Pricing
Markup from an observed price
The audit form: take any price already in the market and recover the loading that produced it. Dividing the same profit by P instead of C gives the margin, so the two are always one substitution apart.
The Formula
m = (P - C) / C
The audit form: take any price already in the market and recover the loading that produced it. Dividing the same profit by P instead of C gives the margin, so the two are always one substitution apart.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| P | Price actually charged | currency | The figure on the invoice, after any list discount but before settlement discounts. |
| C | Cost of one unit | currency | Must be stated on the same basis as the price, tax included or excluded in both. |
| m | Markup as a decimal | decimal | 24 / 60 = 0.40 for a price of 84 on a cost of 60. |
What Each Symbol Means
Pcurrency
Price actually charged
The figure on the invoice, after any list discount but before settlement discounts.
Ccurrency
Cost of one unit
Must be stated on the same basis as the price, tax included or excluded in both.
mdecimal
Markup as a decimal
24 / 60 = 0.40 for a price of 84 on a cost of 60.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate markup page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Markup, filed under Business. Every number the guide produces comes from substituting into this one line.