MycroFiber is a producer of microfiber material for the auto detailing industry. Jamal, the owner of MycroFiber is highly skilled in the technical and manufacturing areas, but does not understand pricing. Jamal knows he wants to cover the cost of production when selling his material and needs revenue to cover his overhead costs and to make a profit. To be sure he meets these goals, Jamal decides to calculate the cost of production and add a percentage to that. Jamal is using:

When the company provides either goods or services, there are factors that need to be considered during pricing. These factors include the profit the company wishes to generate, cost of production and many more. Markup is the difference between goods or services selling price and the its original cost and it is represented as a percentage.

The markup provides the manufacturer or service-provider with profit since it is the amount added to total cost of the goods or services. The significance is to ensure that the company can make a decent gross profit.