Markup definition
/What is a Markup?
Markup is an increase in the cost of a product to arrive at its selling price. The amount of this markup is essentially the gross margin of the seller, which is needed to pay for operating expenses and generate a net profit. The markup amount may be expressed as a percentage. A markup may be a standard amount that is applied to all products, or it may be adjusted for each one, to ensure that the resulting price matches what is being offered by competitors.
Example of a Markup
Here are several examples of markups:
Retail markup. A retailer applies a $10 markup to the $20 price of goods it has obtained from a supplier. The resulting $30 price is then used to resell the goods to the customers of the retailer.
Manufacturing markup. A furniture manufacturer produces a chair at a cost of $50 and sells it to retailers with a 30% markup, pricing the chair at $65.
Restaurant markup. A restaurant buys ingredients for a dish for $5. It applies a 200% markup and sells the dish for $15.
Terms Similar to Markup
A markup is sometimes known as the retail markup.