How this instrument works
This is the bare, one-directional version of a markup check: cost and price go in, and a markup percentage comes out. It does not solve backward for a price the way a full pricing calculator does — there is no dial to flip. That narrower job is deliberate: the instrument is built for verifying a number that already exists on an invoice or a price list, not for inventing a new one.
The people who reach for a bare cost-to-price check tend to be auditing someone else's number rather than setting their own. A procurement officer working a cost-plus supply contract capped at, say, 55% over cost needs to know instantly whether a submitted invoice line crosses that ceiling. A wholesale distributor comparing price lists set by three different sales reps wants to see whether all three are actually applying the same markup, or only claim to be.
The formula divides profit by cost because cost is the figure the seller can prove — a purchase order, a bill of materials, a landed-cost invoice — while the selling price is a decision, not a receipt. That is also its limit: the instrument only knows what you type into Cost, $. Freight, duty, and handling only count if you folded them into that figure before entering it; leave them out and the markup shown is measured against an incomplete cost.
- Enter the amount actually paid per unit into Cost, $ — the invoice or bill-of-materials figure, landed costs included if relevant.
- Enter the amount being charged into Selling price, $ — the number on the price list or invoice line under review.
- Read Markup, % — the exact percentage that price represents above cost, calculated the moment either field changes.
- Compare the figure against a contract ceiling or your own target band; adjust either input to see how close a proposed price sits to that limit.
Worked example — the $60 part sold at $100
A component costs $60 delivered and is sold on at $100. The instrument computes (100 − 60) ⁄ 60 × 100, which reduces to 40 ⁄ 60 × 100, giving a markup of 66.67% (66.666667% at the readout's full precision). That is the markup found the classic way, measured against the $60 actually paid rather than the $100 collected.
A purchasing manager working a cost-plus agreement capped at 60% over cost would flag that 66.67% before the invoice is paid, since it sits above the ceiling. Yet the same $40 of profit is only 40% of the $100 price, comfortably inside any revenue-based cap — exactly why cost-plus terms specify a markup limit rather than a margin one: cost is the base the supplier actually controls and can document.
Questions
Why compute markup instead of margin here?
Because cost-plus contracts, supplier agreements, and manufacturer price lists are usually written with a ceiling over cost, not over revenue — cost is the figure a seller can document with an invoice, while the selling price is just a decision. Margin measures the identical profit against the price instead, which answers a different question entirely.
Can this calculator solve for a target price instead?
Not directly — this version only runs cost and price forward into a markup percentage, with no reverse mode. Rearranged by hand, the relationship gives price = cost × (1 + markup ⁄ 100): multiply the cost figure by one plus the markup expressed as a decimal to find the price a given markup implies.
What does a 100% markup actually mean?
It means the price is exactly double the cost — a convention some retailers call keystone pricing, common in apparel and jewelry, where a $60 wholesale cost becomes a $120 tag. Markup has no ceiling the way margin does; it can run past 100% or 200% in categories carrying heavy handling, spoilage, or return risk.
Why does a cost of zero break the readout?
Markup is profit divided by cost, and dividing by zero has no defined result, so the instrument blanks the field rather than show a meaningless figure. An item that is genuinely free to acquire — a byproduct or a promotional giveaway — is better described by margin, which divides by price and stays defined even when cost is zero.
Should freight and duty be folded into the cost figure?
Yes, if the markup is meant to represent what is really left after acquiring the item. The formula only knows what is typed into Cost, $; leaving out landed costs like freight, duty, and inbound handling makes the markup shown look larger than the room actually available once those bills arrive. Most procurement teams enter landed cost, not the bare purchase price.
Why does the result show six decimal places?
Contract language sometimes states a ceiling to a fraction of a percent, and rounding a markup early can shift a figure from just inside a cap to just outside it. This instrument carries the calculation to six decimal places — 66.666667% for the $60-to-$100 example — so you can round it yourself once you know how the governing document states its limit.
References
- U.S. Small Business Administration — pricing and cost-based strategy
- Internal Revenue Service — Publication 334, cost of goods sold
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.