Markup Definition - The Strategic CFO®

Markup Definition

Other Category: Accounting, Profitability

July 24, 2013
Dan
cost of goods sold, markup percentage, price, retail markup

Retail Markup Definition

Retail markup is the difference between the price of a product and the cost of that product. Retail markup percentage is the retail markup as a percentage of a product’s unit cost. This method is commonly used to find the price of retail products which are somewhat of a commodity. Costs are fixed, and the market dictates purchasing price. Furthermore, many industries have a standard retail markup percentage which most products are sold at.
The retail markup definition is common to many products, services, and industries. Where retail sales are occurring, it is likely that someone used the retail markup calculator. It is important to note that retail markup, margin, and other comparisons of cost of goods sold and price are not the same.
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Retail Markup Formula

To find the retail Markup amount in dollars: Retail Markup = Sales price – Cost
To find the retail Markup percentage: Retail Markup = Markup amount / Retail Price

Retail Markup Calculation

For example, if a product’s unit cost is $10 and its retail price is $15, then the retail markup is $5:
Retail markup = Retail price – Unit cost = $15 – $10 = $5
and the retail markup percentage is 50%:
Retail markup percentage = (Retail markup/Unit cost) = ($5/$10) = 50%.
To learn how to price for profit, download our Pricing for Profit Inspection Guide.

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