A markup (or mark up) calculator is a tool you can use to calculate a sale price. You can enter your cost price, use the calculator, and get your markup price to pass on to the customer. You can also use a markup calculator to identify your costs and revenue.
Below, you can find out what a markup is, how to calculate one, and how convenient such a tool can be during negotiations with customers. Spend less time doing math and more time satisfying your customers’ needs!
What is a Markup?
A markup is a percentage made up of your cost to profit ratio. The profit is the difference between your cost and revenue. An example of this is if you buy something for $50 then sell it for $100, your profit is $50. The profit ratio to your cost is 100 percent.
However, it’s easy to confuse a profit margin with a markup. The profit margin is the profit to revenue ratio whereas markup is the profit to cost ratio. If you want to know your profit margin, you compare your selling price to the profit instead of the purchase price.
How Do You Calculate Markup?
Follow this five-step process below to calculate your markup on a product.
1. Identify the cost of a product – COGS (cost of goods sold). In this example, it’s $50.
2. Identify your gross profit which you get by subtracting the item’s cost from the revenue. We bought a pair of shoes for $50 and are selling them for $80, so the profit is $30.
3. Divide your profit by the cost of the goods sold. $30 / $80 = 0.375
4. Multiply it by 100 to get a percentage. 0.375 x 100 = 37.5 percent.
5. Your markup percentage in a pair of shoes in your store is 37.5 percent.
There is also a formula you can follow for determining the markup.The markup = 100 x profit / cost
The reason for multiplying the markup by 100 is so that you can get a percentage instead of a fraction. If you are missing figures to input into the markup calculator, such as the profit, then you can follow the formula below – using only cost and revenue.
The profit = the revenue – the cost x the markup / 100.If you need to identify the selling price, you can also use:The revenue = the cost + the cost x the markup / 100.
This formula can help you to find out the amount paid and what your regular markup will be if you add a sales price.
When you go to try out the markup calculator, you can enter any of the values you have. Enter a minimum of two for the third to be calculated.
Something Else to Consider
A markup calculator is something that can prove invaluable in any business. If you are in a haggling industry where the ticket price is not necessarily your best offer, then you don’t have to fight with sums in your head. Use this calculator to quickly and accurately work out what your bottom dollar will be while still making a profit.