How to use the Markup Calculator
- Enter your unit cost, including landed freight and duty if you import.
- Enter the markup percentage you intend to apply.
- Read the selling price and the resulting gross margin.
- Adjust the markup until the margin matches your category target.
How the calculation works
Markup is profit as a percentage of cost; margin is profit as a percentage of price. They are never equal, and the gap widens fast: 50% markup is 33% margin, 100% markup is 50% margin, 200% markup is 67% margin. Pricing decisions made with the wrong one are systematically too cheap.
Gross margin has to cover everything downstream of cost of goods — payment processing, returns, shipping subsidies, marketing and overhead — before anything reaches net profit. That is why retail commonly targets keystone pricing (100% markup) rather than the thinner markups intuition suggests.
Use margin, not markup, for cross-category comparison and for modelling contribution to overhead, because margin is directly proportional to revenue and stacks cleanly across a product mix.
Price = cost × (1 + markup); Margin = (price − cost) ÷ priceSource: Nagle & Müller, The Strategy and Tactics of Pricing, cost-plus and margin arithmetic.
Worked example
A $40 unit cost with 60% markup.
- Price = 40 × 1.60 = $64.
- Gross profit = $24.
- Margin = 24 ÷ 64 = 37.5%.
$64 selling price, $24 profit, 37.5% margin — well below the 60% many assume.
Frequently asked questions
What markup do retailers use?+
Keystone (100%) is the traditional apparel and gift benchmark; grocery runs far thinner and jewellery far higher.
How do I hit a target margin?+
Price = cost ÷ (1 − target margin). For 40% margin on $40 cost, price is $66.67.
Should discounts be planned into the markup?+
Yes. If you routinely discount 20%, build that into the initial markup or your realised margin will miss target every period.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.