Markup is the profit expressed as a percentage of the marginal cost, total production cost or total costs, while margin is the profit expressed as a percentage of the sales price.
How to calculate Markup:
Markup is the extra percentage charged to customers on above of producers actual cost.
The markup formula is,
Markup = (Price – Cost)/Cost
Example of Markup:
Suppose, you sell each Television Set for $300 and Costs of Sales of this is $ 200. Hence, Gross profit is = $(300-200) = $ 100.
Using the formula,
Here, Price = $300, Costs of Sales $200.
Mark up is = (Price – Costs)/Costs = $ (300-200)/200 = $100/200 = .50 markup.
The make the markup a percentage, multiply the result by 100,i.e = .50 X 100 =50% markup.
However, some businesses might set their prices based on predetermined markup percentage. The formula in this respect is Cost + (Cost x markup) = Price