Build a price from the unit cost
Markup begins with cost, not with sales. The formula is selling price = unit cost × (1 + markup / 100). It is a pricing rule: how much to add to the cost of one sellable unit. The result assumes the entered cost already represents the unit that will actually be delivered.
A $42 item at 65% markup
A $42 item marked up by 65% has $27.30 added to its cost, producing a $69.30 price. Profit per unit is $27.30. Because that profit is measured against the $69.30 selling price, the resulting margin is 39.39%, not 65%.
Use the cost that reaches the customer
Include landed cost when it matters: purchase price, inbound freight, duties, packaging, and predictable spoilage can all change the real cost per sale. If a promotion discounts the ticket price, recalculate from the discounted price rather than assuming the original markup remains intact.
Why markup cannot cover every overhead cost
This tool does not allocate rent, payroll, payment processing, warranty claims, or sales commissions. It therefore helps set a unit price, but it cannot tell whether the business as a whole breaks even. Use the break-even tool when fixed costs and expected volume are the question.
Choose the commercial rounding rule
Rounding is a commercial choice. A calculated $69.30 may become $69.00, $69.95, or a contractual price list figure. Re-enter the final price in the margin calculation if the decision depends on the exact percentage retained.
Price lists need a cost trail
Price architecture can require a different markup for each item. A low-margin traffic product may be intentional, while a service, accessory, or scarce replacement part may need to cover more handling. Check supplier price breaks before promising a catalogue price: buying ten units at one cost and one hundred at another produces two valid markups. Where tax is quoted separately, keep it out of the unit cost and price comparison so a statutory charge does not masquerade as commercial margin.
Keep the approved cost source with the price list. A buyer, salesperson, and finance reviewer should be able to reproduce the markup without guessing which vendor invoice or packaging assumption was used. Audit that link before each supplier price update.
If a catalogue price includes a promised delivery service, the unit-cost record must include the predictable delivery work. Otherwise the price rule can look sound while each fulfilled order loses money. Separate an optional service charge when the customer can genuinely choose it.
A price change should be tested against the actual quantity customers buy at that price. The arithmetic sets a unit rule; it does not show whether demand will accept the new ticket.
A cost sheet must describe the unit actually promised to the buyer. Suppose a supplier invoice is $42, inbound freight adds $3, packaging adds $1.20, and three percent of units are damaged before sale. The purchase price alone is not the economic unit cost. At a 65% markup, applying the rule to $42 yields $69.30, whereas applying it to a $47.50 delivered-and-loss-adjusted cost yields $78.38. The difference is not a rounding issue; it determines whether the price pays for predictable work required to fulfill the order.
Discount authority can be expressed as a floor price instead of a vague instruction to protect markup. If the final selling price is $69.00 on a $42 cost, unit profit is $27 and realized markup is 64.29%. A ten-percent discount from $69.30 gives $62.37 and reduces unit profit to $20.37, or 48.50% on cost. Writing those cases in the price approval record prevents a salesperson from applying a promotional percentage without seeing the contribution surrendered on every unit.
The markup rule stops where the price meets market behaviour. A $78.38 calculated ticket may be commercially unsuitable if a comparable offer, customer contract, or advertised price cap constrains it. Do not force the arithmetic to solve that conflict by deleting costs from the sheet. Instead, identify whether the response is a different supplier quantity, a service fee, a lower fulfilment cost, a changed product specification, or a decision not to offer the item. The formula makes the required trade-off explicit; it does not establish demand.
Quantity breaks create a second price decision, not a reason to average supplier costs carelessly. If ten units cost $47.50 delivered and one hundred cost $43.00, the approved price can reflect the quantity actually committed, provided the buyer is willing to fund and store that quantity. Applying the cheaper cost to a small order makes the markup look stronger than it is; applying the expensive cost to a confirmed bulk purchase can unnecessarily reject a viable quote. Retain the purchase quantity, freight basis, expected loss rate, and price validity date with the calculation so a later reviewer can reproduce the commercial rule.
A final price approval should state whether the customer receives one unit, a bundled service, or a quantity commitment. That wording controls which cost belongs in the calculation and prevents an old unit-cost assumption from following a changed promise. If the price is negotiated in another currency or is subject to a rebate, retain those terms separately. The markup equation remains valid, but its cost and price inputs must describe the same commercial transaction.