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Markup pricing for manufactured products

From part cost to list price: enter direct cost, expenses, taxes and the margin you want, and see the target price, the minimum price, how much discount fits and how your price compares with the market.

Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.

Preliminary estimateRevised 11/02/2026
Direct cost per unit
Fixed expenses
Sales taxes

Sales tax depends on the state, county and buyer (resale and manufacturing exemptions). It is shown only in the final price to the customer and never enters the markup.

Selling expenses (% of price)
Margin and market

Market price: what customers pay today for a competitor’s product or yours, before sales tax. Leave zero if unknown.

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—Target selling price per unit
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Price breakdown

Where each part of the price goes, per unit; at the market price, profit is what is left.

Tap the chart to see the values.

Price breakdown per unit

Margin versus discount

Profit margin as % of price when a discount is given on the target price.

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Next step

Take this page’s results to another calculator with the fields already filled in.

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Method, assumptions and references

Equations used

Cost base = material + packaging + direct labor + (machine minutes ÷ 60) × hour rate + other direct + fixed expenses per unit
Markup divisor D = 1 − (taxes + commission + freight + bad debt + financing + fixed expenses % + margin); target price = cost base ÷ D; multiplier = 1 ÷ D
Minimum price = cost base ÷ (D + margin); floor = direct cost ÷ (1 − taxes − selling expenses)
Margin at price p = 1 − (taxes + selling expenses + fixed %) − cost base ÷ p; final price = price × (1 + sales tax)

Assumptions and limits

  • Average percentages on the price before sales tax; sales tax is collected on top and never enters the markup.
  • Profit margin is before income tax. Fixed expenses as a % of revenue assume the current sales volume.
  • Rates are typical, editable values; confirm the tax treatment of each product with your accountant.

Standards and technical documents

  • Martins, E. Contabilidade de Custos, 11ª ed. Atlas, 2018 (formação de preços)
  • Bruni, A. L.; Famá, R. Gestão de Custos e Formação de Preços, 7ª ed. Atlas, 2019 (markup divisor e multiplicador)
  • Horngren, C. T.; Datar, S. M.; Rajan, M. V. Cost Accounting: A Managerial Emphasis, 16th ed. Pearson (pricing decisions)
  • Nagle, T. T.; Müller, G. The Strategy and Tactics of Pricing, 6th ed. Routledge, 2018

U.S. regulations

  • No federal sales tax or VAT; sales and use tax is set by each state and locality (South Dakota v. Wayfair, 585 U.S. 162 (2018), on remote sellers)
  • Robinson-Patman Act, 15 U.S.C. §13: price discrimination between competing business buyers
  • IRC §11: 21% federal corporate income tax on profit (not on price)

Frequently asked questions

What is a markup divisor?

It is the number that turns cost into price when taxes, commissions, expenses and profit are percentages of the price. Markup divisor = 1 − sum of the percentages; price = cost ÷ divisor. In the example the percentages add up to 29.5% and the divisor is 0.705: $16.20 ÷ 0.705 = $22.98.

What is the difference between the divisor and the multiplier?

They are the same calculation seen from two sides: the multiplier is 1 ÷ divisor (1.418 in the example) and is applied to cost. The common mistake is adding the percentages on top of cost (cost × 1.295), which gives $20.98 instead of $22.98 and cuts the real margin to 3.3%.

How are sales taxes handled?

U.S. sales tax is charged to the buyer on top of the price and remitted to the state, so it never enters the markup; it only changes the final price shown to the customer. Most industrial sales for resale or further manufacturing are exempt with a certificate. Use the "taxes paid out of the price" field only for gross receipts taxes your company bears.

How should I spread fixed expenses?

As a % of revenue (annual fixed expenses ÷ annual sales) or as an amount per month divided by units sold. The second makes volume visible: with $25,000 a month over 6,000 units, each unit carries $4.17; over 8,000 units, $3.13.

How do I read the example?

Direct cost of $16.20 (material, packaging, labor and 6 min of machine time at $65/h), 12% fixed expenses, 7.5% selling expenses and a 10% margin: target price $22.98. The minimum price is $20.12 and the floor $17.51. The market pays $23.50, a bit above target, giving an 11.6% margin.

How much discount can I give?

Down to the minimum price, which covers every expense at zero profit: 12.4% off the target price in the example. Each point of discount comes out of profit: 5% off drops the margin from 10% to 6.3%, and you would need 67% more volume to keep the same cash profit. Below the minimum price, only sell to fill idle capacity, and never below the floor.

What are the limits?

It is an estimate using average percentages. It does not handle state-specific gross receipts tax rules, volume rebates, payment-term discounts or price discrimination rules (Robinson-Patman Act). Check pricing policy and tax treatment with your accountant before publishing a price list.