Welcome to this article on exercises on business calculations and more specifically on the calculation of the commercial margin. 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 business calculations without any worries.
In this section:
- Application: Liam & Co Supermarket
- Application: BellaGio Company
- Application: La Chocolaterie Gourmande
- Application: Dupont Food Company
- Application: Calculation of the commercial margin at Boulangerie La Bonne Croûte
- Application: Company “Les Pains Dorés”
- Application: Kami Bakery Delights
- Application: The Sparkling Jewelry
- Application: ElectroMega
- Application: Planet Beauty
- Application: Shoe House
Application: Liam & Co Supermarket
States :
Liam & Cie is a supermarket that sells food products. They have recently acquired new fruit juice products. The unit purchase cost (PA HT) of a fruit juice is €1,50. They have sold 2000 units of fruit juice.
Work to do :
1. If the sales price excluding tax (SVP HT) of a fruit juice is €2,50, what is the unit margin on this product?
2. What is the overall margin made on the sale of these fruit juices?
3. Calculate the margin rate made on these fruit juices.
4. Calculate the markup rate achieved on these fruit juices.
5. If Liam & Cie wants to increase its overall margin by 10%, what would be the new sales price excluding tax (SVP HT)?
Proposed correction:
1. The unit margin is calculated using the formula: Unit margin = PV HT – PA HT. So here Unit margin = €2,50 – €1,50 = €1,00.
2. The overall margin is calculated using the formula: Overall margin = Unit margin x quantity sold. So here Overall margin = €1,00 x 2000 = €2000,00.
3. The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. So here Margin rate = ((€2,50 – €1,50) ÷ €1,50) x 100 = 66,67%.
4. The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. So here Markup rate = ((€2,50 – €1,50) ÷ €2,50) x 100 = 40,00%.
5. If Liam & Cie wishes to increase its overall margin by 10%, the new PV excluding VAT would be: New PV excluding VAT = (Overall margin x 1,10 ÷ Quantity sold) + PA excluding VAT = (€2000,00 x 1,10 ÷ 2000) + €1,50 = €2,60.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Calculating the margin per unit sold |
| Overall margin = Unit margin x quantity sold | Calculating the total margin for all units |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Percentage of margin compared to PA HT |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Percentage of margin compared to PV HT |
| New PV HT = (Overall margin x 1,10 ÷ Qty sold) + PA HT | New sales price excluding tax after adjustment |
Application: BellaGio Company
States :
BellaGio is a luxury clothing store that aims to maximize its sales margin. The following data is associated with a particular item, the "royal fur coat".
– Purchase price excluding tax (PA HT): €1600
– Sale price excluding tax (PV HT): €3200
– Quantity sold: 250 units per year.
In addition to this information, BellaGio company faces complex business scenarios related to variations in sales price and quantity sold.
Work to do :
1. Calculate the unit margin on this item.
2. Calculate the overall margin for one year.
3. If the store increases the selling price by 10%, what would be the new margin rate?
4. If the store manages to negotiate a 5% reduction in the purchase price with the supplier, while maintaining the selling price, what would the new margin rate be?
5. Analyze the impact on the overall margin if the quantity sold increased by 10% and the purchase price decreased by 5%.
Proposed correction:
1. The unit margin is calculated by subtracting the purchase price excluding VAT from the sale price excluding VAT, which therefore gives: €3200 – €1600 = €1600.
2. The overall margin is calculated by multiplying the unit margin by the quantity sold, which therefore gives: €1600 x 250 = €400,000.
3. If the selling price increased by 10%, the new selling price would be €3200 x 1.1 = €3520. The new margin rate would therefore be ((€3520 – €1600) ÷ €1600) x 100 = 120%.
4. If the purchase price drops by 5%, the new purchase price would be €1600 x 0.95 = €1520. The new margin rate would therefore be ((€3200 – €1520) ÷ €1520) x 100 = 110,52%.
5. If the quantity sold increased by 10% and the purchase price decreased by 5%, the new overall margin would be ((€3200 – €1520) x (250 x 1.1)) = €462,000.
