Accounting

Markup

Markup is the amount added to a product or service’s cost to set its selling price, usually expressed as a percentage of that cost.

How markup works

Markup is how much you add on top of what something costs you. If a part costs $100 and you sell it for $150, that’s a $50 markup — 50% of the cost. Tradespeople and resellers commonly mark up materials to cover handling, overhead, and profit.

To calculate a selling price from a markup: selling price = cost × (1 + markup %). A 40% markup on a $200 cost gives a $280 price.

Markup vs. margin

Markup and margin describe the same dollar of profit measured against different bases. Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. The same $50 profit on a $100 cost is a 50% markup but a 33% margin.

Mixing them up is a common pricing mistake — a "50% markup" leaves less profit than a "50% margin," so be clear which you mean when setting rates.

Example: A part costs a contractor $100. He applies a 50% markup and bills it at $150 on the invoice — the extra $50 covers handling, overhead, and profit.

FAQs

Frequently asked questions

How do you calculate markup?

Markup % = (selling price − cost) ÷ cost × 100. To go the other way, selling price = cost × (1 + markup %).

What’s the difference between markup and margin?

Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. The same profit is a higher markup % than margin %.

Related terms

Overhead

Overhead is the ongoing cost of running a business that isn’t tied to a specific product or job — things like rent, software, insurance, and utilities.

Payment terms

Payment terms are the conditions on an invoice that state when payment is due and how it should be made — for example "Net 30" or "Due on receipt."

Invoice

An invoice is a document a seller sends to a buyer that itemizes goods or services provided and requests payment by a stated due date.

Put it into practice

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