February 3, 2021 Last updated February 3rd, 2021 769 Reads share

Step-By Step Guide to Calculating Markup Percentage

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Business owners and individuals have the opportunity to make more profit by using the markup. The large markup will make a great profit on the sale of products. You can understand how to calculate markup by using the markup formula. You can easily find the markup on products and services by using this formula. You can use an online markup calculator for calculating markup and revenue and it depends on the cost and profit of the product.

What is Markup

Markup is the difference of the product cost and actual price of the product.  The markup helps the manufacturers to manage the cost of supplies that is required to make product and profit also. Fixed and variable expenses of the product are included in the final price. In the marketplace, markup is referred to as the percentage.

For Example: because of the limited stocks of leather jackets at the lock shopping store is marked up by 25 percent. When it comes to calculating the markup for the stock of your outlet, it becomes a very complex and daunting task for the calculations of many items together. So, simply try percent markup calculator to compute the markup calculations.

Markup Percentage Formula:

The markup formula is expressed as:

Markup percentage = (sale price – unit cost / unit cost) X 100.

For Instance: suppose the cost of the product is $20 and the selling price is $25. So, the markup percentage would be ($25 – $20) / $20 = 0.25 X 100 = 25%.

Instead of using the markup formula for calculating the markup for a product, company or local store, you can use the markup calculator that allows you to compute the cost, markup, revenue, profit, and margin of products.

If the cost of developing the products is about $50 and the product is sold at a price of $80, the markup of the product is $20. The markup price are expenses in the form of a percentage which is 62.5%. For ease, you can try the percent markup calculator to figure out the cost and profit for the product. The calculation for cost and profit is based on the markup and revenue.

Step by Step Procedure To Calculate the Markup of a Product

Let’s calculate the markup of a product with the help of an example:

Example:  Suppose that the company owner is specialized in the production of office computers and printers. The owner of the company has a large order from a customer and the customer demands 35 computers with 10 printers. The buyer also asked the owner to install some software on all of the computers.

The per computer cost is $600 and per printer, the cost is $150 and the cost of installing the computer programs is $1000. If the owner wants to earn a profit of 20% from an order, then what price will charge to get the profit.

Step # 1: To calculate the markup, you need to calculate the total of of the oder:

(cost of computer + cost of  printer + cost of  software)

($600 X 35 + $150 X 10 + $1000)

$21,000+ $1500 + $1000 = $23,500

After doing the calculations, the cost of the order will be $23,500.

Step # 2: calculate the selling price of the product with the desired profit percentage 20%. 20% = (selling price – $23,500) / $23,500 therefore the selling price would be 28,200.

Therefore, the owner of the company achieves the desired markup percentage of 20 percent and the owner charges 28,200 to the customer.

You can also try an online markup percentage calculator that helps you to calculate the ideal markup price for your products or services as well.

Difference Between Markup and Gross Margin

In today’s market, markup and gross margins are usually used as interchangeable factors but traditionally markup and gross margins are different. According to the defination, markup is said to be an increase in the price of the product, where the margins of the product sale subtract the cost sold products.

The Importance of Understanding Markup

For a business, the understanding of markup is very important. For instance: developing a strategy is the most important factor for setting the price. The markup of a product or service is enough to set the expense of the business and also helps to generate the profit for the product or service.

The initial and the most crucial step to calculate the markup for a business is to figure out the standard market price and the audit of your competition. The research market should include the top retailer’s survey that took the discrepancies in the price, it also shed the light on how retailers affect the markup.

Markup in Different Industries

The percentage of the market depends on the industry parameters. The markup percentage is approximately 5% to 10% for the total cost of the manufactured goods. On the other side there are also some industries that have the markup on the goods or services in a large percentage.

Simply use an online percent markup calculator that calculates the percentage markup for the product according to the percentage markup formula.

Conclusion

Calculating the markup for a product or service is a complex task but in this article, we’ve listed the important steps that help you to calculate the markup of the goods or services. Markup of a product is expressed in a fixed amount or in the form of a percentage of the total cost or selling price. Remember that the markup percentage in the market is different in different industries.

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Olga Cohn

Olga Cohn

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