commercial-margin-calculation

Commercial Margin Calculation | 9 Exercises

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Application: To the Epicurean Gourmet

States :

The company "Au Gourmand Épicurien" specializes in the sale of artisanal confectionery. It wishes to analyze the profitability of its products to adjust its commercial strategy. The following data is provided to you for mint candies: Unit purchase price excluding tax: €1,50, Unit sale price excluding tax: €3,00, Quantity sold: 2000 units.

Work to do :

  1. Calculate the unit margin made on each mint candy.
  2. Determine the overall margin earned on sales of mints.
  3. What is the markup on mints?
  4. Calculate the markup rate for this product.
  5. Analyze the impact of a 10% increase in the selling price on the margin rate.

Proposed correction:

  1. The unit margin is calculated by subtracting the unit purchase price excluding VAT from the unit selling price excluding VAT.
    Unit margin = €3,00 – €1,50 = €1,50.
    Each mint candy therefore brings in a margin of €1,50.

  2. The overall margin is obtained by multiplying the unit margin by the quantity sold.
    Overall margin = €1,50 x 2000 = €3000.
    The total sale of sweets generated an overall margin of €3.

  3. The margin rate is calculated by dividing the unit margin by the purchase price, then multiplying by 100.

Margin rate = ((€3,00 – €1,50) ÷ €1,50) x 100 = 100%.
The markup for a mint candy is 100%.

  1. To obtain the markup rate, divide the unit margin by the selling price, then multiply by 100.
    Markup rate = ((€3,00 – €1,50) ÷ €3,00) x 100 = 50%.
    The markup rate for mints is 50%.

  2. If the sales price increases by 10%, the new unit sales price excluding VAT will be €3,00 x €1,10 = €3,30.
    The new margin rate will be: ((€3,30 – €1,50) ÷ €1,50) x 100 = 120%.
    So, a 10% increase in the selling price increases the margin rate from 100% to 120%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Smart Chopsticks

States :

Les Baguettes Futées, a culinary production company specializing in baguettes, decides to review its pricing strategy. It has the following information: Unit manufacturing cost excluding tax: €0,40, Unit selling price excluding tax: €0,80, Quantity sold: 5000 units.

Work to do :

  1. Calculate the unit margin for each baguette.
  2. Estimate the overall margin generated by the sale of baguettes.
  3. Determine the margin rate on the product.
  4. Calculate the markup rate associated with the baguettes.
  5. What would happen to the margin rate if the manufacturing cost decreased by €0,10?

Proposed correction:

  1. The unit margin is determined by subtracting the unit manufacturing cost from the unit selling price.
    Unit margin = €0,80 – €0,40 = €0,40.
    Thus, each baguette generates a unit margin of €0,40.

  2. The overall margin is calculated by multiplying the unit margin by the number of baguettes sold.
    Overall margin = €0,40 x 5000 = €2000.
    The sale of baguettes generated an overall margin of €2.

  3. The margin rate is calculated using the formula:

Margin rate = ((€0,80 – €0,40) ÷ €0,40) x 100 = 100%.
The margin rate for baguettes is therefore 100%.

  1. The markup rate is obtained by dividing the unit margin by the unit selling price.
    Markup rate = ((€0,80 – €0,40) ÷ €0,80) x 100 = 50%.
    The markup rate reaches 50% for baguettes.

  2. If the manufacturing cost decreases by €0,10, the new cost would be €0,40 – €0,10 = €0,30.
    The new margin rate would be: ((€0,80 – €0,30) ÷ €0,30) x 100 = 166,67%.
    A decrease in manufacturing cost of €0,10 would increase the margin rate to 166,67%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: ElectroBoosting

States :

ElectroBoosting, an innovative start-up specializing in rechargeable batteries, wants to evaluate its margins to optimize its costs. Here is the data for its 5000mAh battery: Unit production cost excluding tax: €8, Unit selling price excluding tax: €15, Quantity sold: 1200 units.

Work to do :

  1. Calculate the unit margin obtained by each battery.
  2. What is the overall margin made on the sale of batteries?
  3. Calculate the margin rate for the battery.
  4. What is the markup rate of the batteries sold by ElectroBoosting?
  5. Discuss the strategic implications of a 10% increase in production costs on the rate of margin.

Proposed correction:

  1. The unit margin is obtained by subtracting the production cost from the selling price.
    Unit margin = €15 – €8 = €7.
    Each battery generates a margin of €7.

  2. The overall margin is the product of the unit margin and the quantity sold.
    Overall margin = €7 x 1200 = €8400.
    The sale of batteries generated an overall margin of €8.

  3. The margin rate is given by the following formula:

Margin rate = ((€15 – €8) ÷ €8) x 100 = 87,5%.
The battery margin rate is 87,5%.

  1. The markup rate is calculated as follows:
    Markup rate = ((€15 – €8) ÷ €15) x 100 = 46,67%.
    Battery sales achieved a mark-up rate of 46,67%.

  2. If the production cost increases by 10%, the unit cost becomes €8 x €1,10 = €8,80.
    The new margin rate: ((€15 – €8,80) ÷ €8,80) x 100 = 70,45%.
    A 10% increase in production costs would reduce the margin rate to 70,45%, which could affect ElectroBoosting's profitability in the long term.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Prestige Wines

States :

Vins de Prestige, specializing in the import and distribution of high-end wines, wants to evaluate the financial performance of its sales. For a particular vintage: Purchase cost excluding tax: €12, Sale price excluding tax: €20, Quantity sold: 750 bottles.

Work to do :

  1. Calculate the unit margin for each bottle.
  2. What is the total margin generated by this sale?
  3. Determine the margin rate for this vintage of wine.
  4. Find the markup rate for this product.
  5. What would be the effect of a 10% promotion on the sale price on the markup rate?

Proposed correction:

  1. The unit margin is calculated by subtracting the purchase cost from the selling price.
    Unit margin = €20 – €12 = €8.
    Each bottle offers a margin of €8.

  2. The overall margin is obtained by multiplying this unit margin by the quantity sold.
    Overall margin = €8 x 750 = €6000.
    The total sale generates an overall margin of €6.

  3. The margin rate is evaluated using the formula:

Margin rate = ((€20 – €12) ÷ €12) x 100 = 66,67%.
The margin rate reached 66,67% on this sale.

  1. The markup rate is calculated as follows:
    Markup rate = ((€20 – €12) ÷ €20) x 100 = 40%.
    The mark rate for this vintage is 40%.

  2. In the event of a 10% promotion, the sale price increases to €20 – (€20 x 0,10) = €18.
    The new markup rate would be: ((€18 – €12) ÷ €18) x 100 = 33,33%.
    The promotion would lower the markup rate to 33,33%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Fashion Flashes

States :

Éclats de Mode, a chain of boutiques specializing in fashion accessories, wants to analyze the profitability of its leather bracelets. The known data are: Unit purchase price excluding tax: €5, Unit sale price excluding tax: €12, Quantity sold: 300 units.

Work to do :

  1. Calculate the unit margin associated with these bracelets.
  2. Calculate the overall margin from the sale of bracelets.
  3. Evaluate the margin rate applied.
  4. Determine the markup rate for this product.
  5. What would be the new impact on the margin rate if the purchase price decreased by €1?

Proposed correction:

  1. The unit margin is calculated by subtracting the purchase price from the sale price.
    Unit margin = €12 – €5 = €7.
    Each bracelet generates a margin of €7.

  2. The overall margin is defined as the product of the unit margin by the quantity sold.
    Overall margin = €7 x 300 = €2100.
    The sale of bracelets generates an overall margin of €2.

  3. The margin rate is found via:

Margin rate = ((€12 – €5) ÷ €5) x 100 = 140%.
A margin rate of 140% is recorded for bracelets.

  1. The mark rate is given by:
    Markup rate = ((€12 – €5) ÷ €12) x 100 = 58,33%.
    We observe a mark rate of 58,33%.

  2. With a reduced purchase price of €1, or €4, the margin rate becomes:
    ((€12 – €4) ÷ €4) x 100 = 200%.
    Reducing the purchase price improves the margin rate to 200%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Ecological Lights

States :

Lumières Écologiques, a company involved in LED lighting, is looking to optimize its range of lamps. We have the following information: Unit manufacturing cost excluding tax: €6, Unit selling price excluding tax: €14, Quantity sold: 350 units.

Work to do :

  1. Calculate the unit margin earned on each lamp.
  2. Determine the amount of the overall margin.
  3. Calculate the margin rate for this product.
  4. Calculate the markup rate.
  5. Analyze the impact of a €2 reduction in the selling price on the margin rate.

Proposed correction:

  1. The unit margin is obtained by subtracting the manufacturing cost from the selling price.
    Unit margin = €14 – €6 = €8.
    Each lamp provides a margin of €8.

  2. The overall margin is calculated by multiplying the unit margin by the quantity sold.
    Overall margin = €8 x 350 = €2800.
    The overall margin made following the sale of the lamps is €2.

  3. To calculate the margin rate:

Margin rate = ((€14 – €6) ÷ €6) x 100 = 133,33%.
The margin rate is 133,33%.

