Welcome to this article on exercises on business calculations and more specifically on the calculation of the commercial margin as a percentage. You will find here no less than 11 detailed corrected management exercises on commercial calculations for Operational Management.
At the end of this article, you will know how to calculate the commercial margin in percentage in business calculations without any worries.
In this section:
- Application: The Parisian Gourmet
- Application: The Grand Market
- Application: At Marjorie's
- Application: Clothing Distribution – TrendyStyle
- Application: The delights of Paris
- Application: HappyTech
- Application: ModernTech Company
- Application: Globex Company
- Application: Technicolor Company
- Application: ElectronEquip Company
- Application: The House of Flavors
Application: The Parisian Gourmet
Statement
Le Gourmet Parisien is a delicatessen located in the heart of the capital. They specialize in selling high-end French gourmet products such as cheeses, wines, confectionery and other culinary specialties.
They recently decided to implement a new financial management system to more closely monitor their business performance. To do this, they collected the following data on one of their best-selling products, a fine red wine:
– Purchase price excluding tax (PA HT): €15,00
– Sales price excluding tax (PV HT): €45,00
– Quantity sold: 1000 bottles
Work to do
1. Calculate the unit margin for this product in euros.
2. Calculate the overall margin for this product in euros.
3. Calculate and express the margin rate as a percentage for this product.
4. Calculate and express the markup rate as a percentage for this product.
5. Interpret the results obtained for the margin rate and the markup rate.
Proposed correction
1. The unit margin is calculated by taking the difference between the selling price excluding tax and the purchase price excluding tax, i.e.: Unit margin = PV excluding tax – PA excluding tax = €45,00 – €15,00 = €30,00.
2. The overall margin is calculated by taking the unit margin * the quantity sold, i.e.: Overall margin = Unit margin x quantity sold = €30,00 x 1000 = €30.
3. The margin rate is calculated by doing: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((€45,00 – €15,00) ÷ €15,00) x 100 = 200%.
4. The markup rate is calculated by doing: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€45,00 – €15,00) ÷ €45,00) x 100 = 66,67%.
5. The margin rate of 200% means that each euro invested in the purchase of this product generates 2 euros of margin. The markup rate of 66,67% means that the margin represents 66,67% of the selling price excluding VAT. These two results demonstrate a good commercial performance for this product.
Summary of the formulas used
| 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: The Grand Market
States :
The Grand Marché is a large area located in the heart of France. It offers a variety of products ranging from food to clothing. The company wants to look into the management of its assortment, particularly on the products in the butcher's department, based on the following information:
– The tax-free purchase price of a kilo of beef is €10.
– The sales price excluding tax is €15.
– The Grand Marché sold 500 kg of beef this month.
Work to do :
a) Calculate the unit commercial margin of beef.
b) Calculate the overall commercial margin of beef for the month.
c) Calculate the margin rate for beef.
d) Calculate the markup rate for beef.
e) What is the impact of the increase in the purchase price on the sales margin as a percentage?
Proposed correction:
a) The unit commercial margin is calculated as follows: Unit margin = PV HT – PA HT = €15 – €10 = €5.
b) The overall commercial margin is:
Overall margin = Unit margin x quantity sold = €5 x 500 = €2.
c) The margin rate is calculated as follows: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((15 € – 10 €) ÷ 10 €) x 100 = 50%.
d) For the markup rate, we have: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((15 € – 10 €) ÷ 15 €) x 100 = 33,33%.
e) If the purchase price increases, it will reduce the unit sales margin as well as the markup rate and the markup rate because they are both based on the difference between the selling price and the purchase price. This means that the company will earn less on each product sold. The exact impact will depend on the increase in the purchase price.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| Overall margin = Unit margin x quantity sold | The overall margin is calculated by multiplying the unit margin (the difference between the selling price and the purchase price of a product) by the quantity of products sold. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate is the percentage that the profit represents on the cost of production. It is an indicator of the profitability of a product. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | The markup rate is the percentage that the profit represents on the sales price excluding taxes. It is an indicator of the profitability of the company. |
Application: At Marjorie's
States :
The company "Chez Marjorie" is a boutique that sells different types of fashion items. Marjorie wants to calculate her sales margin in order to determine whether her activities are profitable or not.
