How Do You Calculate The Mark Up Price

Basically, businesses calculate the markup price from the actual cost of the product or services to its selling prices tag when it comes out of the market. This computation may involve several accounting practices like getting all the expenses to create the product.

To determine the profit obtained in the goods and services, most companies usually add the markup to the over-all cost in generating the product.

This way, the firm can distinguish easily the total costs of the over-all expenses, including the distribution of the goods and services.

However, the methods that the company will employ in determining the markup price of the product depend on how the accounting department will see the factors. There are various ways that the company can obtain the markup prices.

One of the most common users of the markup pricing methods is resellers like Wal-Mart and 711 convenient stores. These companies simply add a certain percentage on top of the product that they bought from the distributors to come up with the initial price when they resell the products. The percentage that will be added in the product may vary depending on the quality and materials used to produce it. This may also depend on the objective of the company and number of demands for that product.

The simplicity involved in implementing markup pricing in products makes it more viable for companies since it is cost-effective and can be accomplished in just a short-period of time.

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The two most commonly used methods of markup are Mark-on-cost and Mark-up on-selling price.

In Markup-on-cost, the initial price of the product is, most often than not, set above the actual cost of the product. For example, the item cost is 50 dollars and the markup price is 15 dollars, by getting the difference of the two variables, you will come up with 15 percent markup percentage.

In determining the initial price of the product, a company usually multiplies the actual cost of the product by a preset percentage. The company then adds the result of the equation to the total cost.

Meanwhile, in Markup-on-Selling-Price, most of the companies and resellers acquire their Markup on the reflection of the price tag of the product. Most often than not, these companies see the markup as a certain percentage of the selling price, this is contrary to the percentage of the cost that is obtained in the Markup-on-cost.


The question now is why companies use different styles of acquiring the Markup? In certain industries, like Wal-Mart, it has been accustomed to discuss how they come up with the price.

But studies showed that Markup-on-Selling-Price provides the company promotional value to their money since most of them makes higher profit rather than going with Markup-on-cost method. The promotional value of the product will always show that the costumer saves money, while the company makes a little. But in reality, it is just the same whether you use Markup-on-Cost or Markup-on-Selling-Price. The company always comes up with a high percentage of profit in each product.
 

