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.
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 Questions
- A retailer buys goods for 200 and applies a 35% markup. What is the selling price?
- An item sells for 390 after a 30% markup. What was the cost price?
- A product bought for 60 is sold for 78. What is the markup percentage?
- A cafe buys coffee beans at 12 per kg and sells coffee at a 150% markup on cost. What is the selling price per kg of beans used?
- If a 25% margin (on SP) is the target, what markup % on CP does this correspond to?