pricing without it quietly eats the margin.
What does not belong in cost is overhead: rent, insurance, software subscriptions, salaries that do not vary with output. Those sit below gross profit, which is why a healthy markup can still coexist with a loss-making business. The gross margin calculator shows where the line falls.
Advertising a markup as a discount
If you plan to advertise "was $100, now $70", the comparison price is regulated. Under the FTC's Guides Against Deceptive Pricing, a former price must be one at which the product was actually offered in good faith and in the recent, regular course of business — not a figure invented to make the discount look bigger. State consumer protection laws often go further. The penalty is not a fine but a refund obligation, and it applies to the whole campaign.
Three worked examples
1. A retailer moving from keystone to a target margin
A shop buys at $42 and doubles it, selling at $84 — a 100% markup and a 50% margin. Costs rise and the owner decides a 40% margin is the new floor. Working from margin, the price is 42 ÷ 0.6 = $70.00.
Wait — that is lower than the current price. The correct reading is the other way round: the current $84 price already yields a 50% margin, so no increase is needed. The example matters because it shows how easily margin and markup get crossed: applying the 40% margin formula gave a lower price than the existing 100% markup, and only working both numbers exposes which target is actually being met.
2. A maker pricing a handmade item
Materials cost $18, direct labour is 45 minutes at $25 an hour ($18.75), and packaging plus outbound shipping is $4. Total unit cost is $40.75. Applying a 150% markup gives 40.75 × 2.5 = $101.88, which is a 60% margin and leaves $61.13 per unit.
Had labour been left out of the cost — a common shortcut — the markup would have been applied to $22.75 and the price would have landed at $56.88. The maker would have been working for close to nothing and the markup percentage would have looked perfectly healthy.
3. A distributor checking a volume deal
A distributor sells at a 30% markup on a $60 cost, which is $78.00 and a 23.08% margin — $18 of gross profit per unit. A customer asks for 15% off for a large order, taking the price to $66.30.
Gross profit falls to $6.30 per unit, a 9.5% margin. To recover the original $18 of profit per unit the volume has to nearly triple. That is the arithmetic behind every "we'll make it up on volume" conversation, and it is worth doing before agreeing to the discount rather than after.
Sources and standards
How we verify this calculator
The formulas follow standard cost accounting definitions: markup is gross profit divided by cost, margin is gross profit divided by price, and the two convert through margin = markup ÷ (100 + markup). No rounding is applied until display, so the table above reconciles to the cent.
Conversion table and industry conventions last reviewed: 19 September 2026.
This tool provides calculations, not accounting or legal advice. Advertising price comparisons are regulated and the rules vary by state.
FAQ
What is keystone pricing?
Keystone means doubling the cost — a 100% markup. It has been the traditional baseline for bricks-and-mortar retail for decades because it leaves room for rent, staffing and markdowns while still earning a 50% margin.
How do I convert markup to margin?
Divide the markup by (100 + markup) and multiply by 100. So 50% markup → 50 ÷ 150 = 33.3% margin, and 100% markup → 50% margin. Margin is always the smaller figure.
How do I calculate a selling price from cost and markup?
Multiply cost by (1 + markup ÷ 100): a $60 item at 50% markup sells for $60 × 1.5 = $90. The calculator above does it instantly and shows the margin behind the price.
What is a typical markup for retail?
Keystone (100%) is the classic baseline. Boutique and specialty goods often carry 150–300% markups, while high-volume groceries may run 10–25%. Service businesses usually price on margin rather than markup.
Should I price on markup or margin?
Use markup when you think in terms of "what did this cost me and what do I add on". Use margin when you need to hit a profitability target measured against revenue — which is how accountants and investors report it. Just never mix the two in the same sentence.
Does markup include overhead?
Only if you deliberately build it in. A markup calculated purely on product cost must be large enough to also cover rent, labour and marketing — which is why high-volume, low-markup businesses survive on scale.
How does VAT or sales tax affect markup?
Tax does not belong in your markup maths: compute markup on pre-tax prices only, then let the till or invoice add tax on top. Charging tax inside a marked-up price silently shrinks your real margin.
What is the difference between markup and margin?
Markup is gross profit divided by cost; margin is gross profit divided by price. A $60 cost sold at $100 is a 66.67% markup but only a 40% gross margin. Margin is always the smaller of the two numbers because it divides by the larger base.
What is the formula for markup percentage?
Markup % = (price − cost) ÷ cost × 100. Buy at $60 and sell at $90 and the profit is $30, so the markup is 30 ÷ 60 = 50%.
How do I work out the cost if I know the price and markup?
Divide the price by 1 plus the markup as a decimal. A $90 price at a 50% markup means 90 ÷ 1.5 = $60. This is the figure to use when a supplier quotes a retail price and you need to know what you can pay for the goods.
Why does a 50% markup only produce a 33% margin?
Because the two percentages divide the same profit by different bases. On a $60 cost at a $90 price the profit is $30 — half of the $60 cost (50% markup) but only a third of the $90 price (33.33% margin). The higher the markup, the wider the gap.
Can markup be negative?
Yes. If the selling price is below cost the markup is negative, which means you are selling at a loss on every unit. That is expected for a deliberate loss leader and a serious problem everywhere else.