Mark-up

Mark-up is the amount added to a product's cost to arrive at its selling price, expressed as a percentage of cost. It differs from margin: a 25% mark-up on a €80 cost gives a €100 price and a 20% margin.

ByHoang TruongUpdated July 2, 2026

FrameworkPricing

See it move

Loading infographic...

A product costing €80 is priced with a 25% mark-up, giving a selling price of €80 × 1.25 = €100 and a profit of €20. That same €20 is a 25% mark-up measured against the €80 cost, but only a 20% margin measured against the €100 price. Confusing the two overstates profitability whenever a mark-up percentage is mistaken for a margin.

Where it fits

SubjectCost AccountingCoreTopicPricing & Cost ManagementCore

The formula

LaTeX

P = C \times (1 + m)

Variables

$P$: selling price (€)
$C$: full cost of the product (direct costs plus allocated overhead) (€)
$m$: mark-up expressed as a decimal (e.g. 0.25 for a 25% mark-up) (decimal)

Mark-up is applied to cost, not to selling price. A 25% mark-up on a €80 cost gives a selling price of €100 and a profit of €20.

LaTeX

m\% = \frac{GP}{C} \times 100

Variables

$GP$: gross profit (selling price minus full cost) (€)
$C$: full cost of the product (€)

LaTeX

Margin = \frac{m}{1+m} \qquad m = \frac{Margin}{1-Margin}

Variables

$M a r g in$: gross profit margin expressed as a decimal (gross profit ÷ selling price) (decimal)
$m$: mark-up expressed as a decimal (gross profit ÷ cost) (decimal)

A 25% mark-up (m = 0.25) corresponds to a 20% margin: 0.25 ÷ 1.25 = 0.20. Confusing the two overstates profitability when a mark-up percentage is mistakenly treated as a margin.

Check yourself

PracticeCORE

A wholesaler prices all products with a 40% mark-up on cost. A product line costs €175 per unit. A new finance director claims the firm therefore earns a 40% profit margin on this line. Is the director correct, and what is the actual gross margin?

Select an answer to check your understanding.