How to calculate markup based on cost

Written by carter mcbride
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How to calculate markup based on cost
Companies can calculate markup by determining cost of the product and profit desired. (calculator image by gajatz from Fotolia.com)

To calculate the markup on a product, your company needs to know the cost of the item. This can be the expense to produce it or the cost to buy it wholesale. The markup is the price above the cost that your company charges to sell the product. The markup will be the profit on the sale of each item.

Skill level:
Easy

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Instructions

  1. 1

    Determine the cost of the product and the per cent of profit that your company wants to make on each sale. For example, you produce widgets for £1.90 a piece. You want to make 150 per cent profit on each sale. If you convert the percentage to decimal form, then 150 per cent equals 1.50.

  2. 2

    Add 100 per cent to the per cent of the profit that the company wants to make on each sale, as determined in the step above. This represents the cost to produce the product. In decimal form, one hundred per cent equals one. In the example, one plus 1.50 equals 2.50. Alternatively, you could write this in its percentage form as 100 per cent plus 150 per cent equals 250 per cent.

  3. 3

    Multiply the cost of the product by the number calculated in Step Two. In the example, £1.90 times 2.50 equals a selling price of £4.80. Alternatively, this can be expressed as £1.90 times 250 per cent equals a selling price of £4.80.

  4. 4

    Subtract the selling price from the cost of the product to determine the markup. In the example, £4.80 minus £1.90 equals a £2.90 markup.

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