Summary of Formulas Used:
| Formula name | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: La Chocolaterie Gourmande
States :
La Chocolaterie Gourmande is a company specializing in the manufacture and sale of high-end artisanal chocolates. It takes care of the entire process, from the selection of cocoa beans to retail sales in its boutiques. It offers a range from classic chocolates to special assortments for special occasions.
The chef of Chocolaterie Gourmande presents the following information to you:
– The selling price excluding tax per kilogram of chocolate is €80.
– The purchase price excluding tax per kilogram of cocoa beans required to make one kilogram of chocolate is €25.
– The production costs excluding tax related to the production of a kilogram of chocolate (excluding the cost of cocoa) amount to €15.
– The company sold 1 kg of chocolate.
Work to do :
1) What is the commercial margin of Chocolaterie Gourmande for the sale of these 1 kg of chocolate?
2) What is the company's margin rate on the sale of these 1 kg of chocolate?
3) What is the company's markup rate on the sale of these 1 kg of chocolate?
4) How could the company increase its sales margin?
5) What risks could the company incur by trying to increase its sales margin?
Proposed correction:
1) The trade margin is the difference between the selling price excluding VAT and the purchase price excluding VAT, multiplied by the quantity sold. In this case, the trade margin is therefore (€80 – €25) x 1500 kg = €82.
2) The margin rate is the commercial margin divided by the purchase price excluding tax, all multiplied by 100. Here, the margin rate is equivalent to: ((€80 – €25) ÷ €25) x 100 = 220%.
3) The markup rate is the commercial margin divided by the selling price excluding tax, the total multiplied by 100. For this example, the markup rate is therefore: ((€80 – €25) ÷ €80) x 100 = 68,75%.
4) To increase its sales margin, the company could increase its sales prices, reduce its purchasing costs or increase its quantity sold by launching marketing campaigns, for example.
5) If the company chooses to increase its selling prices, it risks losing some of its price-sensitive customers. If it decides to increase its quantity sold, it will have to ensure that it has enough inventory and is able to handle increased production. Furthermore, reducing purchasing costs could lead to a decline in product quality, which could harm the company's reputation.
Summary of Formulas Used:
| Packages | Explanations |
|---|---|
| Overall margin = Unit margin x quantity sold | The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT. This margin is then multiplied by the quantity sold to obtain the overall margin. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100) | The margin rate gives the share of the margin in each euro of the purchase price excluding VAT. It is calculated by dividing the difference between the sale price excluding VAT and the purchase price excluding VAT by the purchase price excluding VAT, then multiplying the result by 100. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100) | The markup rate indicates the share of the margin in each euro of the selling price excluding VAT. It is calculated by dividing the difference between the selling price excluding VAT and the purchase price excluding VAT by the selling price excluding VAT, then multiplying the result by 100. |
Application: Dupont Food Company
States :
Dupont Food Company is a company that sells food products. The company is concerned about its financial results and wants to carry out a detailed analysis of its sales margin.
His accountant provided the following information for the previous tax year:
– Cost of goods sold (COGS): €40
– Sales revenue: €80
– Number of products sold: 2000 units
Work to do :
1. Calculate the company's sales margin for the previous fiscal year.
2. Determine the unit sales margin.
3. What was the company's profit margin for the previous fiscal year?
4. What was their markup rate for the previous fiscal year?
5. If Dupont Foods wants to improve its margin rate by 5%, at what price should the selling prices be set?
Proposed correction:
1. The sales margin (SM) is the difference between sales revenue (SR) and the cost of goods sold (CMV). For Société Alimentaire Dupont, this gives: SM = SR – CMV or SM = €80 – €000 = €40.
2. Unit margin is simply the sales margin divided by the number of products sold (Q). Therefore, unit margin = MC ÷ Q or Unit margin = €40 ÷ 000 = €2000.
3. The margin rate (MR) is ((PV HT – PA HT) ÷ PA HT) x 100, knowing that the PV HT is the selling price excluding taxes, i.e. the sales revenues and the PA HT is the Cost of goods, i.e. (80 – 000) ÷ 40) x 000 = 40%.