She bought a batch of 50 scarves for €5 each excluding tax. She resells them for €12,50 each excluding tax. The purchase costs for this batch are €10.
Work to do :
1. Calculate the total purchase cost of the scarves.
2. Calculate the turnover excluding tax for the sale of scarves.
3. Calculate the commercial margin in euros.
4. Calculate the margin rate as a percentage.
5. Calculate the markup rate as a percentage.
Proposed correction:
1. The total purchase cost of the scarves is 50 scarves x €5/scarf + €10 additional purchase fee = €250 + €10 = €260.
2. The turnover excluding tax for the sale of scarves is 50 scarves x €12,50/scarf = €625.
3. The commercial margin in euros is €625 – €260 = €365.
4. The margin rate in percentage is ((€12,50 – €5) ÷ €5) x 100) = 150%.
5. The markup rate in percentage is ((€12,50 – €5) ÷ €12,50) x 100) = 60%.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Total purchase cost = (Unit purchase price x Quantity) + Purchase costs | This formula is used to calculate the total cost incurred in purchasing the goods. |
| Net sales turnover = Unit sales price x Quantity | This formula is used to calculate the total amount of sales excluding tax. |
| Sales margin = Net sales – Total purchase cost | This formula is used to calculate the commercial margin in euros, i.e. the profit made on the sale of the goods. |
| Margin rate = ((Selling price excluding tax – Purchase price excluding tax) ÷ Purchase price excluding tax) x 100 | This formula is used to calculate the margin rate, that is, the percentage of profit made in relation to the purchase price. |
| Brand rate = ((Sales price excluding tax – Purchase price excluding tax) ÷ Sales price excluding tax) x 100 | This formula is used to calculate the markup rate, that is, the percentage of profit made in relation to the sale price. |
Application: Clothing Distribution – TrendyStyle
States :
TrendyStyle is a company specializing in the distribution of clothing. It recently purchased a series of 500 shirts at a unit price of €30 excluding VAT. After applying a margin, the shirts are sold at a unit price of €55 excluding VAT.
Work to do :
1. Calculate the unit margin on each shirt.
2. Calculate the overall margin generated by the sale of the 500 shirts.
3. Calculate the margin rate on each shirt.
4. If the VAT rate is 20%, calculate the sales price including VAT of a shirt.
5. Calculate the total sales amount including tax for the 500 shirts.
Proposed correction:
1. The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT. Therefore, Unit margin = Selling price excluding VAT – Purchasing price excluding VAT = €55 – €30 = €25.
2. The overall margin is obtained by multiplying the unit margin by the quantity sold. Therefore, Overall margin = Unit margin x Quantity sold = €25 x 500 = €12.
3. The margin rate is calculated as follows: Margin Rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) ÷ Purchase Price excluding VAT) x 100% = ((€55 – €30) ÷ €30) x 100% = 83,33%.
4. The sales price including VAT is calculated by adding VAT to the sales price excluding VAT. Therefore, Sales price including VAT = Sales price excluding VAT + (Sales price excluding VAT x VAT rate) = €55 + (€55 x 20%) = €66.
5. The total amount of sales including tax is obtained by multiplying the sales price including tax by the quantity sold. Therefore, Total sales including tax = Sales price including tax x Quantity sold = €66 x €500 = €33.
Summary of Formulas Used:
| Packages | Explanations |
|---|---|
| Overall Margin = Unit Margin x Quantity Sold | The overall margin is the total profit made after selling a certain quantity of product. It is obtained by multiplying the unit margin (difference between the selling price excluding VAT and the purchase price excluding VAT) by the number of units sold. |
| Margin Rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) ÷ Purchase Price excluding VAT) x 100% | The margin rate is the profit rate on each product sold, calculated as a percentage. It allows you to understand how many euros of profit are generated for each euro spent on the purchase of the product. |
Application: The delights of Paris
States :
The patisserie Les délices de Paris is a company that produces and sells a variety of cakes. Its manager, Mr. Boulanger, is in the habit of analyzing his financial results every quarter. For the last quarter, he recorded the following information: Purchase price excluding tax of a cake: €4,50. Sale price excluding tax of a cake: €9,50. Quantity of cakes sold: 1000.