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67 Comments

  • Adam said on May 13, 2009
    I need help, I am opening a small italian food take away, and I would like you to help me with how much markup do I need to put on my product to be competitive and survive. please, I would really appreciate. ciao
  • shirley said on August 4, 2009
    I am a housewife and I am opening a secondhand clothing shop and a small food take away, i would like you to assist me in calculating my markup on the product. it is my first time to start such, your help will be very much appreciate. ta.Nops, PNG
  • Junior Brown said on November 8, 2009
    Hi I need some help, I am opening up a Rim and tire shop, and I would like to get some advice on how much markup do I need to put on my product to be competitive in a very competitive market. Thank you
  • Stacey Dougan said on December 14, 2009
    Hi I am opening a small vegetarian restaurant and need to know what the general markup is on restaurant food. Just general. nothing specific of course. thanks! p.s. i am located in Las Vegas, NV
  • elizabeth said on March 10, 2010
    hi i am opening a used clothing store in canada and i need to know what the general markup is thanks(Guelph Ont Canada)
  • john kelly said on May 5, 2010
    Hello, I'M looking into starting a juice/smoothie company in new england. Wondering if their is a specific protocol for figuring cost analysis and markup to be such a competitive industry. thank-you john
  • Alicia mitchell said on August 5, 2010
    we are opening a pet store in clovis nm and are not sure how we should mark up the products
  • Iza said on October 4, 2010
    Hi I am opening a home-based business (chocolate). this is my first time. I would like to know how to mark-up the price, so that it is competitive. Your help are very much appreciate. Thank you
  • Joy Singco said on October 5, 2010
    I need help to know more on how to mark up the prices in my convenience store. Please send me an email and to know more the date about Profit and Losses..
  • Liza Adi said on October 7, 2010
    Hi, I am opening a home-based business selling homemade cookies. I would like to know how to mark-up the price. Appreciate your help. Thank you.
  • D Lamkz said on December 20, 2010
    Hi, please advice me for mark up in ladies clothing, I am planning to open a ladies clothing boutique. cation in Toronto, Canada
  • ashok said on June 6, 2011
    i have 5000sq.ft space in main market in kota, rajasthan, india. this is student based market, this is a place where student come from all over india. this place is on first & second floor in main road. so kindly advice me to start business related to student. thnks
  • yeten said on June 25, 2011
    Hi, i am starting up a wood and steel fabrication unit to supply to the construction sector. so i have to determine how much working capital i would require for the start up,but firstly, i need to figure out how much selling price is to be charged for my product? please help!
  • Jason Schuck said on June 26, 2011
    Brand Xchange located in Las Vegas, NV, is a new retail female clubwear clothing boutique near The Strip. What is the general markup % on clubwear? ShoeS? Thank you very much for your insight! Jason
  • Judy Mirassou said on July 20, 2011
    Prescott, AZ. I am also starting a home based business from my home. Please advise on the appropriate mark up to retail stores. Thank You Judy
  • Sara said on August 5, 2011
    Mankato, MN Hi i'm opening a clothing store I would very much like it if you helped me with the mark-up
  • Given said on August 14, 2011
    I need to know about different mark up strategies/methods on promotional material. Regards
  • Martina said on August 19, 2011
    Hi, I'm just starting out with a Bath and Body Care line (all organic). Please advise on appropriate markup. I'm located in Southern Ca
  • jeff smith said on August 26, 2011
    pittsview,al...usa.....i am opening a small grocery store in the country....my concerns on pricing the groceries and prepared are....whats the best way to markup?....by margins or just by a percentage??.....ur input would be valuable....thanx...jeff
  • DJ said on September 29, 2011
    Thank you for your help. We are looking to lease or buy a Rental / Banquet Hall and we need help with how much to charge others to rent the hall....appx 3,000 - 4,000 sf. Tampa, Fl
  • Jen said on October 12, 2011
    Starting up a wholesale skincare line, wondering about an average markup for wholesale vs retail?
  • sambath kong said on November 15, 2011
    i just open a souvenir, metal jewelry and fashion cloths shop so would u pls help me to mark up price for my product to be competitive and survive?. Thanks phnom penh capital city, Cambodia.
  • Earl Smith said on November 20, 2011
    I am starting a home based business making sweet potato pies. A mom and pop store wants to sell them. A small pie around the banquet pie size, they want to buy for $1.50 and sell for $3.00. What should be the markup for pie. I need to sell them for $2.00, they can make a $1.00 if they sell them for $3.That would be a 50% markup. Is that right?
  • james bhengra said on December 14, 2011
    I am looking to open a continental restaurant in new delhi, India. Please advise the markup strategies I should be looking into. Thanks,
  • chris hiller said on January 7, 2012
    if the cost of a cake is $1.50 and i want to achieve a gross profit of 75% on the cake, what is the formula used to calculate the sale price of the cake?
