Sales Dictionary
Mark-up
Definition
The amount added to the cost price of goods to cover overhead and profit.
Deep Dive
Mark-up is the amount or percentage added to the cost price of goods or services to determine their selling price. It's a fundamental pricing strategy used by businesses to ensure that all operational expenses are covered and a desired profit is achieved. Unlike margin, which is calculated based on the selling price, mark-up is calculated as a percentage of the cost price, making it a "cost-plus" approach to pricing.
Examples & Use Cases
- 1A clothing boutique buys a dress for $30 and applies a 100% mark-up to sell it for $60, covering costs and generating profit.
- 2A catering company calculates the total ingredient and labor cost for an event at $1,000 and applies a 50% mark-up, charging the client $1,500.
- 3A software reseller purchases licenses for $50 per unit and applies a 20% mark-up, selling them to customers for $60 per unit.
Related Terms
MarginPricing StrategyCost-Plus Pricing