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Home > Markup (business)
In marketing, markup is the amount by which the price of a product exceeds the cost of producing and distributing the product. It can be expressed as an fixed amount or as a percentage. There are numerous variations of each.1 As a fixed amount
assume:
retail list price = $1.99 and the product cost is $1.40
MARKUP = price − cost
1.99 − 1.40 = 0.59
assume the actual selling price was $1.60
MARKDOWN = List price − selling price
1.99 − 1.60 = 0.39
INITIAL MARKUP = list price − cost
1.99 − 1.40 = 0.59
MAINTAINED MARKUP = sale price - cost
1.60 − 1.40 = 0.20
2 As a percentage
INITIAL MARKUP % = initial markup / sale price
0.59 / 1.99 = 29%
MAINTAINED MARKUP % = maintained markup / sale price
0.20 / 1.60 = 13%
MARKUP % ON COST = markup / cost
0.59 / 1.40 = 42%
MARKUP % ON PRICE = markup / price
0.59 / 1.99 = 29%
To convert from markup on price to markup on cost:
MARKUP ON COST = markup % on price / (1 − markup % on price)
0.29 / (1 − 0.29) = 42%
To convert from markup on cost to markup on price:
MARKUP ON PRICE = markup % on cost / (1 + markup % on cost)
0.42 / (1 + 0.42 ) = 0.29
PRICE = cost / (1 − markup % on price)
1.40 / (1 − 0.29) = 1.99
COST = price / (1 + markup % on cost)
1.99 / (1 + 0.42) = 1.40
PRICE = markup / markup % on price
0.59 / 0.29 = 1.99
3 See also
marketing, pricing, cost-plus pricing, production, costs, and pricing
3.1
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