Summary
Chocolate Factory L'Éclat de Cacao
States :
Chocolate maker L'Éclat de Cacao wants to adjust its pricing strategies. You are tasked with calculating different values resulting from these decisions. To do this, you have the following information: the purchase cost of a box of pralines is €12, the sales price excluding tax (SRP HT) is €20, and the annual demand is 3 units. The annual storage cost is €000 per box and the ordering cost is €1,5.
Work to do :
- Calculate the unit margin for the box of pralines.
- What is the margin rate, and what is its value for this product?
- Determine the markup rate for the box of pralines.
- Calculate the economic order quantity (EOQ) for pralines.
- Analyzing all the previous results, what recommendations would you give to improve profitability?
Proposed correction:
1. The unit margin is calculated by subtracting the purchase cost from the selling price excluding VAT.
Unit margin = €20 – €12 = €8.
The unit margin is €8.
2. The margin rate is the difference between the PV excluding tax and the PA excluding tax, divided by the PA excluding tax, all multiplied by 100.
Margin rate = ((€20 – €12) ÷ €12) x 100 = 66,67%.
The margin rate is 66,67%.
3. The markup rate is the difference between the PV HT and the PA HT, divided by the PV HT, all multiplied by 100.
Markup rate = ((€20 – €12) ÷ €20) x 100 = 40%.
The markup rate is 40%.
4. The QEC is calculated using Wilson's formula:
QEC = ?((2 x Annual demand x Ordering cost) ÷ Storage cost).
QEC = ?((2 x 3000 x 50) ÷ 1,5) = ?(300000 ÷ 1,5) ? 447 boxes.
The optimal QEC for pralines is approximately 447 boxes.
5. In light of these calculations, Éclat de Cacao should consider reducing its purchasing costs or adjusting its selling price to improve its margin rate. Increasing the quantity ordered at each replenishment according to the QEC can also reduce order-related costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
KreatiWeb Digital Agency
States :
The digital agency KreatiWeb analyzes the profitability of its web development services. For a typical project, the cost of completion is estimated at €1 and the client is billed €500 (excluding VAT). The agency is considering a 2% price increase next year. Its annual marketing expenses are €500, generating an average of 10 annual projects.
Work to do :
- What is the unit margin amount per project?
- Calculate the initial margin rate.
- Determine the initial markup rate.
- What would be the new PV HT with the 10% tariff increase, and what would be the new margin rate?
- Analyze the potential impact of increasing tariffs on demand, taking into account current data.
Proposed correction:
1. The unit margin is the difference between the PV excluding tax and the cost of production.
Unit margin = €2 – €500 = €1.
The unit margin per project is €1.
2. The margin rate is calculated here as follows:
Margin rate = ((€2 – €500) ÷ €1) x 500 = 1%.
The initial margin rate is 66,67%.
3. The markup rate is calculated by:
Markup rate = ((€2 – €500) ÷ €1) x 500 = 2%.
The initial markup rate is 40%.
4. With a 10% increase, the new PV HT is calculated as follows:
New PV excluding tax = €2 x 500 = €1,1.
New margin rate = ((€2 – €750) ÷ €1) x 500 = 1%.
The new PV excluding tax would be €2, and the new margin rate would be 750%.
5. Increasing prices could reduce demand if the price is elastic, but improve the contribution margin per project. KreatiWeb should assess the price sensitivity of its customers to decide the best strategic course.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Cost of production |
| Margin rate | ((PV HT – Cost of realization) ÷ Cost of realization) x 100 |
| Brand taxes | ((PV HT – Cost of realization) ÷ PV HT) x 100 |
| New Sale Price | PV HT x (1 + Percentage increase) |
Futuristic Energy Start-Up
States :
Énergie Futuriste, a start-up specializing in solar panels, is planning to launch a new range of products. Each panel has a production cost of €460 and is sold after all charges at €800 excluding VAT. The start-up anticipates an annual order of 1 units, with each order generating a processing cost of €200, and €35 per panel for storage.
Work to do :
- Determine the unit margin for each solar panel.
- Calculate the margin rate for this product line.
- What is the markup rate associated with the solar panel?
- Establish QEC to optimize costs.
- Suggest ways to improve costs without affecting quality.
Proposed correction:
1. The unit margin is calculated as follows:
Unit margin = €800 – €460 = €340.
The unit margin is €340 per solar panel.
2. The margin rate is determined by the formula:
Margin rate = ((€800 – €460) ÷ €460) x 100 = 73,91%.
