How To Calculate A 20 Percent Markup

If you've ever bought clothes on sale, you're familiar with the concept of a markdown, or reducing the price by a given percentage. A markup works the opposite way: The price is ​increased​ by a given percentage. Retailers do this every day, because they pay one price for their goods (the wholesale price), and then add a markup to create the retail price they sell to you at. Often, the markup from wholesale price to retail price can be as much as 50 percent, but some retailers will sell at lower markups such as 20 percent.

If you know the wholesale price of an item and want to calculate how much you must add for a 20 percent markup, multiply the wholesale price by 0.2, which is 20 percent expressed in decimal form. The result is the amount of markup you should add.

So, if you're marking up a pair of pants that cost $50, the markup amount is:

\(\$50 × 0.2 = \$10\)

If you want to calculate the total price after markup, add the original price plus the markup:

\(\$50 + \$10 = \$60\)

So the final price of the pants would be $60.

If you want to go straight to the total price of the item ​after​ a 20 percent markup, multiply the wholesale price by 1.2. This represents 100 percent of the original wholesale price plus the 20 percent markup, or 120 percent total, expressed in decimal form.

Using the same pair of pants as the previous example, you'd have:

\(\$50 × 1.2 = \$60\)

Note that you get the exact same result as working out the markup on its own and then adding it to the original price, but you've saved yourself a step.

Here's one more angle to consider: What if you know how much an item costs after the 20 percent markup, and you want to know what the original price was before the markup? Think back to the previous example: You know that after a 20 percent markup, the final price is 120 percent of the original. So you can calculate backward to the original price by dividing by 120 percent expressed in decimal form, which is 1.2.

For example, knowing that the pair of pants you've been considering costs $60 after the markup, it comes as no surprise that when you calculate thusly:

\(\$60 ÷ 1.2 = \$50\)

...you end up back at the original price of the pants.