How markup turns cost into a selling price
Markup expresses profit relative to cost. It is convenient when you start with a known cost and want to add a percentage on top, but it should not be confused with gross margin.
Formula
Selling price = cost × (1 + markup %). Markup % = profit ÷ cost × 100.
Example
A £40 cost with a 50% markup produces a £60 selling price and £20 gross profit. The equivalent gross margin is 33.3%.
Common mistakes to avoid
- Assuming a 50% markup means a 50% margin.
- Applying markup before all direct costs are included.
- Using the same markup for every product without considering demand and overheads.
ProfitMaths provides general calculation tools and educational information. Results are estimates and are not accounting, tax, legal or financial advice.