Markdown Calculator (retail price cut & margin impact)

Understanding the markdown calculator — concept and principle

This calculator works out the sale price after a markdown and shows what the price cut does to your gross margin and profit per unit. It also gives the total markdown on the stock you plan to reduce and how many more units you must sell to keep the same gross profit. Retailers, buyers and online sellers use it before seasonal sales and clearance.

25% off: what it costs you — with the default inputs: +83.3% units.

How it is calculated

Sale price = original price × (1 − markdown %)
Markdown per unit = original price − sale price
Gross margin = (price − cost) ÷ price × 100, before and after
Profit per unit after markdown = sale price − cost
Total markdown on stock = markdown per unit × units
Extra units for the same gross profit = ((original − cost) ÷ (sale − cost) − 1) × 100

The principle

A markdown cuts the price but not the cost, so the whole cut comes out of profit. That is why the margin falls faster than the price. If profit per unit drops from 44 to 24, each sale earns only 24 ÷ 44 of what it did, and you must sell 44 ÷ 24 = 1.83 times as many units to earn the same gross profit. The total markdown is the revenue given up if all the stock sells at the lower price; it is the usual way retailers budget for markdowns.

Worked example

Defaults: original price 80, markdown 25%, cost 36, 150 units.

Sale price = 80 × 0.75 = $60.00; markdown per unit = $20.00.
Margin before = (80 − 36) ÷ 80 = 55%; after = (60 − 36) ÷ 60 = 40%.
Profit per unit after = 60 − 36 = $24.00.
Total markdown = 20 × 150 = $3,000.
Extra units = (44 ÷ 24 − 1) × 100 = 83.3% more units.

Each point is the calculator re-run with only “Original selling price” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Original selling price	Sale price after markdown
20	$15.00
40	$30.00
60	$45.00
80	$60.00
100	$75.00
120	$90.00
160	$120.00

How to read the result

A 25% price cut needing 83% more sales shows how expensive markdowns are. They make sense when stock would otherwise not sell at all, when holding it costs money, or when space is needed for new lines. If the extra volume is unlikely, a smaller cut or a bundle offer may work better. Track sell-through after the markdown to see whether the cut was deep enough.

Common mistakes

Thinking a 25% price cut lowers profit by 25%; here profit per unit falls by 45%.
Calculating the markdown on cost instead of the selling price.
Applying a second markdown to the original price instead of the current price.
Forgetting that marked-down stock may sell anyway at full price later.

Keep in mind: The calculation ignores holding costs, the value of freed space and effects on other products. It is a planning aid, not financial advice.

Frequently asked questions

What is the difference between a markdown and a discount?

A markdown is a reduction in the ticket price for all customers; a discount is often temporary or limited to some buyers or codes.

How much more do I need to sell after a markdown?

(original − cost) ÷ (sale − cost) times as many units; with the defaults, 1.83 times.

Should I mark down to cost?

Only to clear stock; at cost you earn nothing on each sale.

Sources: OpenStax, Contemporary Mathematics, section 6.2 "Discounts, Markups, and Sales Tax"

Checked 9 Nov 2026. Sale price = original price × (1 − percent discount): OpenStax, “Contemporary Mathematics”, section 6.2 “Discounts, Markups, and Sales Tax”. Gross margin = (price − cost) ÷ price (arithmetic).

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