This markup calculator is an essential business tool you can use to calculate the sale price of an item. If you don’t know how to calculate markup, this tool will be a huge help to you. Apart from calculating the markup, you can also use this online calculator to generate other values you need in your business.
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How to use the markup calculator?
Using this retail markup calculator is easy. As long as you have the required values to enter into the calculator, you’ll see how useful it is. Here are the steps to follow for this percent markup calculator:
- This markup calculator contains three monetary values namely the Cost, Revenue, and Profit. It also has one percentage value which is the markup.
- One way to use the calculator is to enter all of the monetary values. This gives you the markup percentage.
- Another way to use the calculator is to enter the cost and the markup percentage value to generate the values of the Revenue and the Profit.
- When you make changes in the values, the other values will change as automatically recomputed by the calculator.
How do you calculate mark up?
Markup refers to the ratio of cost to profit, and it’s expressed as a percentage value. Profit refers to the difference between cost and revenue. For instance, if you purchase an item for $50, then you sell the same item for $75, this gives you a profit of $25.
The ratio of your profit ($25) to your cost ($75) is 33.33%. It’s easy to get this value using the markup calculator. But if you want to learn how to calculate markup and perform the calculation manually, here are the steps:
- First, determine the cost of goods sold or COGS. Let’s use $40 for this value.
- Next, find the gross profit by subtracting the cost from the revenue. If you sell the item for $50, you have a profit of $10.
- Divide the profit by the original price or the COGS to get 0.25.
- Convert the decimal value into a percentage value. To do this, multiply it by 100 to get 25%.
There you have it! Calculating markup is a simple process. To check the accuracy of your computation, use the retail markup calculator. In this computation, we used the following formula:
markup = profit / cost * 100
Multiplying the value by 100 converts it to a percentage formula. If you don’t know the value of the profit, but you know how much the item costs and how much you sold it for, make a couple of substitutions to the formula. Since
profit = revenue – cost,
this means that:
markup = (revenue – cost) / cost * 100
In cases where you need to know the product’s selling price, use this formula:
revenue = cost + cost * markup / 100
This is a very common scenario. Where you know how much you’ve spent on the item along and you also know the markup value. With these values, you’d like to know how much is the sale price of the item.
How to calculate markup percentage?
The markup percentage refers to the percentage value of the calculated markup. To solve for this, all you have to do is multiply the value by 100. For instance, if you have a product which costs $100 and your profit is $20, use the markup formula:
markup = profit / cost = 20/100 = 0.2 * 100 = 20%
How do you mark up a price?
The factors which influence the pricing strategies are the branding goals and the market conditions. When you’re determining the markup, you need to carefully evaluate the overhead costs, production costs, recurring costs, and the variable costs which affect the break-even point.
If you plan to do a price markup, the best starting point is to know your product’s cost per unit. Having a markup beyond this will determine your profitability. Also, you need to select a pricing strategy which suits your business best. Some of the most common pricing strategies include:
Price matching
Learn about your competition and try to set your prices at a similar rate. Most of the industries have their own standard markup which applies to several kinds of products. But the actual profit margins may vary across the different brands based on the costs of sourcing or production.
The closer you work with a manufacturer within your supply chain, the lower will your acquisition costs be. Price matching allows you to remain in a “normalized” state.
50% markup
This is a very common pricing strategy, and it’s ideal for business owners who aren’t sure which pricing option to use. Here, you can begin at 50% then test this on the market before you decrease or increase your pricing based on your customers’ responses and sales.
For the 50% markup, divide the cost of your product by 50 then multiply the value you get by 100 to get the retail price. For instance, if you have a base price of $20, divide this by 50 then multiply the value by 100. In doing this, you’ll get a $40 retail price.
Discount markup
Discounts are very powerful, especially if you want to see a lot of movement in your inventory. Pricing strategies in retail help you use discounts without experiencing a much of a margin loss.
Sometimes, you need to set a high retail price at the beginning then discount this price, so the buyers think that they’re saving a lot. If you want to use the 50% markup strategy, try setting a 70% markup first. Then apply the discount which results in 50% on your margin.
Price high
You may have already seen similar products in stores wherein one of them has a price that’s much higher than the other. Retailers do this because higher markups can result in more sales. When you build your brand behind through this strategy, this will attract a lot of loyal customers who will pay more in the long-run.
If your industry has a standard markup of 50%, concentrate on your branding and have a 100% markup. This higher price will catch the attention of the consumers. They may think that you offer more value and maybe that’s why your product is more expensive.
