How to use the markup calculator
Type any two of the four values. The calculator keeps the two you typed last and works out the other two, with the profit per unit and the multiplier.
- From the cost and a markup, it works out the selling price, the way a price list built on cost does.
- From the cost and a target margin, it works out the price that reaches that margin.
- From the cost and a quoted price, it works out the markup and the margin the quote earns.
- From a price and a margin, it works out the highest cost that keeps the margin, for example when a customer names a target price.
The calculator starts with an example: an enclosure that costs $180.00, sold with a 40% markup.
Margin vs markup
Markup and margin both describe the profit on a sale, measured against different numbers. BDC, the Business Development Bank of Canada, expresses markup as a percentage of the cost of goods sold. It defines gross margin as gross profit as a percentage of revenue.
- Profit = price − cost
- Markup = profit ÷ cost
- Margin = profit ÷ price
- Price = cost × (1 + markup) = cost ÷ (1 − margin)
- Margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin)
- Multiplier = price ÷ cost = 1 + markup
A worked example
An electrical enclosure costs $180.00 to build: $95.00 of material, $50.00 of labour and $35.00 of overhead. Its product family carries a 40% markup, so the price is $180.00 × 1.40 = $252.00.
The profit is $72.00. As a share of the $180.00 cost, that is the 40% markup. As a share of the $252.00 price, it is a 28.6% margin.
To earn a 40% margin instead, divide the cost by 0.60. The price becomes $300.00, which is a 66.7% markup on the same cost.
A 40% markup and a 40% margin are two different prices, $252.00 and $300.00 for this enclosure. If your budget states a margin and your price list adds a markup, convert one into the other before you compare them.
BDC's own example works the same way. An item that costs $3.50 and sells for $10.00 earns $6.50, which BDC shows as a 186% markup. The same $6.50 is a 65% margin on the $10.00 price.
Markup to margin table
Each row converts a markup on cost into the margin it gives on the price. It also shows the multiplier and the price of an item that costs $100.00.
| Markup on cost | Margin on price | Multiplier | Price on a $100.00 cost |
|---|---|---|---|
| 10% | 9.1% | 1.10 | $110.00 |
| 15% | 13.0% | 1.15 | $115.00 |
| 20% | 16.7% | 1.20 | $120.00 |
| 25% | 20.0% | 1.25 | $125.00 |
| 30% | 23.1% | 1.30 | $130.00 |
| 35% | 25.9% | 1.35 | $135.00 |
| 40% | 28.6% | 1.40 | $140.00 |
| 45% | 31.0% | 1.45 | $145.00 |
| 50% | 33.3% | 1.50 | $150.00 |
| 60% | 37.5% | 1.60 | $160.00 |
| 75% | 42.9% | 1.75 | $175.00 |
| 100% | 50.0% | 2.00 | $200.00 |
| 150% | 60.0% | 2.50 | $250.00 |
| 200% | 66.7% | 3.00 | $300.00 |
Markup for a target margin
Read this table the other way round: find the margin you want, and it gives the markup and the multiplier that reach it.
| Target margin | Markup on cost | Multiplier | Price on a $100.00 cost |
|---|---|---|---|
| 10% | 11.1% | 1.111 | $111.11 |
| 15% | 17.6% | 1.176 | $117.65 |
| 20% | 25.0% | 1.250 | $125.00 |
| 25% | 33.3% | 1.333 | $133.33 |
| 30% | 42.9% | 1.429 | $142.86 |
| 35% | 53.8% | 1.538 | $153.85 |
| 40% | 66.7% | 1.667 | $166.67 |
| 45% | 81.8% | 1.818 | $181.82 |
| 50% | 100.0% | 2.000 | $200.00 |
| 60% | 150.0% | 2.500 | $250.00 |
Pricing from cost in manufacturing and distribution
A markup applies to a unit cost, so the cost has to be complete. BDC's guide counts raw materials, labour, amortization and factory overhead in a manufacturer's cost of goods sold. It leaves out marketing, selling and administration, which the gross profit has to pay for.
For a distributor, BDC's cost of sales starts from the cost of buying the products. It adds the labour and amortization of handling, storing and delivering them to the customer.
If you set one markup per product family, enter the family's markup and the unit cost to get the list price. Then read the margin it leaves. The guide to cost-plus pricing shows how to build that unit cost from material, labour and overhead.
BDC's guide also warns that you cannot choose a markup on math alone, because competitors' prices limit what you can charge. Price optimization covers how cost, demand and win and loss data set the price instead.
Check the margin you actually earn
A markup sets the margin a price earns on the cost you used. The margin you earn depends on the cost on the day you ship, and on discounts, rebates and freight. The guide to margin analysis covers how to measure it by product, customer and order.
Questions
What is the difference between markup and margin?
How do I convert markup to margin?
How do I convert margin to markup?
What markup gives a 50% margin?
What is the multiplier?
Should the cost include overhead?
Is anything I type sent anywhere?
See the real margin on every customer, product and order
The calculator shows the margin a markup should give. ThriveAI builds margin reports from the invoice lines in your own ERP. You see what each customer, product and order earned after rebates and freight.
See margin and pricing intelligence