This **markup calculator** finds the mark up percentage relative to product cost, gross profit value and the selling price by applying the gross margin formula. Below the tool there is more info on how to estimate these financial figures important for your retail business.

## How does this markup calculator work?

This basic application can help you determine the markup percentage when trying to establish the optimal selling price for your items. It considers the original cost and the desired gross margin rate.

In most of the cases sellers set up the selling price by applying a standard financial rule which says that in order to obtain profit you have to have a good control of your product’s costs and a clear target on the profits figure.

The algorithm behind this *markup calculator* is based on the equations explained here:

- Mark up is calculated by dividing the gross profit by the original cost and then by multiplying the value that results by 100.
- Gross profit value can be forecasted by two different formulas:

- by subtracting from the selling price the original cost.

- by multiplying the Selling price (revenue) by the gross margin rate.

- Selling price (revenue) is obtained by dividing the original cost by (1 – Gross margin rate).

## Example of a calculation

Assuming that the original cost of a product was $1,000 and a gross margin rate of 7.5% the following figures will result:

■ Markup = 8.11%

■ Selling price (revenue) = $1,081.08

■ Gross profit = $81.08

## What is markup?

This is a useful financial indicator that every retail business owner periodically assess as it represents thedifference between the cost of a good or service and its selling price. It is added onto the total cost incurred by the producer of an item in order to register some profit.

Markup figure can be expressed either as a fixed/absolute value or as a percentage of the selling price.

06 Feb, 2015 | 0 comments
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