Definition
The term markup commonly refers to the practice of adding a percentage to costs in order to calculate selling prices. Although some people use the terms “margin” and “markup” interchangeably, this is not appropriate. To get a better idea of the relationship between margin and markup, a 50% markup on a variable cost of $10 would be $5, yielding a retail price of $15. By contrast, the margin on this item would be $5/$15, or 33.3% The following table shows the relationship between markups and margins for various products retailing at $10.[1]
References
- ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition). Upper Saddle River, New Jersey: Pearson Education, Inc. <http://www.amazon.com/Marketing-Metrics-Definitive-Measuring-Performance/dp/0137058292>
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