Work to do :
1. Calculate the unit margin of the Les délices de Paris pastry shop.
2. Calculate the overall margin.
3. Calculate the margin rate.
4. Calculate the mark rate.
5. Interpret the result obtained.
Proposed correction:
1. The unit margin is calculated by subtracting the purchase price excluding VAT from the sale price excluding VAT. Unit margin = Sale price excluding VAT – Purchase price excluding VAT. Therefore the unit margin is €9,50 – €4,50 = €5,00.
2. The overall margin is calculated by multiplying the unit margin by the quantity sold. Overall margin = Unit margin x Quantity sold. So the overall margin is €5,00 x 1000 = €5000.
3. The margin rate is calculated by dividing the difference between the selling price excluding tax and the purchasing price excluding tax by the purchasing price excluding tax, all multiplied by 100. Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100. Therefore the margin rate is ((€9,50 – €4,50) ÷ €4,50) x 100 = 111,11%.
4. The markup rate is calculated by dividing the difference between the selling price excluding tax and the purchase price excluding tax by the selling price excluding tax, all multiplied by 100. Markup rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100. Therefore the markup rate is ((€9,50 – €4,50) ÷ €9,50) x 100 = 52,63%.
5. The results show that Les délices de Paris makes a unit margin of €5,00 per cake and a margin rate of 111,11%. This means that the company makes a profit of 111,11% on each cake sold compared to its initial purchase cost.
Summary of Formulas Used:
| Concept | Formulas |
|---|---|
| Unit margin | Unit margin = Selling price excluding VAT – Purchase price excluding VAT |
| Overall margin | Overall margin = Unit margin x Quantity sold |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Brand taxes | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
Application: HappyTech
States :
HappyTech is a company specializing in new technologies. You are responsible for financial management and you are in charge of analyzing the company's commercial performance. Last month, the company sold 200 computers. The purchase price excluding tax of each computer is €700, the sale price excluding tax is €1000.
Work to do :
1. Calculate the unit margin of each computer.
2. Calculate the overall margin achieved by the company.
3. Calculate HappyTech's margin rate.
4. Calculate HappyTech’s markup rate.
5. If management decides to lower the selling price excluding tax to €950, what will the new margin rate and the new markup rate be?
Proposed correction:
1. The unit margin is calculated as the selling price excluding VAT minus the purchasing price excluding VAT. So in this case, the unit margin is €1000 – €700 = €300.
2. The overall margin is the unit margin multiplied by the quantity sold. So, it is €300 x 200 = €60.
3. The margin rate is calculated using the formula ((Sale price excluding VAT – Purchase price excluding VAT) ÷ Purchase price excluding VAT) x 100. The calculation therefore gives ((€1000 – €700) ÷ €700) x 100 = 42,86%.
4. Similarly, the mark-up rate is calculated using the formula ((Sale price excluding VAT – Purchase price excluding VAT) ÷ Sale price excluding VAT) x 100. The calculation therefore gives ((€1000 – €700) ÷ €1000) x 100 = 30%.
5. If the selling price excluding VAT is reduced to €950, the new margin rate would be ((€950 – €700) ÷ €700) x 100 = 35,71%. As for the new markup rate, it would be ((€950 – €700) ÷ €950) x 100 = 26,32%.
Summary of Formulas Used:
| Unit margin = PV excluding tax – PA excluding tax |
| Overall margin = Unit margin x quantity sold |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
Application: ModernTech Company
States :
The company ModernTech, which specializes in the sale of computer equipment, wishes to analyze and evaluate its commercial profitability. For different products, it has the following information:
Product A: Purchase price excluding tax (PA HT): €530, Sale price excluding tax (PV HT): €600
Product B: Purchase price excluding tax (PA HT): €400, Sale price excluding tax (PV HT): €455
Product C: Purchase price excluding tax (PA HT): €150, Sale price excluding tax (PV HT): €220
Quantities sold: Product A: 150 units, Product B: 120 units, Product C: 70 units
Work to do :