  1. The markup rate is calculated by:
    Markup rate = ((€14 – €6) ÷ €14) x 100 = 57,14%.
    The markup rate is 57,14%.

  2. If the sale price drops by €2, it becomes €12.
    The margin rate would be: ((€12 – €6) ÷ €6) x 100 = 100%.
    A decrease of €2 would lower the margin rate to 100%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Vitality Drinks

States :

Boissons Vitalité is a company producing energy fruit juices. The marketing director wants to evaluate the profits generated by the launch of its latest product. The available data are: Unit production cost excluding tax: €0,70, Sales price excluding tax: €2, Quantity sold: 800 units.

Work to do :

  1. Calculate the unit margin to get an idea of ​​the profit per juice.
  2. Calculate the overall margin to determine the total profit.
  3. Evaluate the product's margin rate.
  4. Determine the markup rate for these juices.
  5. What would be the effect of a 10% reduction in the selling price on the markup rate?

Proposed correction:

  1. The unit margin is calculated from:
    Unit margin = €2 – €0,70 = €1,30.
    Each juice generates a margin of €1,30.

  2. The overall margin is obtained by multiplying the unit margin by the quantity sold:
    Overall margin = €1,30 x 800 = €1040.
    The overall margin is therefore €1.

  3. The margin rate is deduced as follows:

Margin rate = ((€2 – €0,70) ÷ €0,70) x 100 = 185,71%.
The margin rate is 185,71%.

  1. To calculate the markup rate:
    Markup rate = ((€2 – €0,70) ÷ €2) x 100 = 65%.
    The markup rate is 65%.

  2. With a sale price revised downwards by 10%: new price = €1,80.
    The markup rate becomes: ((€1,80 – €0,70) ÷ €1,80) x 100 = 61,11%.
    This drop would result in a decrease in the mark rate to 61,11%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Elegance Jewelry

States :

Bijoux Élégancia, an online boutique of artisanal jewelry, analyzes the performance of its silver earrings. Here is the data provided: Unit purchase cost excluding tax: €18, Sale price excluding tax: €42, Quantity sold: 150 pairs.

Work to do :

  1. Calculate the unit margin for each pair.
  2. Evaluate the overall margin generated by the sale.
  3. Determine the margin rate for these earrings.
  4. Calculate the markup rate.
  5. Consider how a €5 increase in purchase cost affects the margin rate.

Proposed correction:

  1. The unit margin is obtained from:
    Unit margin = €42 – €18 = €24.
    Each pair of earrings thus generates a margin of €24.

  2. The overall margin is calculated as follows:
    Overall margin = €24 x 150 = €3600.
    The overall margin reaches €3.

  3. The margin rate is determined by:

Margin rate = ((€42 – €18) ÷ €18) x 100 = 133,33%.
The margin rate is therefore 133,33%.

  1. To obtain the mark rate:
    Markup rate = ((€42 – €18) ÷ €42) x 100 = 57,14%.
    The mark rate reached 57,14%.

  2. If the purchase cost increases by €5, it goes to €23.
    The new margin rate would be: ((€42 – €23) ÷ €23) x 100 = 82,61%.
    An increase in purchasing cost reduces the margin rate to 82,61%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

Application: Sweet Desserts

States :

Sweet Desserts, a renowned ice cream maker, wants to better understand the profitability of its vanilla ice cream tubs. The data for this product are: Production cost excluding tax: €2,50, Selling price excluding tax: €6, Quantity sold: 400 units.

Work to do :

  1. Calculate the unit margin on each pot.
  2. Evaluate the overall margin from these sales.
  3. Estimate the margin rate.
  4. Determine the markup rate for this product.
  5. What would be the effects on the margin rate of an increase of €0,50 in the cost of production?

Proposed correction:

  1. The unit margin is:
    Unit margin = €6 – €2,50 = €3,50.
    Each tub of vanilla ice cream brings in a margin of €3,50.

  2. The overall margin is:
    Overall margin = €3,50 x 400 = €1400.
    The overall margin is €1 for these sales.

  3. The margin rate is:

Margin rate = ((€6 – €2,50) ÷ €2,50) x 100 = 140%.
A margin rate of 140% for these ice cream pots is recorded.

  1. The markup rate is calculated as follows:
    Markup rate = ((€6 – €2,50) ÷ €6) x 100 = 58,33%.
    We note a mark rate of 58,33%.

  2. With an increased production cost of €0,50, the cost is €3.
    The margin rate becomes: ((€6 – €3) ÷ €3) x 100 = 100%.
    This would reduce the margin rate to 100%.

Formulas Used:

Title Formulas
Unit margin PV HT – PA HT
Overall margin Unit margin x Quantity sold
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100

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