Markup Calculation & Formula

Definition: Markup refers to the percentage added to the cost to get the selling price for a product. It can be expressed as a percentage of cost or in dollars.

Formula:
Markup = (Gross profit / Cost of goods sold) * 100%
Or,
Markup Percentage = (Sales Price - Unit Cost) / Unit Cost

Example 1:
Peter bought an item for $23 and sold it for $28. Calculate the percentage markup.
Solution:
Markup Percentage = (28 - 23) / 23 = 21.74%

Example 2:
Calculate the sales price if the original cost of a product is $200 and the markup is 20%.
Solution:
Sales Price = (Cost * Markup Percentage) + Cost = (200 * 20%) + 200 = $240

Example 3:
Product B has a cost of $40, and you markup the price by $5. Then, the markup would be: Markup = ($5 / $40) * 100% = 12.5%

Example 4:
Calculate the Markup Percentage for UT Ltd, given the following information: Sales $55,000, Cost of sales $30,000.
Solution:
Gross profit = 55,000 - 30,000 = $25,000
Markup = (25,000 / 30,000) * 100% = 83.3%

* Next: Net Profit Ratio Formula & Example
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