What formula is used to calculate markup on selling price?

The formula used to calculate markup on selling price is derived from understanding how markup relates to the cost of an item and its selling price. The correct formula, which is option B, is (selling price - cost) / selling price.

This formula calculates the markup as a percentage of the selling price. To break it down, the formula subtracts the cost from the selling price to determine the amount of markup in absolute terms. By dividing this markup amount by the selling price, you obtain a ratio that indicates how much markup is added relative to the price at which the product is sold, effectively expressing the markup as a percentage of the final selling price.

Using this approach allows businesses to see how much of the selling price is profit, which is essential for pricing strategies and ensuring profitability. Understanding this formula is crucial for marketing professionals aiming to set competitive prices while maintaining profitable margins.