4. The markup rate (TMarque) is ((PV HT – PA HT) ÷ PV HT) x 100 or ((80 – 000) ÷ 40) x 000 = 80%.
5. We now want to improve the margin rate by 5%. This means that the new margin rate must be 100% + 5% = 105%. We can then use the definition of the margin rate to find the new selling price: PV HT = PA HT * (1 + (margin rate ÷ 100)) or the new PV HT = €40 * (000 + (1 ÷ 105)) = €100. Therefore, to improve their margin rate by 82%, Société Alimentaire Dupont will have to set their selling prices at €000.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| MC = RV – CMV | The sales margin measures how much a company earns on each dollar of sales after paying the cost of goods sold. |
| Unit margin = MC ÷ Q | Unit margin provides a measure of the profit generated by the sale of a single unit of product. |
| TM = ((PV HT – PA HT) ÷ PA HT) x 100 | The margin rate provides a measure of the profitability of each sale as a percentage of the purchase cost. |
| TMrand = ((PV HT – PA HT) ÷ PV HT) x 100 | The markup rate provides a measure of the profitability of each sale as a percentage of the selling price. |
| New PV HT = PA HT * (1 + (margin rate ÷ 100)) | This formula gives the new selling price needed to reach a certain margin rate. |
Application: Calculation of the commercial margin at Boulangerie La Bonne Croûte
States :
La Bonne Croûte Bakery is a small business specializing in bakery products. They offer a variety of breads and pastries to their customers. In order to optimize its value chain, the company is trying to understand its financial functioning.
The following information is provided:
– The purchase price excluding tax (PA HT) of a baguette is €0,50.
– The retail price excluding tax (PV HT) of the baguette is €1,00.
– They sold 3000 baguettes of bread in the last month.
Work to do :
1. Calculate the amount of the unit margin made by Boulangerie La Bonne Croûte on each baguette sold.
2. Calculate the overall commercial margin achieved last month.
3. Determine the margin rate of La Bonne Croûte Bakery.
4. Calculate the markup rate of La Bonne Croûte Bakery.
5. If Boulangerie La Bonne Croûte decides to increase the selling price excluding tax of its baguettes to €1,10 while maintaining its purchase price, what would be its new unit margin, its overall margin and its margin and brand rates?
Proposed correction:
1. The unit margin is calculated as the difference between the sales price excluding tax (STP) and the purchase price excluding tax (PP). Therefore: Unit margin = STP – PP. Hence: Unit margin = €1,00 – €0,50 = €0,50.
2. The overall commercial margin is calculated by multiplying the unit margin by the quantity sold. Therefore: Overall margin = Unit margin x quantity sold. Hence: Overall margin = €0,50 x 3000 = €1500.
3. The margin rate is obtained by dividing the unit margin by the purchase price excluding tax (PA HT) and multiplying by 100 to obtain a percentage. therefore: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. From which: Margin rate = ((€1,00 – €0,50) ÷ €0,50) x 100 = 100%.
4. The markup rate is calculated by dividing the unit margin by the sales price excluding tax (SVP HT) and then multiplying by 100. Therefore: Markup rate = ((SVP HT – PA HT) ÷ SVP HT) x 100. Hence: Markup rate = ((€1,00 – €0,50) ÷ €1,00) x 100 = 50%.
5. With a new selling price excluding VAT of €1,10:
– The new unit margin would be: €1,10 – €0,50 = €0,60.
– The new overall margin would be: €0,60 x 3000 = €1800.
– The new margin rate would be: ((€1,10 – €0,50) ÷ €0,50) x 100 = 120%.
– And the new markup rate would be: ((€1,10 – €0,50) ÷ €1,10) x 100 = 54,55%.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | The unit margin is the difference between the selling price excluding tax and the purchase price excluding tax. |
| Overall margin = Unit margin x Quantity sold | The overall margin is obtained by multiplying the unit margin by the quantity sold. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate is the unit margin divided by the purchase price excluding tax multiplied by 100 to obtain a percentage. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | The markup rate is the unit margin divided by the selling price excluding tax and then multiplied by 100 to obtain a percentage. |
Application: Company “Les Pains Dorés”
States :
The company "Les Pains Dorés" is a popular bakery that makes a wide range of breads, pastries and pastries. Among their flagship products, we have the "Pain Complet" which sells very well. To produce this bread, the company must invest in various ingredients and supplies.
