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Definition: Markup

Markup refers to the percentage increase or simply increase over the cost incurred in a product. Markup is the additional price added over the cost of a product so that overhead costs & profits are covered. Markup is in contrast to Markdown which is a discount offered on the selling price.

The pricing strategy used by companies to do markup is known as markup pricing. Maintained markup is done when prices have to be reduced slightly when there is no sale.

Formula for Markup

The formula for markup can be given as

Margin Percentage = (Gross Profit Margin/ Unit Cost) x 100

In this case,

Gross Profit Margin= Sale Price - Unit Cost

Example of Markup

$8 is the cost of a product, and the producer wants a 25 % mark up, the markup price would be

$8 + 25% of $8

i.e, $8 + $2= $10

Hence the final product price would reach the retailer at $10 Markup.

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