Markup is the amount added to the cost of a product or service to determine its selling price. It represents the difference between what a company pays to produce or acquire something and what it charges the customer, usually expressed as a percentage of the cost.

Markup ensures a business covers its costs and earns a profit.

Markup is often confused with margin, but they’re not the same.

• Markup is based on cost.
• Margin is based on the selling price.

Formula: 

Markup (%) = ((Selling price – Cost) ÷ Cost) × 100

Example:

If a product costs $50 to make and you sell it for $75:

Markup = ((75 – 50) ÷ 50) × 100 = 50%