1. Calculate the margin rate for each product.
2. Calculate the markup rate for each product.
3. Calculate the overall margin for each product.
4. Which product has the highest markup rate?
5. Which product has the highest margin rate?
Proposed correction:
1. The margin rate is calculated using the following formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
For product A: Margin rate = ((€600 – €530) ÷ €530) x 100 = 13,21%
For product B: Margin rate = ((€455 – €400) ÷ €400) x 100 = 13,75%
For product C: Margin rate = ((€220 – €150) ÷ €150) x 100 = 46,67%
2. The markup rate is calculated using the following formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100)
For product A: Markup rate = ((€600 – €530) ÷ €600) x 100 = 11,67%
For product B: Markup rate = ((€455 – €400) ÷ €455) x 100 = 12,09%
For product C: Markup rate = ((€220 – €150) ÷ €220) x 100 = 31,82%
3. The overall margin is calculated using the following formula: Overall Margin = Unit Margin x Quantity Sold
For product A: Global Margin = €70 (€600 – €530) x 150 = €10
For product B: Global Margin = €55 (€455 – €400) x 120 = €6
For product C: Overall Margin = €70 (€220 – €150) x 70 = €4
4. Product C has the highest markup rate at 31,82%.
5. Product C also has the highest margin rate at 46,67%.
Summary of Formulas Used:
| Formulas | Meaning |
|---|---|
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100) | The margin rate is the ratio between the commercial margin achieved and the purchase price excluding tax. It expresses profitability in terms of margin reported to the purchase price of the product. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100) | The markup rate is the ratio between the commercial margin and the sales price excluding tax. It expresses profitability in terms of margin reported to the sales price. |
| Overall Margin = Unit Margin x Quantity Sold | The overall margin is used to assess the total amount of commercial margin achieved for a certain quantity sold. |
Application: Globex Company
States :
Globex is a distributor of electronic products. It buys laptops at €400 excluding VAT each and resells them at €700 excluding VAT. For the month of March, it sold 200 units of these computers.
Work to do :
1. Calculate Globex's overall sales margin for the month of March.
2. Calculate Globex's margin rate for this product.
3. Calculate Globex's markup rate for this product.
4. What would be the margin if Globex decides to sell the computers at €650?
5. What would be the new margin rate and markup rate if Globex sells the computers at €650?
Proposed correction:
1. The overall sales margin is calculated by subtracting the purchase price from the sale price, then multiplying by the quantity sold. So, (700 – 400) x 200 = €60.
2. The margin rate is calculated by dividing the unit margin by the purchase price and multiplying by 100. Therefore, ((700 – 400) ÷ 400) x 100 = 75%.
3. The markup rate is calculated by dividing the unit margin by the selling price and multiplying by 100. Therefore, ((700 – 400) ÷ 700) x 100 = 42,86%.
4. If Globex decides to sell the computers at €650, the unit margin would be €250. Therefore, the overall margin would be 250 x 200 = €50.
5. The new margin rate would be ((650 – 400) ÷ 400) x 100 = 62,5%. The new markup rate would be ((650 – 400) ÷ 650) x 100 = 38,46%.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Overall margin (€) | Unit margin (€) x quantity sold (units) |
| Margin rate (%) | ((Sale price excluding VAT (€) – Purchase price excluding VAT (€)) ÷ Purchase price excluding VAT (€)) x 100 |
| Mark rate (%) | ((Sale price excluding VAT (€) – Purchase price excluding VAT (€)) ÷ Sale price excluding VAT (€)) x 100 |
Application: Technicolor Company
States :
Technicolor is a company specializing in the sale of computer and electronic equipment. In 2021, it purchased laptops at a unit price excluding tax of €500 and sold them at a unit price excluding tax of €700. It sold a total of 1000 laptops during the year.
Work to do :