The margin rate is 73,91%.
3. The calculation for the markup rate is:
Markup rate = ((€800 – €460) ÷ €800) x 100 = 42,5%.
The markup rate is 42,5%.
4. The QEC is calculated by:
QEC = ?((2 x 1 x 200) ÷ 35) = ?(15 ÷ 84) ? 000 panels.
The ideal QEC is approximately 74 panels per order.
5. To reduce costs, Énergie Futuriste could explore automating certain production steps or negotiating more advantageous conditions with suppliers to reduce the cost of raw materials.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| Brand taxes | ((PV HT – Production cost) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Leather Goods Authentic Luxury
States :
Le Luxe Authentique, a renowned craftsman specializing in high-end leather goods, is looking to optimize the yield of its flagship product, a leather handbag. The cost price (PA HT) of the bag is €250 and it is sold for €540 (HT). In order to better anticipate demand, they analyze the logistics costs at €70 per order and €10 per unit in storage. Currently, 500 units are sold annually.
Work to do :
- Calculate the unit margin for each bag.
- What is the product's margin rate?
- Determine the markup rate applied.
- Calculate the QEC for this handbag.
- What impact would a 10% reduction in logistics costs have on QEC?
Proposed correction:
1. The unit margin is:
Unit margin = €540 – €250 = €290.
The unit margin per bag is €290.
2. The margin rate is calculated as follows:
Margin rate = ((€540 – €250) ÷ €250) x 100 = 116%.
The margin rate is 116%.
3. The mark rate is given by:
Markup rate = ((€540 – €250) ÷ €540) x 100 = 53,7%.
The markup rate is 53,7%.
4. To calculate the QEC:
QEC = ?((2 x 500 x 70) ÷ 10) = ?(70 ÷ 000) = 10 bags.
The optimal QEC is 84 bags per order.
5. With a 10% reduction in logistics costs (i.e. €63 per order):
QEC = ?((2 x 500 x 63) ÷ 10) = ?(63 ÷ 000) = 10 bags.
A 10% reduction in logistics costs would lower the QEC to 79 bags per order.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Knowledge & Culture Bookstore
States :
The Savoir & Culture bookstore is expanding its collection of rare books, whose average purchase price is €45 per unit, sold at €90 (excluding VAT). With storage costs of €3 per book and an ordering cost of €15, it sells around 800 copies each year.
Work to do :
- Determine the unit margin for each rare book.
- Calculate the margin rate for this product.
- What is the mark rate?
- Evaluate the QEC to optimize this product.
- What strategic adjustments could streamline inventory management?
Proposed correction:
1. The unit margin is calculated as follows:
Unit margin = €90 – €45 = €45.
The unit margin per book is €45.
2. The margin rate is as follows:
Margin rate = ((€90 – €45) ÷ €45) x 100 = 100%.
The margin rate for books is 100%.
3. The markup rate is:
Markup rate = ((€90 – €45) ÷ €90) x 100 = 50%.
The markup rate is 50%.
4. The QEC is calculated by:
QEC = ?((2 x 800 x 15) ÷ 3) = ?(24 ÷ 000) = 3 pounds.
The optimal QEC is around 89 pounds per order.
5. Optimizing inventory management could involve increased automation of the supply chain and more accurate demand forecasting. Reducing the transportation cycle and optimizing inventory rotation are other avenues to explore.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Nova Gadget Electronics Store
States :
Nova Gadget, an expert in electronic gadgets, is considering revisiting the profitability of a specific product – a high-quality audio headset whose production cost is €24, for a selling price excluding VAT set at €55. The storage cost is €5 per unit, and each order generates a fixed cost of €100. The locker sells about 200 units per month.
Work to do :
- What is the unit margin amount for the headset?
- Establish the margin rate.
- What is the mark rate?
- Calculate the QEC to optimize annual inventory management.
- Discuss the effect of inventory turnover on profitability.
Proposed correction:
1. The unit margin is calculated:
Unit margin = €55 – €24 = €31.
The unit margin is €31 per helmet.
2. The margin rate is:
Margin rate = ((€55 – €24) ÷ €24) x 100 = 129,17%.
The margin rate is 129,17%.
3. The markup rate is as follows:
Markup rate = ((€55 – €24) ÷ €55) x 100 = 56,36%.
The markup rate is 56,36%.
4. Calculation for the QEC on an annual basis (200 units per month or 2400 per year):
QEC = ?((2 x 2 x 400) ÷ 100) = ?(5 ÷ 480) = 000 helmets.
