Summary
Application: House of Delights
States :
Maison des Délices is a small pastry shop specializing in the sale of macarons. Each month, it sells an average of 1 macarons at a price of €200 each. Production costs are €2 per macaron, and it offers a 1% discount to customers who buy more than 10 units.
Work to do :
- Calculate the average monthly turnover without taking into account discounts.
- Determine the unit margin of each macaron.
- What will the monthly turnover be if 30% of sales benefit from the discount?
- Calculate the monthly overall margin without reduction.
- Analyze how a 10% fluctuation in production cost could impact unit margin.
Proposed correction:
-
The average monthly turnover without discount is calculated as follows:
Sales revenue = Quantity sold x Unit selling price
That is 1 x €200 = €2.
Thus, the average monthly turnover is €2. -
The unit margin is obtained by subtracting the production cost from the unit selling price.
Unit margin = PV excluding tax – PA excluding tax
That is 2 € – 1 € = 1 €.
Each macaron generates a unit margin of €1. -
To determine the turnover with the discount applied at 30% of sales, let's first calculate the reduced sales.
Reduced sales = (1 x 200) = 0,30 macarons
Price with discount = €2 x (1 – 0,10) = €1,80
Reduced turnover = 360 x €1,80 = €648
Full price turnover = (1 – 200) x €360 = €2
Total = €648 + €1 = €680.
The turnover is then €2.
-
The overall margin without discount is found by multiplying the unit margin by the quantity sold.
Overall margin = Unit margin x Quantity sold
That is €1 x €1 = €200.
The overall monthly margin is therefore €1. -
To observe the impact of a 10% fluctuation in production cost on unit margin, let's recalculate the cost.
New production cost = €1 x (1 ± 0,10) = €0,90 or €1,10
Low unit margin = €2 – €1,10 = €0,90
High unit margin = €2 – €0,90 = €1,10.
The unit margin can vary between €0,90 and €1,10, showing a possible decrease or increase of 10 cents.
Formulas Used:
| Title | Formulas |
|---|---|
| Turnover | Quantity sold x Unit selling price |
| Unit margin | PV HT – PA HT |
| Turnover with discount | Discounted Quantity x Reduced Price + (Total Quantity – Discounted Quantity) x Regular Price |
| Overall margin | Unit margin x Quantity sold |
Application: DevTech Solutions
States :
DevTech Solutions is a startup specializing in mobile application development. The company charges its clients €50 for the development of a standard application. The average cost is €000. This year, it added an annual maintenance service for €35 per application, a service that 000% of current clients choose.
Work to do :
- Determine the margin rate for developing an application.
- What is the turnover achieved per application including maintenance?
- Calculate the margin generated per application including maintenance service.
- DevTech plans to reduce development prices by 10% to boost sales. What will be the new selling price and unit margin?
- Analyze the impact of maintenance service on total revenue if each customer opts for this service.
Proposed correction:
-
The margin rate is calculated by the formula:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
That is ((€50 – €000) ÷ €35) x 000 = 35%.
The margin rate therefore stands at 42,86%. -
To calculate revenue per application with maintenance:
Total revenue = Application price + (Percentage of maintenance customers x Maintenance price)
That is €50 + (000 x €0,60) = €5.
The turnover per application including maintenance is therefore €53. -
The margin generated per application with maintenance is calculated as follows:
Total margin = (Application PV + Maintenance PV x % customers) – Cost price
That is (€50 + €000 x 5) – €000 = €0,60.
The margin per application including maintenance is €18.
-
If DevTech reduces the sale price by 10%, the calculation is as follows:
New PV = €50 x (000 – 1) = €0,10
New unit margin = €45 – €000 = €35.