  • catherine mate said on January 16, 2012
    hi,i want to start a fresh fruit juice company and i was wondering if you could send me a business plan,am from NAIROBI,KENYA
  • Just Peter said on February 2, 2012
    Catherine mate, Hi, I'm from Nairobi too, I am starting up a fresh fruit and vegetable store. I am currently working on my business plan and wouldn't mind to share a few pointers
  • futhi said on March 6, 2012
    hi help me am in the bakery industry and i lost the govt tenders because they said i was expensive, one bakery tendered below the market price knowing that after 6 months will be allowed to increase prices, which disadvantaged other bidders, help me to price. from Botswana in Afica
  • Daniel said on April 3, 2012
    My location is Milpitas, CA, USA. Need to start a pickle business, please help me.
  • antonio Santos said on April 9, 2012
    i'm opening a grocery store and i need to know how to markup my product. is there a standard way of doing this?
  • Biggie Simbi said on October 4, 2012
    Am running an online stationery business from home based in Capetown, South Africa. May somebody help me in calculating my selling price on all Stationery and Computer Consumables. Would really appreciate all the assistance rendered.
  • Biggie Simbi said on October 4, 2012
    I would also like to start selling Tyres online and other Motor Accessories. I would like to buy my staff from Auctions for resell. Please advise as well.
  • Samuel chakanza said on October 17, 2012
    I am starting a small bakery and a shop in sussundenga chimoio in mozambique. what is the appropriate markup i can use for my business to survive my stating capital is 50 000 miticais
  • Jan said on October 18, 2012
    I am starting a home based baking business just outside Portland, OR. I will be selling cookies and cupcakes to a local cafe.
    1. How much should I mark up the cost to make and charge the cafe who inturn will sell direct to their customers? (I have researched what local bakeries & other cafes charge respectfully for each item).
    2. If I calculate it out knowing what they charge (to soon be negotiated with my customer)- would it be correct to expect them to get almost equal profits as me? Thank you very much.
  • Gary said on October 19, 2012
    Hi I am from durban, south africa I am starting a business regarding steelworks eg.burglar guards and driveway gates could you please tell me what markup I should put on these jobs. Thanks Gary
  • Patrick said on November 10, 2012
    I own a small general store in a small town I need to know i'm putting the right mark up on my stuff. I'm just putting 30% across the board. Is that right?
  • Brandon Young said on November 11, 2012
    I own my own business and I'm having a hard time getting started I want to be competitive with other businesses in my town but not sure where I would need to start if u could help me I would be very appreciated of ur advice. Thanks
  • Lesibia said on November 29, 2012
    Hi, I am from Bethlehem P.A.USA and I want to start up my own Business making and selling crafts for these crafts I need to use different materials from different sources, I need advise on how to calculate the selling price for the crafts I plan to sell on a website. Thank you, Lesibia
  • Grant said on December 3, 2012
    I would like to start cotton farm business. Please help to give me info about how to find land, farm, where to get info for this cotton area. Thanks
  • Mickey said on December 26, 2012
    Currently i'm looking for a supplier for a company to buy some product. And i have found one supplier that sell me this product for this price. Should i markup the price for the product that they are quoting to me for the company that asking me to look for a supplier that sell the product that the company wants. Thk you. If yes, whats is the markup price that you would advise. tq
  • Mike said on February 7, 2013
    Hi, Need to find the mark up percentage on materials i've purchased can you help, JOBS WORTH £13,000 MATERIALS WORTH £4581.28. Regards mike
  • Chuck Worden said on February 7, 2013
    what would be a decent markup price for shrimp and or crayfish
  • Kathy said on February 20, 2013
    Hi,I'm going to run a home baking business from home & I would greatly appreciate it if you could advise me on HOW TO CALCULATE MY MARK UP PRICES on my goods, I'm from Gauteng , South Africa. Your help is much appreciated..
  • selvakumar.v said on February 27, 2013
    I want to start a organic flower farm. where to get full details. i dont have any idea about this business, but ready to learn & execute. my business location is coimbatore or mettupalayam, tamilnadu, india
  • Teressa said on March 12, 2013
    Hi, I am interested in starting up a (Home Bakery) Cake Business in Virginia. Would appreciate any help on pricing my cakes, cupcakes etc. and how I should go about marking up costs of supplies from food to decorations, boxes, delivery/set up etc. How to find/buy wholesale products as well. Thanks in advance. Hampton, VA (USA)
  • B.B. said on March 14, 2013
    i am opening a small spanish grocery store were i can sale coffee and sandwich too in the country. my concerns on pricing the groceries and prepare. what's the best way to markup? by margins or just by a percentage? but i don't understand how to do it. ur input would be valuable. thanx...
  • sanatosh redekar said on March 31, 2013
    i am dam interested to open membership based retail general store. please suggest.
