Markup – Adding Value to the Cost Price

Markup is the amount added to the cost price of a product to arrive at the selling price. While profit percentage is calculated on cost price, markup works in the same direction but is defined and used slightly differently in business settings.

The markup-versus-margin distinction on this page trips up even experienced small-business owners, because the two percentages use different denominators for what looks like the same calculation — and mixing them up leads to under-pricing. A retailer who wants a 25% margin (on selling price) but mistakenly applies a 25% markup (on cost price) will actually end up with only a 20% margin, quietly eating into their intended profit on every single sale. This is exactly why accountants and point-of-sale software always specify explicitly which base a percentage is measured against.

Key Terms

Term	Meaning
Cost Price (CP)	What the business paid to obtain the product
Markup Amount	The amount added to the cost price
Selling Price (SP)	Cost Price plus Markup
Markup %	Markup expressed as a percentage of the cost price

Formulas

Markup Amount = (Markup % / 100) times Cost Price. Selling Price = Cost Price plus Markup Amount. Or: SP = CP times (1 + Markup%/100).

Worked Examples

A shopkeeper buys an item for 80 and marks it up by 40%.

Markup = 40% of 80 = 32. SP = 80 + 32 = 112. Or: 80 times 1.40 = 112.

A product costing 250 is sold at 325. Find the markup %.

Markup = 325 - 250 = 75. Markup % = (75 / 250) times 100 = 30%.

An item sells for 180 with a 20% markup. Find the cost price.

SP = CP times 1.20. CP = 180 / 1.20 = 150.

Markup vs Profit %

	Markup %	Profit %
Based on	Cost Price	Cost Price
Formula	(SP-CP)/CP x 100	(SP-CP)/CP x 100
Same?	Yes — markup % on CP equals profit % on CP. They are the same calculation.

Note: In retail, markup is sometimes quoted as a percentage of the selling price (called margin). Margin % = (SP-CP)/SP times 100. Always clarify which base is being used.

Key Takeaways

Markup % on cost price is identical to profit % on cost price.
SP = CP times (1 + markup%/100).
To find CP from SP and markup%: CP = SP / (1 + markup%/100).
Margin % (on SP) is different from markup % (on CP) for the same transaction.

Practice: Markup

Find the Markup Percentage