During the month of February, the company sold 4000 wholemeal loaves. Each wholemeal loaf is sold for €1,20 excluding VAT and costs €0,70 excluding VAT to produce.
Work to do :
1. Calculate the unit sales margin for wholemeal bread.
2. What is the overall sales margin for the month of February?
3. Determine the margin rate for wholemeal bread.
4. What does the markup rate of wholemeal bread represent?
5. If the company wants to increase its sales margin by 10% on wholemeal bread, what should the new sales price be?
Proposed correction:
1. The unit trade margin is the difference between the sales price excluding tax (SPT) and the purchase price excluding tax (PP). In this case,
Unit margin = PV excluding tax – PA excluding tax = €1,20 – €0,70 = €0,50.
2. The overall sales margin is the unit margin multiplied by the quantity of products sold. Therefore,
Overall margin = Unit margin x Quantity sold = €0,50 x 4000 = €2000.
3. The margin rate is the sales margin divided by the purchase cost and multiplied by 100 to obtain a percentage. Therefore,
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((1,20 € – 0,70 €) ÷ 0,70 €) x 100 = 71,4%.
4. The markup rate is the trade margin divided by the selling price and multiplied by 100 to get a percentage. So,
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((1,20 € – 0,70 €) ÷ 1,20 €) x 100 = 41,7%.
5. If the company wants to increase its sales margin by 10%, the new selling price will be the current margin plus 10% of the current margin. Therefore,
New PV HT = (Unit margin + 10% unit margin) + PA HT = (€0,50 + 10% of €0,50) + €0,70 = €1,35.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Calculation of unit commercial margin |
| Overall margin = Unit margin x Quantity sold | Calculation of the overall commercial margin |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Calculation of the margin rate |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Calculation of the mark rate |
| New PV HT = (Unit margin + 10% unit margin) + PA HT | Calculation of the new selling price to increase the commercial margin by 10% |
Application: Kami Bakery Delights
States :
Kami Bakery is a local business that makes artisanal products, including croissants and baguettes. The owner, Mr. Kami, is looking to assess the financial performance of his business. To do this, he has collected some financial information. Here is some data:
– The cost of purchasing a croissant is €0,20.
– Mr. Kami sells each croissant at the price excluding tax of €0,90.
– The quantity of croissants sold per day is around 200 pieces.
– The VAT rate applied to croissants is 5,5%.
Work to do :
1. Calculate the unit trade margin on each croissant.
2. Calculate the overall sales margin for a day of croissant sales.
3. Calculate the margin rate on each croissant.
4. Calculate the markup rate on each croissant.
5. If the purchase cost of croissants increases by €0,05, what impact will this have on the unit sales margin and the margin rate?
Proposed correction:
1. The unit trade margin is calculated by subtracting the purchase price excluding tax from the sale price excluding tax. Here, this gives: (€0,90 – €0,20) = €0,70. The unit trade margin is therefore €0,70.
2. The overall commercial margin is calculated by multiplying the unit margin by the quantity sold. Here, this gives: €0,70 x 200 = €140. The overall commercial margin for a day of croissant sales is therefore €140.
3. The margin rate is calculated by dividing the commercial margin by the sales price excluding tax, then multiplying by 100. Here, this gives: ((€0,70 ÷ €0,90) x 100) = 77,78%. The margin rate on each croissant is therefore 77,78%.
4. The markup rate is calculated by dividing the commercial margin by the purchase price excluding tax, then multiplying by 100. Here, this gives: ((€0,70 ÷ €0,20) x 100 = 350%). The markup rate on each croissant is therefore 350%.
5. If the purchase cost of croissants increases by €0,05, the unit sales margin becomes: (€0,90 – €0,25) = €0,65. The margin rate becomes: ((€0,65 ÷ €0,90) x 100) = 72,22%. Therefore, the increase in the purchase cost reduces the unit sales margin and the margin rate.
Summary of Formulas Used:
| Concept | Formulas |
|---|---|
| Unit sales margin | Unit margin = PV excluding tax – PA excluding tax |
| Overall trade 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: The Sparkling Jewelry
States :
La Bijouterie Éclatante is a company that manufactures and sells gold and silver jewelry. One of their flagship products is a gold bracelet. This bracelet is purchased from a supplier at a purchase price excluding tax (PA excluding tax) of €250. They sell this bracelet at a Sale Price excluding tax (PV excluding tax) of €400. They sell an average of 20 bracelets per month.
