Markup calculator
About this calculator?
Markup
A sustainable business model follows the basic principle of selling a product or service for more than it costs to manufacture it or exert time to complete it. The markup is the gap between the cost of a product/service and its sale price, known as mark-on. The general rule is that markup should be set at a level that allows for an acceptable profit. The markup price can be expressed in local currency or as a percentage of the cost or selling price.
The markup process
Businesses use markups to increase the selling price of a product/service usually as a percentage in order to calculate a profit. The variable cost-plus pricing technique is a pricing strategy in which a business can determine a selling price by adding a markup to total variable costs. Businesses may need to add a markup to their overall expenses in order to secure a profit and recoup the costs of creating a product/service.
The end-goal.
The end-goal of utilising this calculator is to allow you to identify a markup from known cost and profit. Additionally, the profit can be deduced from the revenue and cost. Although, the revenue can be identified from the cost and the markup.
Necessary terms.
Markup: This is the price spread between the cost to produce a product/service and its selling price.
Profit: This is the financial benefit realized when the revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.
Cost: This is the money spent to produce a product, invest in providing a service, or purchase an item for reselling.
Revenue: This is money generated from normal business operations. Also known as sales on the income statement.
The formula.
Markup
Markup: MP
Profit: PT
Cost: CT
MP = 100 * (PT / CT)
Profit
Profit: PT
Revenue: RE
Cost: CT
PT = RE - CT
Markup
Markup: MP
Revenue: RE
Cost: CT
MP = 100* ((RE - CT) / CT)
Revenue
Revenue: RE
Cost: CT
Markup: MP
RE = (CT + CT) * (MP / 100)
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