Calculation of the selling price with margin rate

Welcome to this article on exercises on business calculations and more specifically on how to calculate the selling price with margin rate. You will find here no less than 9 detailed corrected management exercises on business calculations for Operational Management.

At the end of this article, you will know how to calculate the selling price with margin rate in business calculations without any worries.

Summary table of the formulas used:

Formulas	Description
PV excluding tax = PA excluding tax x (1 + Margin rate)	Sale price excluding tax
VAT amount = PV excluding VAT x VAT rate	VAT amount
PV incl. tax = PV excl. tax + VAT amount	Selling price including all taxes
Profit = Margin rate x Sales volume x PV excluding VAT	Profit
Unit margin = PV excluding tax – PA excluding tax	Unit margin
Overall margin = Unit margin x Quantity sold	Overall margin
Margin rate = ((PV HT – PA HT) / PA HT) * 100	Margin rate
Mark rate = ((PV HT – PA HT) / PV HT) * 100	Brand taxes
New PV HT = New PV TTC / 1,2	New sales price excluding tax after adjustment
New margin rate = ((New PV HT – PA HT) / PA HT) * 100	New margin rate after adjustment
Total profit = (PV HT – PA HT) * Quantity sold	Total profit

Paradise Ebooks Application

States :

You are the manager of the company "Paradise Ebooks". This company specializes in selling e-books of various genres. Currently, you are facing some problems related to setting the selling price of your products. You have purchased a batch of e-books at the purchase price excluding tax (PA HT) of €6,50. You are aiming for a margin rate of 30%.

Here is the additional information:

– The VAT rate is 5,5%.
– Your goal is to determine the right selling price to achieve the financial goals you have set for yourself.

Work to do :

1. Calculate the amount of margin you want to earn per e-book sold.
2. Determine the sales price excluding tax (SRP HT) of each e-book.
3. How much VAT would be per book?
4. Calculate the sales price including all taxes (PV TTC) of each e-book.
5. What would be the markup rate of this product?

Proposed correction:

1. The amount of the desired margin is calculated as follows: Margin = Margin rate * PA HT = 30% * €6,50 = €1,95. You would therefore like to make a margin of €1,95 per e-book sold.

2. The sales price excluding tax (SVP HT) is found by adding the PA HT and the margin. Thus, PV HT = PA HT + Margin = €6,50 + €1,95 = €8,45.

3. The amount of VAT per book is calculated as follows: VAT = VAT rate * PV excluding VAT = 5,5% * €8,45 = €0,465.

4. The sales price including all taxes (PV TTC) is calculated by adding the PV excluding tax and the VAT. This gives: PV TTC = PV excluding tax + VAT = €8,45 + €0,465 = €8,92.

5. The markup rate is calculated as follows: Markup rate = (PV HT – PA HT) ÷ PV HT * 100 = (€8,45 – €6,50) ÷ €8,45 * 100 = 23,08%. The markup rate of the product is therefore 23,08%.

Summary of Formulas Used:

– Margin = Margin rate * PA HT
– PV HT = PA HT + Margin
– VAT = VAT rate * PV excluding VAT
– PV incl. VAT = PV excl. VAT + VAT
– Mark rate = ((PV HT – PA HT) ÷ PV HT) * 100

Julie's Treats App

States :

The company Les Gourmandises de Julie, which specializes in the production of artisanal pastries, is in the process of thinking about setting prices for its products. For one of its flagship products, a chocolate éclair, the company has the following information:

– Purchase price excluding tax (PA HT) of the chocolate éclair: €1,60.
– Desired margin rate: 70%.

Work to do :

1. Calculate the selling price excluding tax (PV HT) which would allow the company to achieve its desired margin rate.
2. If the company decides to apply the VAT rate of 5,5%, what would be the sales price including all taxes (PV TTC) of the chocolate éclair?
3. What is the markup rate of the chocolate éclair?
4. If the company decides to increase the margin rate to 80%, how much will it have to sell the chocolate éclair (excluding tax) to maintain this rate?
5. How should the company price its products taking into account its desired margin rate?

Proposed correction:

1. Margin Rate = ((PV HT – PA HT) / PA HT) * 100) therefore: PV HT = (Margin Rate x PA HT / 100) + PA HT = ((70 x €1,60 / 100) + €1,60) = €2,72.


2. PV incl. tax = PV excl. tax + (PV excl. tax x VAT rate) = €2,72 + (€2,72 x 5,5%) = €2,87.


3. Markup Rate = ((PV HT – PA HT) / PV HT) * 100) therefore Markup Rate = ((€2,72 – €1,6) / €2,72) * 100 = 41,18%.


4. PV excluding tax = ((80 x €1,60 / 100) + €1,60) = €2,88.


5. To set its prices, Les Gourmandises de Julie must first determine the cost of purchasing its products and then add a margin based on the desired margin percentage. It can then add VAT to obtain the final sale price.

Summary of Formulas Used:

1. Margin Rate = ((PV HT – PA HT) / PA HT) * 100).
2. VAT inclusive = VAT exclusive + (VAT exclusive x VAT rate).
3. Brand Rate = ((PV HT – PA HT) / PV HT) * 100).

