Markup and gross profit percentage are not the same! Also, the accounting for gross profit vs markup is different! A clear understanding and application of the two within a pricing model can have a drastic impact on the bottom line.
Markup percentage is the percentage difference between the actual cost and the selling price, while gross profit percentage is the percentage difference between the selling price and the profit.
Markup is a percentage of the cost.
Gross profit is the same amount expressed as a percentage of the selling price.
Item costs R100.00 and sells for R150.00.
Markup is R50 or 50% of the cost.
Gross profit is R50 but 33% of the selling price.
How to calculate:
Markup % = (Selling price – cost price) / cost price x 100
Gross profit % = (Selling price – cost price) / selling price x 100
Gross Profit vs Markup Chart
15% Markup = 13.0% Gross Profit
20% Markup = 16.7% Gross Profit
25% Markup = 20.0% Gross Profit
30% Markup = 23.0% Gross Profit
33.3% Markup = 25.0% Gross Profit
40% Markup = 28.6% Gross Profit
43% Markup = 30.0% Gross Profit
50% Markup = 33.0% Gross Profit
75% Markup = 42.9% Gross Profit
100% Markup = 50.0% Gross Profit