1. Calculate the unit margin.
2. Calculate the overall margin.
3. Calculate the margin rate.
4. Calculate the mark rate.
5. What is the impact of the margin rate and the markup rate on the profitability of the company?
Proposed correction:
1. The unit margin is the difference between the selling price and the purchase price. Unit margin = PV HT – PA HT = €700 – €500 = €200
2. The overall margin is the unit margin multiplied by the quantity sold. Overall margin = Unit margin x quantity sold = €200 x 1000 = €200
3. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100. Margin rate = ((700 € – 500 €) ÷ 500 €) x 100 = 40%
4. The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100. Markup rate = ((700 € – 500 €) ÷ 700 €) x 100 = 28,57%
5. Margin rate and markup rate are important indicators of profitability. Margin rate indicates the percentage of profit on each unit sold compared to the purchase cost, while markup rate indicates the percentage of profit compared to the selling price. The higher these rates, the more profitable the company is. However, a high margin can mean high prices, which could discourage some customers. Therefore, the company must strike a balance between a profitable margin and attractive prices for customers.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| Overall margin = Unit margin x quantity sold | Formula used to calculate the overall margin, allows you to know the overall financial advantage for the company for a given product. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100) | Formula used to calculate the Margin Rate, allows to analyze the level of profitability of a product in relation to the unit purchase cost. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100) | Formula used to calculate the markup rate, allows to analyze the level of profitability of a product in relation to the selling price. |
Application: ElectronEquip Company
States :
ElectronEquip specializes in selling various electronic products. Recently, the flagship product of their collection is a new brand of smartphones. In the past month, they sold 150 smartphones at a retail price excluding tax (RPT) of €450 per unit. The acquisition cost of each smartphone from the manufacturer (RPT) was €250.
Work to do :
1. Calculate the unit commercial margin in euros.
2. Calculate the overall commercial margin in euros.
3. Calculate the margin rate as a percentage.
4. Calculate the markup rate as a percentage.
5. If the company plans to increase its selling price excluding VAT to €500 while maintaining the same purchase price, what will the new margin rate and the markup rate be?
Proposed correction:
1. The unit sales margin is calculated by subtracting the acquisition price excluding tax (AP HT) from the sales price excluding tax (SVP HT). For ElectronEquip, this gives €450 – €250 = €200.
2. The overall sales margin is calculated by multiplying the unit margin by the quantity sold. In this case, we multiply €200 x 150 to get €30.
3. The margin rate is calculated using the formula ((PV HT – PA HT) ÷ PA HT) x 100). Here, this gives ((€450 – €250) ÷ €250) x 100 = 80%.
4. The markup rate is calculated using the formula ((PV HT – PA HT) ÷ PV HT) x 100). Here, this gives ((€450 – €250) ÷ €450) x 100 = 44,44%.
5. If the net selling price increases to €500, then the new margin rate is ((€500 – €250) ÷ €250) x 100 = 100% and the new markup rate is ((€500 – €250) ÷ €500) x 100 = 50%.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Calculation of the margin for a single product, by subtracting the acquisition cost from the selling price. |
| Overall Margin = Unit Margin x Quantity Sold | Calculation of the overall margin, by multiplying the unit margin by the total number of products sold. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate determines the percentage of the acquisition cost that the margin represents. It is calculated by subtracting the AP HT from the PV HT, dividing by the AP HT and multiplying by 100 to obtain a percentage. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | The markup rate determines the percentage of the selling price that the margin represents. It is calculated by subtracting the HT PA from the HT PV, dividing by the HT PV and multiplying by 100 to obtain a percentage. |
Application: The House of Flavors
States :
La Maison Des Saveurs is a restaurant renowned for its quality cuisine. They want to improve their operational management and need your help to understand their commercial margin.
Here is some data provided by the owner:
1. The purchase price excluding tax (PA HT) of a chicken dish is €10.
2. The dish is sold at a sales price excluding tax (PV HT) of €20.
3. During the previous month, they sold 150 chicken dishes.
Work to do :
1. What is the unit margin on the chicken dish?
2. What is the overall margin made on the chicken dish for the previous month?
3. What is the margin rate on the chicken dish?
4. What is the markup rate on the chicken dish?
5. If the purchase price of the chicken dish increases to €12, how will this affect the margin rate and the brand rate?
Proposed correction:
1. The unit margin on the chicken dish is the PV HT – PA HT. Therefore, €20 – €10 = €10.
2. The overall margin is the unit margin x the quantity sold, so €10 x 150 = €1.
3. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100). Therefore, ((20 € – 10 €) ÷ 10 €) x 100 = 100%.
4. The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100). Therefore, ((20 € – 10 €) ÷ 20 €) x 100 = 50%.
5. If the PA excluding tax increases to €12, then:
– The margin rate would be ((€20 – €12) ÷ €12) x 100 = 66,67%, a decrease because the cost of goods has increased.
– The markup rate would be ((€20 – €12) ÷ €20) x 100 = 40%, also a decrease due to the increase in the cost of goods.
Summary of Formulas Used:
| Concept | 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 |