The new selling price is €45 and the new unit margin is €000. -
When each customer is expected to opt for the maintenance service, the turnover is:
Overall turnover = €50 + €000 = €5 x Number of customers
This increases turnover by €5 per customer compared to the situation where only 000% of customers take maintenance.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Turnover with maintenance | PV application + (Percentage of customers x PV maintenance) |
| Total margin with maintenance | (PV application + PV maintenance x % customers) – Cost price |
| New PV after reduction | PV – (Reduction x PV) |
Application: Gourmet Bio
States :
Gourmet Bio, an organic food supplier, sells its products at €18 per kg to local stores. The supply costs are €12 per kg. Recently, Gourmet Bio introduced a new range of products sold at €22 per kg, with a supply cost of €15 per kg.
Work to do :
- Calculate the markup rate for old products (€18 per kg).
- Calculate the margin rate for the new product line.
- If Gourmet Bio sells 500 kg of the old product per month, what is the overall margin generated?
- If the supplier increases the cost of old products by 10%, what will the new margin rate be?
- Assess the potential impact on overall margin if sales gradually shift to the new range.
Proposed correction:
-
The markup rate is given by the following formula:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
That is ((€18 – €12) ÷ €18) x 100 = 33,33%.
The markup rate for the old product is therefore 33,33%. -
The margin rate of the new range is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
That is ((€22 – €15) ÷ €15) x 100 = 46,67%.
The margin rate for the new range is 46,67%. -
The overall monthly margin on the old product is calculated by:
Overall margin = Unit margin x Quantity sold
Unit margin = €18 – €12 = €6
That is €6 x €500 = €3.
The overall margin generated per month is €3.
-
If the cost of the old products increases by 10%, the new cost is €12 x €1,10 = €13,20.
New margin rate = ((€18 – €13,20) ÷ €13,20) x 100 = 36,36%.
The new margin rate after the increase is 36,36%. -
If sales shift to the new range, the overall margin could increase as follows:
Respective margins: €6 for the old versus €7 for the new (€22 – €15) per kg.
With the transition, the company would benefit from an additional margin of €1 per kg sold, thus gradually improving financial performance over time.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| New cost price | Initial cost x (1 + Rate of increase) |
Application: SolarPro
States :
SolarPro installs solar panels for businesses, charging €300 for each complete project. The cost of each installation is around €000. The company plans to offer battery storage as an additional option for €240, which around 000% of customers choose.
Work to do :
- Calculate the unit margin for an installation without options.
- What is the total revenue when the battery is added by 40% of customers?
- How many projects must be sold to generate a minimum overall margin of €600?
- Assuming a 5% discount on the initial price to encourage sales, what would be the total revenue per project including the option?
- Analyze the possible effect of a 5% increase in costs on the unit margin.
Proposed correction:
-
The unit margin without option is calculated by:
Unit margin = PV excluding tax – PA excluding tax
That is €300 – €000 = €240.
The unit margin for an installation is €60. -
For total revenue with 40% of customers adding battery:
Total CA = Standard price + (Battery price x % customers)
= €300 + (€000 x 30) = €000.
The turnover per project including the battery is €312. -
For a total margin of €600, let's calculate:
Number of projects = Margin target ÷ Unit margin
That is €600 ÷ €000 = 60 projects.
SolarPro must sell 10 projects to reach an overall margin of €600.
-
If the price is reduced by 5%, let's calculate the new price:
New PV = €300 x (000 – 1) = €0,05
New turnover with option = €285 + (€000 x 30) = €000.
The turnover per project, including reduction, is €297. -
If costs increase by 5%, the new cost will be:
New cost = €240 x 000 = €1,05
New unit margin = €300 – €000 = €252.
A 5% cost increase would result in a reduction in the unit margin to €48.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total turnover with option | Standard PV + (Option x % customers) |
| Project names | Margin target ÷ Unit margin |
| PV reduction | PV – (Reduction x PV) |
| New cost | Initial cost x (1 + Rate of increase) |
Application: HealthBody Equipment
States :
SantéCorps Equipements is a supplier of medical equipment. They leave a 30% margin on the products, sold at €1 excluding VAT per unit. Their annual fixed costs are €300, and the variable costs are €120 per unit. They hope to sell 000 units this year.
