On this page, we discuss the relationship between selling price, cost, and markup, with an example. Markup refers to the difference between what an item was purchased for and what it was sold for. That is, markup = selling price minus cost. So, if you buy a watch for $10 and sell it for $15, your markup is $5. Markup can also be seen as the amount you add to the cost of an item before selling it. that is, selling price = cost + markup. So, for the watch that cost you $10 to buy, You add $5 on top and sell it for $15. And that also means cost = selling price minus markup. Thus, selling price = cost + markup. Cost = selling price minus markup And markup = selling price minus cost.

Now, some businesses calculate their markup as a percent of the cost, while others calculate it as a percent of the selling price. The rate of markup based on cost, which we denote RC, is markup divided by cost. And the rate of markup is based on the selling price. We denote RS as markup divided by the selling price. And we often multiply by 100% to convert them from decimals to percentages. So, if the Markup is 60% of the cost, For example, we write M = 0.6 C. And if the markup is 45% of the selling price, we write M = 0.45 S. Now, let’s solve some problems: We have provided an example in the picture below.