Work to do :
1. What is the unit margin on the gold bracelet (in €)?
2. What is the overall margin on the gold bracelet (in €)?
3. What is the margin rate on the gold bracelet (in %)?
4. What is the markup rate on the gold bracelet (in %)?
5. If the purchase price of the bracelet increases by 5%, how does this affect the unit and overall margin (in €)?
Proposed correction:
1. The unit margin is the selling price excluding VAT (SVP excluding VAT) minus the purchasing price excluding VAT (PP excluding VAT). In this example, the unit margin is therefore €400 – €250 = €150.
2. The overall margin is the unit margin multiplied by the quantity sold. Here, the overall margin is therefore €150 x 20 = €3000 for 20 bracelets.
3. The margin rate is the unit margin divided by the purchase price excluding tax (PA HT), then multiplied by 100 to obtain a percentage. Here, the margin rate is therefore (€150 ÷ €250) x 100 = 60%.
4. The markup rate is the unit margin divided by the sales price excluding tax (SVP HT), then multiplied by 100 to obtain a percentage. It is therefore (€150 ÷ €400) x 100 = 37,5%.
5. If the purchase price of the bracelet increases by 5%, this means that the price goes from €250 to €250 + (€250 x 5 ÷ 100) = €262,5.
The new unit margin would therefore be €400 – €262,5 = €137,5.
Therefore, the overall margin would be €137,5 x 20 = €2750. As the purchase price increases, the unit margin and the overall margin decrease.
Summary of Formulas Used:
| Packages | Definitions |
|---|---|
| VAT rate | 20% | 5,5% |
| 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 |
| Increase in PA HT | PA HT + (PA HT x 5 ÷ 100) |
Application: ElectroMega
ElectroMega is a retail company of household appliances. Currently, the company wants to analyze its profitability on certain products in order to improve its pricing strategy.
States :
Let's take for example their leading product; the "FrigiMax" refrigerator. ElectroMega buys the FrigiMax from the manufacturer for €350 excluding VAT and sells it for €600 excluding VAT. The company sold 200 of these appliances in the last quarter.
Work to do :
1. Calculate the unit margin on each FrigiMax refrigerator sold.
2. Calculate the overall margin achieved on FrigiMax refrigerator sales during the last quarter.
3. Calculate the margin rate on the FrigiMax refrigerator.
4. Calculate the markup rate on the FrigiMax refrigerator.
5. If ElectroMega decides to increase the selling price excluding tax of the FrigiMax to €625, what will be the company's new margin rate on this product?
Proposed correction:
1. The unit margin is the selling price excluding VAT of the unit minus the purchase price excluding VAT of the unit. For the FrigiMax, the unit margin is €600 – €350 = €250.
2. The overall margin is the unit margin multiplied by the quantity sold. For this exercise, the overall margin during the last quarter would be €250 x 200 = €50.
3. The margin rate is the ratio of the margin to the purchase price excluding VAT.
[(PV HT – PA HT) ÷ PA HT] x 100)
[(€600 – €350) ÷ €350] x 100 = 71,43%.
4. The markup rate is the ratio of the margin to the selling price excluding tax.
[(PV HT – PA HT) ÷ PV HT] x 100)
[(€600 – €350) ÷ €600] x 100 = 41,67%.
5. If the selling price excluding VAT increases to €625, with the same purchase price excluding VAT:
Margin rate = [(PV HT – PA HT) ÷ PA HT] x 100)
[(€625 – €350) ÷ €350] x 100 = 78,57%.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Margin made on each unit sold. |
| Overall margin = Unit margin x quantity sold | Margin made on all sales of a product. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100) | Proportion of the margin in relation to the purchase price excluding VAT. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100) | Proportion of the margin in relation to the selling price excluding tax. |
Application: Planet Beauty
Planète Beauté is a company that sells different cosmetic products such as makeup, perfumes, skin care, etc. It has recently launched a new lipstick in the market.