Work to do :
- What is the unit purchase price excluding tax (PA excluding tax) for the products?
- Calculate the annual break-even point in number of units sold.
- What is the total turnover expected for the year?
- If SantéCorps decides to increase the unit selling price by 10%, calculate the new markup rate.
- Evaluate the potential impact of a 5% change in variable costs on the break-even point.
Proposed correction:
-
To find the PA HT, we use the markup rate formula:
PA HT = PV HT ÷ (1 + Mark rate)
That is €1 ÷ 300 = €1,3.
The unit purchase price excluding VAT is €1. -
The break-even point in number of units is calculated by:
Break-even point = Fixed costs ÷ (Unit selling price – Variable costs)
= €120 ÷ (€000 – €1) = 300 units.
The break-even point is 200 units. -
The total expected turnover is:
Total CA = Expected quantity x Unit sales price
= 500 x €1 = €300.
The total turnover expected for the year is therefore €650.
-
With a 10% increase in the selling price, the new price is:
New PV = €1 x 300 = €1,10
New markup rate = ((€1 – €430) ÷ €1) x 000 = 1%.
The new mark rate is 30,07%. -
If variable costs increase by 5%, they become:
New variable charges = €700 x 1,05 = €735
New threshold = €120 ÷ (€000 – €1) = 300 units.
An increase results in a need to sell 222 units to reach the threshold.
Formulas Used:
| Title | Formulas |
|---|---|
| PA HT | PV HT ÷ (1 + Mark rate) |
| Break even | Fixed charges ÷ (unit PV – Variable charges) |
| Turnover | Expected quantity x Unit selling price |
| New PV | PV x (1 + Increase Rate) |
| New charges | Variable charges x (1 + Rate of increase) |
Application: Luminance Luminaire
States :
Luminence Luminaire designs and sells designer LED lamps in retail stores, at a unit price of €75. The manufacturing cost per lamp is €45. Recently, a professional customer ordered 1000 lamps with a 15% discount on the unit price.
Work to do :
- Calculate the unit margin for a lamp.
- What is the turnover generated by the professional order after the reduction?
- Determine the total margin generated by the business order after discount.
- If material prices increase by 10%, adjust the unit margin calculation.
- Discuss the strategic implications of offering such a discount on professional sales.
Proposed correction:
-
The unit margin is obtained by:
Unit margin = PV excluding tax – PA excluding tax
= €75 – €45 = €30.
Each lamp generates a unit margin of €30. -
The turnover after reduction for the pro order is:
PV after reduction = €75 x (1 – 0,15) = €63,75
Total turnover = €63,75 x 1 = €000.
The turnover generated is €63. -
The total margin after reduction is calculated by:
Total margin = Quantity x (PV after reduction – PA excluding tax)
= 1 x (€000 – €63,75) = €45.
The professional order generates a total margin of €18.
-
If costs increase by 10%, the new cost is €45 x 1,10 = €49,50.
New unit margin = €75 – €49,50 = €25,50.
The new unit margin would be €25,50. -
Offering professional discounts can stimulate large orders, which could increase sales volumes and market share. However, it is crucial to ensure that margins remain sufficient to support profitability and not overwhelm production capacity.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total turnover | PV after reduction x Quantity |
| Total margin | Quantity x (PV after reduction – PA excluding tax) |
| New cost | PA HT x (1 + Increase rate) |
Application: FastTech Repair
States :
FastTech Repair, a computer equipment maintenance company, charges €90 per intervention for its services. The average technical cost per intervention is €50. FastTech plans to increase its rates by 12% next year.
Work to do :
- Calculate the current margin rate per intervention.
- What will the new rate per intervention be after the increase?
- Calculate the impact of the new pricing on the unit margin.
- Estimate the annual turnover if FastTech performs 300 interventions.
