BROWSE HOW TOs

How to Calculate a Price Markup

By eHow Business Editor

Rate: (28 Ratings)

Turning a profit is paramount when running a business. In order to make a profit, you need to calculate a markup on the price you are going to charge for goods or services. Determine what price markup to charge for your product or service by following these steps.

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Instructions

Difficulty: Moderate

Things You’ll Need:

Calculator
Product/service cost information
Industry markup information

Step1

Determine your product/service cost. How much did it cost you? As an example, let’s assume the product cost is $1.40.

Step2

Determine the percentage markup you wish to apply. Research your industry to apply a markup that will be competitive. In this example, we will use 30 percent.

Step3

Convert the percentage markup to a decimal. In this case, a 30 percent markup would translate to 0.30 (30 divided by 100).

Step4

Subtract the decimal in STEP 3 from 1. In this example, 1 minus 0.30 equals 0.70.

Step5

Compute the total selling price by taking the cost from STEP 1 and dividing it by the result from STEP 4. In this example, $1.40 is divided by 0.70. The result is $2.00, which should be the total selling price.

Step6

Calculate the price markup by subtracting the product cost from the selling price. In this example, the $2.00 selling price minus the $1.40 product cost gives you a price markup of $0.60.

Tips & Warnings

Include all necessary expenses in the total cost of your product to ensure your markup will be profit.
Make sure you don’t overprice your product. The selling price needs to be competitive in the marketplace.

Comments

andypep said

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on 10/3/2008 This information is wrong. To calculate the markup, you would find the percent being marked up, and write that number as a decimal. We will use 30%, as you did in your example.

We then take the number, 0.30, and multiply it by the cost, in your example, $1.40. 1.40 * 0.30 = $0.42

This $0.42 represents your mark-up.

You would then add your mark-up to the original price of $1.40 for a total cost of $1.82, NOT the $2.00 that you suggest.

To use your logic, with the same cost of $1.40, a 50% mark-up would result in the following.

1-0.5 = 0.5

$1.40 / 0.5 = $2.80

To find percent change, I find the change in price, and divide it by the original price (in this case, the cost)

$2.80 - $1.40 = $1.40.

The change is $1.40. So I will now divide this by the cost of $1.40.

$1.40 / $1.40 = 1

I then multiply this number by 100 to find my percent.

1 x 100

BusinessesSale said

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on 8/12/2008 Thats how i would do it too

BusinessesSale said

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on 8/12/2008 I agree, I mark up like tdad. Mmmmm

robij said

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on 8/7/2008 I agree this is wrong, according to this way a mark up of 50% would double the price!!! What would a mark up of 100% do?? Try it! LOL

tdad1999 said

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on 4/21/2008 Tell me this. If you are planning to mark something up by 30% why don't you use the formula of 1 plus the markup percentage (30%) multiplied by cost.

I.E. $100 x 1.3 = 130

OR $100 / 0.7 = 142.86

Someone please clarify this for me.