The amount or percentage added to the cost price of a product to determine its selling price, covering overhead expenses and generating profit.
Markup is calculated as a percentage of COST (not selling price — that's margin). It's the simplest pricing strategy: determine your cost, add a markup percentage, and that's your selling price. Markup percentages vary widely by industry — grocery stores use 5–15%, while restaurants use 200–300%, and jewelry stores use 50–100%. Understanding the difference between markup and margin is critical for pricing and profitability analysis.
A retailer buys a product for ₹1,000 and sells it for ₹1,500. Markup = ((₹1,500 − ₹1,000) ÷ ₹1,000) × 100 = 50%. Note: the margin on this same product is 33.3% (₹500 ÷ ₹1,500).
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Markup is profit as a percentage of COST. Margin is profit as a percentage of SELLING PRICE. A 50% markup equals 33.3% margin. A 100% markup equals 50% margin. They describe the same profit differently.
Margin to Markup: Markup = Margin ÷ (1 − Margin). Markup to Margin: Margin = Markup ÷ (1 + Markup). Example: 25% margin = 33.3% markup.
The percentage of revenue that exceeds the cost of goods sold, showing how much of each rupee in sales is retained as gross profit.
The profit a company makes after deducting the cost of goods sold (COGS) from its revenue, before accounting for operating expenses.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
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