  • Wanda said on April 16, 2013
    Hi I sell Blinds and window coverings in Texas. Is 20% mark up a fair price. to that I'd have to add costs to hang the product plus 8.25% taxes?
  • Richard said on April 30, 2013
    I have over 20+ years in the watersport industry. I want to open a Sport jet manufacturing facility in Southbay San Diego, Caifornia. The facility would manufacture State-of-the-Art PWC's. I have designed two PERSONAL WATERCRAFT that we'd be featuring. The WW-1 and the WW-ll. I have put all my knowledge of safety and design into these PC's. We will also have our own swim wear. This is ALL dependent on financing ! How do I price my Jets and swim wear competitively?
  • Ritu said on June 27, 2013
    Is there a way to know what is the ideal markup for the training industry if one was setting up a training house? Is there a standard benchmark?
  • Siko JM said on November 19, 2013
    I buy and sell electrical pumps,water meters,solar products etc. How much percentage should I add to make a competitive pricing. South Africa, Zeerust town in North-West. +27725997676,jm siko-skype. Kind Regards, Siko JM
  • denise myers said on December 17, 2013
    Henry county, Spencer, VA. I have started an Artisan cookie company in my area and would like to sell in convenience stores. I have gotten conflicting opinions from two different store owners. One owns a chain, the other sold his business about ten years ago. I just need to know what the percentage of markup should actually be. I was told by one that convenience stores work on pennies for a product. Is he correct or selling himself short?
  • Robin Webb said on February 23, 2014
    Small deli and grocery store in the country Paris Ky a lot of large racing horse farms and a ton of men needing breakfast and lunch
  • Don oberley said on August 2, 2014
    Hi, we're located in victoria bc canada. We are a 18 employee wholesale bakery I am looking for a good formula for costing my products ,it's always been cost then double it but I don't think this old formula applies in our changing world.
  • irene muronda said on August 6, 2014
    I am a clothing producer, may u help me on how to set the selling price for a garment
  • Sharon said on August 14, 2014
    I need some help. I am opening an online store on selling the home décor accessories. I import the goods directly from the factory. What is the reasonable mark up?
  • aubrey said on August 20, 2014
    hi, please can you help me I'm opening a second hand clothing. and I have these information to start the business. steel racks=R110k, washing machines=R100k, cash register=R10k, initial stock=90k(monthly replenishment=R7k), salaries=R45k, truck=R100k, license to trade=R12k, rent=R15k per month, counter=R10k, rails=5k and electricity and water=3k I have R50k deposit and the bank is willing to give me R5m which I will pay R15 000 every month I 'm from south Africa
  • VIJAYA said on September 2, 2014
    hi, I am from GAISENN FIRE & SAFETY, Please help me how to calculate Mark up price on Fire Products. With regards, GAISENN FIRE & SAFETY. VIJAYA-Proprietor, BANGALORE; Contact No:08065555974/9731609551/9902101213.
  • Robert said on October 31, 2014
    Would like to start a meat shop in nairobi kenya
  • Ashley said on November 19, 2014
    Hi, I'm opening a second hand formal gown store that would take donated prom gowns and resale, and I'm having trouble understanding how to markup donated apparel. Can you please help, thanks.
  • Blondell Brown said on November 21, 2014
    I am going to opening a boutique soon in Summerton Sc. I want to know how much add percentage for clothes and accessories? Please e-mail me asap,thanks.
  • sangita said on December 30, 2014
    I want to open a burger restaurant so please help me get details regarding cost, chefs, adds etc. please mail me.
  • Paolo said on February 13, 2015
    hi, my family is currently involved in the retail and commercial business. These business involved leasing out spaces to be used as commercial and with this involves selling to tenants the utility meters i.e. water and gas meters. Only meters purchased from our us are allowed to maintain integrity of the product. My question is how much to charge our meters "as prescribe by law" if our purchase cost is around P850 for water meter and P28,000 for gas meters. Can we charge 20% mark-up or is it too high. I will highly appreciate any reply to my queries above. Thank you
  • Paul Dixon said on April 1, 2015
    Message To Paolo:- A 20% mark-up is not expensive but needs to be measured against the cost. For example 20% on 100,000 is a lot of money so there need to be a balance or a cap. The bigger question is have you considered all staffing cost, including taxes to be paid and applied this to the base rate of the units and then added your Mark-up.
  • Monica said on June 29, 2015
    Opening a candy / convenience store next to a school. Can you please tell me how much to mark up my candy
  • Derek C MacKay said on September 25, 2015
    The city of Barrie Ontario Canada. going to be manufacturing a 4oz hair gel product for the 12 to 30 year old male and female, how can I obtain the % markup from the retailers such as Shoppers drug mart and Walmart stores. Thank you D.C.M.
  • andrew said on June 22, 2016
    Hi I'm starting a medicinal herbal business how do I license my products in south Africa. I mix the products myself.
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