The optimal QEC is 310 helmets per order.
5. Efficient inventory turnover maximizes space utilization by minimizing storage cost. Rapid turnover can also reduce the risk of product depreciation while improving long-term net profit margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| Brand taxes | ((PV HT – Production cost) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Elegance and Delight Tea Room
States :
Élégance et Délice, a prestigious tea room, wants to maximize the sale of its assortment of rare teas. The average purchase price per box is €18 and each box is sold at €42 (excluding VAT). Storage costs are €2 per box and the cost of an order is €30. The room sells an average of 600 per year.
Work to do :
- What is the unit margin amount?
- Determine the margin rate.
- Calculate the markup rate.
- What is the QEC for these rare teas?
- Offer suggestions to improve profits while maintaining the unique quality of their teas.
Proposed correction:
1. The unit margin is obtained as follows:
Unit margin = €42 – €18 = €24.
The unit margin per box of tea is €24.
2. The margin rate is calculated by:
Margin rate = ((€42 – €18) ÷ €18) x 100 = 133,33%.
The margin rate is 133,33%.
3. The markup rate is as follows:
Markup rate = ((€42 – €18) ÷ €42) x 100 = 57,14%.
The markup rate is 57,14%.
4. The QEC is given by the formula:
QEC = ?((2 x 600 x 30) ÷ 2) = ?(36 ÷ 000) = 2 boxes.
The optimal QEC is 134 boxes per order.
5. To maximize profits, the teahouse could introduce themed events or bundled offers that increase sales volume and reduce unit ordering costs while maintaining the high-end image.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Textile Fashion and Elegance
States :
Mode et Élégance, a textile company, is reviewing its production costs for its luxury shirts. The production cost of the shirts is €35, and they are sold at €75 (excluding VAT). The annual demand for these shirts is 5 units, with an ordering cost of €000 and a storage cost of €200 per unit.
Work to do :
- Determine the unit margin for each shirt.
- Calculate the margin rate.
- What is the mark rate?
- Evaluate QEC for optimized management.
- Suggest strategies for better inventory management that could reduce the cost of storage.
Proposed correction:
1. The unit margin is calculated as follows:
Unit margin = €75 – €35 = €40.
The unit margin per shirt is €40.
2. The margin rate is calculated as follows:
Margin rate = ((€75 – €35) ÷ €35) x 100 = 114,29%.
The margin rate is 114,29%.
3. The markup rate is:
Markup rate = ((€75 – €35) ÷ €75) x 100 = 53,33%.
The markup rate is 53,33%.
4. The QEC to optimize management is:
QEC = ?((2 x 5 x 000) ÷ 200) = ?(4 ÷ 2) = 000 shirts.
The optimal QEC is approximately 707 shirts per order.
5. Mode et Élégance could adopt an automated inventory management system for better real-time visibility, thereby reducing the need for prolonged storage, which would lead to a reduction in associated costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| Brand taxes | ((PV HT – Production cost) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Organic Bulk & Zero Waste Supermarket
States :
Bio Vrac & Zéro Déchet specializes in organic bulk products. Currently, a pack of organic cereals is purchased for €9 and sold for €16,50 (excluding VAT). The storage cost is €0,8 per pack, and the cost per order is €20. With a sales forecast of 3 units per year, the supermarket wants to optimize its supplies.
Work to do :
- Calculate the unit margin on a pack of organic cereals.
- What is the value of the margin rate?
- Calculate the markup rate for the cereal pack.
- Determine the QEC for optimal supply management.
- Suggest measures to improve cash flow management based on inventory turnover.
Proposed correction:
1. The unit margin is obtained by:
Unit margin = €16,50 – €9 = €7,50.
The unit margin is €7,50 per pack of cereals.
2. The margin rate is calculated as follows:
Margin rate = ((€16,50 – €9) ÷ €9) x 100 = 83,33%.
The margin rate is 83,33%.
3. The markup rate is determined by:
Markup rate = ((€16,50 – €9) ÷ €16,50) x 100 = 45,45%.
The markup rate is 45,45%.
4. The QEC is calculated by:
QEC = ?((2 x 3 x 200) ÷ 20) = ?(0,8 ÷ 128) = 000 packs.
The optimal QEC is 400 packs per order.
5. To effectively manage cash flow, Bio Vrac & Zéro Déchet could negotiate longer payment terms with suppliers, linking cash inflow to sales cycles, while maintaining an inventory level that minimizes storage costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Economic Order Quantity (EOQ) | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |