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Add next step in your pricing workflow by sending the cost price determined above to a calculator below
This tool will calculate the required cost, and necessary profit to make when selling an item, from the selling price or revenue needed, at the required level of percentage markup.
The formula used by this calculator to determine the cost and profit is:
C = SP · 100 / (100 + MU)
P = SP – C
- C = Cost
- SP = Selling price
- MU = Markup (%)
- P = Profit
This is the price that an item should be sold at to achieve the required percentage markup. It represents the price a customer will pay before any tax is added.
This is a percentage of the cost that should be added to the cost to establish a selling price.
Unlike profit margin which is constrained between 0 and 100%, a markup can go above 100%, e.g. a markup of 400% added to an item cost of $5 would give a selling price of $25.
This is the purchase price to buy the item, or the internal cost to produce the item. There is more than one type of cost which could be used in this calculation, therefore it is important that the required markup is appropriate for the cost being considered.
For an internally manufactured item, the cost would be made up of the material and labour/manufacturing overhead costs.
For an outsourced purchased item, the cost would be the item purchase price and delivery charge paid before any tax was included.
In addition to this would be the general business overhead costs for administration, sales and marketing, however this would normally be incorporated into the required markup instead.
This is the amount of money contributed to the business by selling the item, and is determined by subtracting the cost from the selling price.
The profit may also be called gross profit or contribution, and would typically cover the general business overhead and net profit target assigned to the business operation.