Price determination in any industry is important as you want customers to buy from you, but you also want to make a profit. The markup pricing method gives you a simple way to determine your products' selling prices and it also guarantees a profit, assuming customer demand remains high. Markup pricing typically ignores certain factors, such as your marketing and administration expenses as well as consumer demand. However, when other businesses in your industry use this same type of price determination, consumers usually have uniform prices.
Calculate the total cost to acquire the product. For example, retailers' total cost for the product equals the product's purchase price from the manufacturer or wholesaler and may include other variables, such as the cost for shipping or transporting the product to your store. On the other hand, a manufacturers' total cost often includes the cost for raw materials, labor and other overhead factors used to produce the actual product for resale to wholesalers, distributors or retailers. For this example, assume you are reselling computers and your total cost to acquire a particular desktop system is $600.
Determine a markup percentage for the product you're reselling. Read industry profile reports from market research firms like Dun & Bradstreet, IBISWorld and MicroBilt, as well as industry trade journals, to locate average markups for your industry. In this example, assume that the industry average for desktop computer retailers' equals 22 percent.
Divide the markup percent by 100 to convert it to a decimal. Add "1" to the result. In this example, converting 22 percent to a decimal and adding 1 equals 1.22.
Multiply your markup percentage multiplier by the product's total cost to determine your selling price. In this instance, multiplying 1.22 (markup percentage plus 1) by the $600 total cost for a desktop computer equals a resale price of $732.