States :
Planète Beauté purchased a quantity of lipstick at a unit price of €8 excluding tax. The company decides to sell the lipstick at a unit price of €15 excluding tax. During a certain period, it sold 200 units of lipstick.
Work to do :
1. What is the total purchase price excluding VAT for the lipsticks?
2. What is the total selling price excluding VAT for the lipsticks?
3. What is the unit margin made on each lipstick sold?
4. What is the overall margin made on all the lipsticks sold?
5. What are the margin and brand rates generated by this product?
Proposed correction:
1. The total purchase price excluding VAT (TPP) is calculated by multiplying the unit purchase price by the number of units purchased. TPP = Unit purchase price excluding VAT x Quantity purchased = €8 x 200 = €1.
2. The total selling price excluding VAT (TSP) is the product of the unit selling price excluding VAT and the quantity sold. Therefore, TSP = Unit selling price excluding VAT x Quantity sold = €15 x 200 = €3.
3. The unit margin is the difference between the unit selling price excluding VAT and the unit purchasing price excluding VAT. Therefore, Unit margin = Unit selling price excluding VAT – Unit purchasing price excluding VAT = €15 – €8 = €7.
4. The overall margin is the product of the unit margin and the quantity sold. Overall margin = Unit margin x Quantity sold = €7 x 200 = €1.
5. The margin rate is calculated by doing ((Sale price excluding VAT – Purchase price excluding VAT) ÷ Purchase price excluding VAT) x 100. Margin rate = ((€15 – €8) ÷ €8) x 100 = 87,5%.
The markup rate is calculated by doing ((Sale price excluding tax – Purchase price excluding tax) ÷ Sale price excluding tax) x 100. Markup rate = ((€15 – €8) ÷ €15) x 100 = 46,67%.
Summary of Formulas Used:
| Formulas | Details |
|---|---|
| Total purchase price excluding tax | Unit purchase price excluding tax x Quantity purchased |
| Total sales price excluding tax | Unit sales price excluding tax x Quantity sold |
| Unit margin | Unit selling price excluding VAT – Unit purchase price excluding VAT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((Selling price excluding tax – Purchase price excluding tax) ÷ Purchase price excluding tax) x 100 |
| Brand taxes | ((Sales price excluding tax – Purchase price excluding tax) ÷ Sales price excluding tax) x 100 |
Application: Shoe House
States :
La Maison de la Chaussure is a small family business specializing in the sale of artisanal shoes. For a new model of leather shoes, the company buys each pair at €50 excluding tax (HT) and sells them at €100 excluding tax. The company sold 500 pairs of this model in the last month.
Work to do :
1. Calculate the unit sales margin.
2. Calculate the overall trade margin.
3. Calculate the margin rate.
4. Calculate the mark rate.
5. What is the margin if the company decides to lower the selling price to €90 excluding VAT?
Proposed correction:
1. The unit trade margin is the Selling Price excluding VAT (SVP excluding VAT) – the Purchasing Price excluding VAT (PP excluding VAT). Here, it is €100 – €50 = €50.
2. The overall sales margin is calculated by multiplying the unit margin by the number of products sold. Here, it is €50 x 500 = €25.
3. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100. Here, it is ((100 € – 50 €) ÷ 50 €) x 100 = 100%.
4. The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100. Here, it is ((100 € – 50 €) ÷ 100 €) x 100 = 50%.
5. If the company lowers its selling price to €90 excluding VAT, the unit margin becomes €90 – €50 = €40 and the overall margin becomes €40 x 500 = €20.
Summary of Formulas Used:
| Entitled | Formulas |
|---|---|
| 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 |
Thank you for sharing these concepts with us which will help us analyze the commercial margin.
Thank you very much for this comment 🙂
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It seems to me that the calculation in exercise 2 question 5 is wrong and that the correct answer is 462000
5. If the quantity sold increased by 10% and the purchase price decreased by 5%, the new overall margin would be ((€3200 – €1520) x (250 x 1.1)) = €445,000.
cordially
Hello DAG,
You are absolutely right. I am correcting it.
Thank you a lot.
Good luck to you.
The calculation in exercise 2 question 3 is also wrong
cordially
Hello,
Could you be more specific please?
Thank you for these exercises which help me prepare for a sales interview.
You are welcome and above all, good luck.