- Discuss the possible impacts of this price increase on sales volumes.
Proposed correction:
-
The current margin rate is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((€90 – €50) ÷ €50) x 100 = 80%.
The margin rate is 80% per intervention. -
The new rate after 12% increase is:
New PV = €90 x (1 + 0,12) = €100,80.
The new rate per intervention will be €100,80. -
The new unit margin is found by adjusting for the new rate:
New unit margin = New PV – PA HT
= €100,80 – €50 = €50,80.
The price increase increases the unit margin to €50,80.
-
With 300 interventions at the old rate, the annual turnover is:
Total CA = Current pricing x Number of interventions
= €90 x 300 = €27.
The turnover would be €27. -
Raising prices can improve unit profitability, but it can also reduce customer volume if the market is price sensitive. The company will need to monitor the impact on demand, especially in a competitive sector.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New rate | PV x (1 + Increase Rate) |
| New unit margin | New PV – PA HT |
| Total turnover | PV x Number of interventions |
App: EcoTravel Services
States :
EcoTravel Services offers group bike tours. They charge €25 per person for a standard tour. Fixed costs are €7 per month and variable costs are €500 per participant. On average, they host 10 participants per month.
Work to do :
- Calculate the unit margin for a participant.
- Determine the break-even point in number of participants.
- If EcoTravel decides to offer a 20% discount for groups of more than 20 people, what would be the price per participant for these groups?
- What is the total income per month before reduction?
- Explain the potential impacts of the discount policy on volumes and profitability.
Proposed correction:
-
The unit margin is obtained by:
Unit margin = PV HT – Variable cost
= €25 – €10 = €15.
The unit margin for a participant is €15. -
The break-even point in terms of participants is calculated by:
Break-even point = Fixed costs ÷ Unit margin
= €7 ÷ €500 = 15 participants.
The break-even point is 500 participants. -
With a 20% discount, the price for groups is:
PV after reduction = €25 x (1 – 0,20) = €20.
The price per participant for groups is €20.
-
The total income per month with their current average sales is:
Total Revenue = Participants x Pricing
= 400 x 25 € = 10 €.
The total income per month is €10. -
Introducing a discount for large groups could increase the volume of participants, thus attracting more customers. However, if discounted prices become too frequent, there could be a negative effect on overall profitability. The company will need to monitor the balance between increased market share and reduced margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Variable cost |
| Break even | Fixed costs ÷ Unit margin |
| PV after reduction | PV x (1 – Reduction Rate) |
| Total revenue | Participants x Pricing |
App: ActiveWear Studio
States :
ActiveWear Studio manufactures sportswear. The main line sells for €60 per item, with a manufacturing cost of €40. Fixed costs are €80 per year, and sales are around 000 items each year.
Work to do :
- Calculate the unit margin for an item.
- Determine the annual turnover.
- What is the annual break-even point in terms of number of items sold?
- If the company lowers its price by 10% to increase sales, what would the new selling price be?
- Analyze the possible ramifications of a price drop on annual profits.
Proposed correction:
-
The unit margin is given by:
Unit margin = PV excluding tax – PA excluding tax
= €60 – €40 = €20.
The unit margin for an item is €20. -
The annual turnover is:
Sales revenue = Number of items x Selling price
= €5 x €000 = €60.
The turnover is €300 per year. -
For the break-even point:
Break-even point = Fixed costs ÷ Unit margin
= €80 ÷ €000 = 20 items.
The break-even point is 4 items.
-
If the price decreases by 10%, the new price is:
New PV = €60 x (1 – 0,10) = €54.
The new price would be €54 per item. -
A price decrease could result in an increase in total sales, which would offset the decrease in unit margin. However, if sales do not increase significantly to meet or exceed the new break-even point, it could negatively affect overall profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Turnover | Number of items x Sale price |
| Break even | Fixed costs ÷ Unit margin |
| New PV | PV x (1 – Reduction Rate) |