How to Calculate Markup Rate

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When you run a business, you have to add on to the price that you pay for goods to get the price at which you sell those goods to customers. The markup rate is a term used to figure what percentage is added on to the cost of the item to find its selling price. As a business owner, if you set your markup rate too high, competitors will be able to undercut your prices. However, if you set markup rates too low, you will be hard pressed to make a profit.

Subtract the price that you pay for an item from the price that you sell that item for to customers. For example, if you sell an item for $8 but only pay $6, you would subtract $6 from $8 to find $2 is added to the price.

Divide the amount added to the price by the amount the item costs you to buy to find the markup rate expressed as a decimal. In this example, you would divide $2 by $6 to get 0.3333.

Convert the markup rate expressed as a decimal to a markup rate expressed as a percentage by multiplying it by 100. In this example, you would multiply 0.3333 by 100 to find the markup rate to be 33.33 percent.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."