How to Figure Out Mark Ups & Gross Profit

The markup and gross profit are two terms used to describe the difference between the cost of an item and the price it is sold for to a customer. Businesses at all levels of production can use these measures to determine the profitability of their products. The profit measures the raw dollars and cents of profit while the markup measures the percentage increase of the sales price relative to the cost of the item.

Things You'll Need

• Calculator

Instructions

1. Subtract the cost of the item from the sales price of the item to figure out the profit. For example, if you sell an item for $12.20 and you paid $10 for it, you would subtract $10 from $12.20 to find the profit equals $2.20.

2. Divide the profit by the cost to find the markup expressed as a decimal. In this example, you would divide the profit of $2.20 by the cost of $10 to get 0.22.

3. Multiply the markup expressed as a decimal by 100 to find the markup percentage. In this example, you would multiply 0.22 by 100 to get a markup of 22 percent.

References

• University of Tennessee: Selling Price, Gross Margin & Mark-Up Determination