Markup is the profit divided by the cost, as a percentage: (price − cost) ÷ cost × 100.
TL;DR: Markup = (price − cost) ÷ cost × 100. An $8 cost sold at $20 is a 150% markup. The markup calculator gives the price from a cost and markup, or the markup from a cost and price.
The formula with a worked example
Buy an item for $8 and sell it for $20. The profit is $12. Divide that by the $8 cost and you get 1.5, or 150% markup. You have added one and a half times the cost on top.
The key is that markup divides by cost, not by price. Dividing the same $12 by the $20 price would give 60%, which is the margin instead. The markup calculator keeps the two apart so you do not mix them up.
Converting markup to margin
The two are linked but never equal. Markup is always the larger number because it divides by the smaller figure (cost). To turn markup into margin, divide the markup by one plus the markup. A 50% markup becomes 0.50 ÷ 1.50 = 33.3% margin.
To go the other way, use margin ÷ (1 − margin). A 40% margin needs 0.40 ÷ 0.60 = 66.7% markup. Keep both numbers handy so you know what each one means before you set a price.
Keystone and common markups
Keystone pricing is a flat 100% markup: double the cost. A $25 item sells for $50, which works out to a 50% margin. Many retailers start from keystone and adjust up for slow-moving or premium goods and down for competitive ones. It is a starting point, not a rule.