Optima Outfit Application

States :

The company Optima Outfit, which specializes in selling clothing and fashion accessories, wants to define the selling price of its new branded jacket. To do this, it uses a margin rate to define the selling price. The purchase cost of the jacket excluding tax is €60. Optima Outfit has the following information:

– Desired margin rate: 50%
– Applicable VAT rate: 20%

Work to do :

1. What is the amount of unit margin desired by Optima Outfit on this product in euros?
2. So what would be the tax-free selling price of the jacket?
3. What would be the selling price including tax of the jacket?
4. If the company sells 500 jackets, what would be the overall margin achieved?
5. The company decides to change its margin rate to 60%, what would then be the new sales price excluding tax and the sales price including tax of the jacket?

Proposed correction:

1. The amount of the desired unit margin on the product in euros is calculated as follows: PA HT x margin rate = unit margin. That is €60 x 50% = €30.

2. To determine the sale price excluding tax of the jacket, we add the margin to the purchase cost: PA excluding tax + unit margin = PV excluding tax. Which makes €60 + €30 = €90.

3. To determine the all-tax sales price of the jacket, the VAT rate is applied to the excluding-tax sales price: PV HT + (PV HT x VAT rate) = PV TTC. That is €90 + (€90 x 20%) = €108.

4. To calculate the overall margin achieved if the company sells 500 jackets, we multiply the unit margin by the number of jackets sold: Unit margin x quantity sold = overall margin. Hence: €30 x 500 = €15.

5. If the company changes its margin rate to 60%, the new sales price excluding tax would be €60 x 60% = €96. Applying the VAT rate, the new sales price including tax would therefore be €96 + (€96 x 20%) or €115,20.

Summary of Formulas Used:

– Unit margin = PA HT x margin rate
– Sales price excluding tax = PA excluding tax + Unit margin
– Sales price including all taxes = PV excluding VAT + (PV excluding VAT x VAT rate)
– Overall margin = Unit margin x quantity sold

Sweet Cupcakes App

States :

The company 'Sweet Cupcakes', is a company that specializes in the production and sale of pastries. They are introducing a new product in their range: a special chocolate cupcake. This cupcake is purchased by the company at €1,20 excluding VAT per unit at the factory and the company has set a margin rate of 40%. The current VAT rate is 20%.

Work to do :

1. Calculate the Retail Price excluding Tax (RPT) of the cupcake.
2. Calculate the All-Tax-Inclusive Selling Price (ATIP) of the cupcake.
3. If the company sold 5,000 cupcakes during the month, what will be the total profit generated?
4. What would happen if the company decided to increase its margin rate to 50%?
5. What would be the implications of increasing the VAT rate to 22.5%?

Proposed correction:

1. The PV HT can be calculated using the formula: PV HT = PA HT * (1 + (margin rate/100)). Here, PV HT = €1,20 * (1 + (40/100)) = €1,68.

2. The VAT-inclusive PV can be calculated using the formula: VAT-inclusive PV = VAT-exclusive PV * (1 + (VAT rate/100)). Here, VAT-inclusive PV = €1,68 * (1 + (20/100)) = €2,01.

3. Total profit can be calculated using the formula: Total profit = (Selling price excluding VAT – Purchase price excluding VAT) * quantity sold. Here, Total profit = (€1,68 – €1,20) * 5,000 = €2,400.

4. If the company decides to increase its margin rate to 50%, the new PV excluding VAT would be €1,20 * (1 + (50/100)) = €1,80 and the new PV including VAT would be €1,80 * (1 + (20/100)) = €2,16. This means that each sale would generate a higher profit, but it may also deter some consumers if the price seems too high.

5. If the VAT rate increased to 22,5%, the new VAT-inclusive PV would be €1,68 * (1 + (22,5/100)) = €2,06.

This means that each sale would generate a slightly lower profit for the business, because a larger share of the sale price would go towards paying VAT.

Summary of Formulas Used:

– Selling Price Excluding Tax (PV HT) = Purchase Price Excluding Tax (PA HT) * (1 + (Margin Rate / 100))
– Sales Price Including All Taxes (PV TTC) = PV Excl. Tax * (1 + (VAT rate / 100))
– Total Profit = (Sale Price excluding VAT – Purchase Price excluding VAT) * quantity sold.

Mediterranean Flavors Application

States :

The company "Les Saveurs de la Méditerranée" sells delicatessen products from the Mediterranean region. Among them, the premium olive oil is a bestseller. The company buys the olive oil at €10 excluding VAT per liter from its suppliers.

Work to do :

1) Calculate the desired margin rate if the company plans to sell olive oil at €18 excluding tax per liter.

2) Determine the selling price excluding tax if the company wants to achieve a unit margin of €8.

3) What will be the sales price including VAT if the company applies a VAT rate of 20% on olive oil?

4) Prove that the markup rate is different from the margin rate.

5) If the company sells 1000 liters of olive oil, what is the overall margin achieved?

Proposed correction:

1) The margin rate is calculated by the formula: Margin rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) / Purchase Price excluding VAT) * 100. Therefore Margin rate = ((18 – 10) / 10) * 100 = 80%.

2) The selling price excluding VAT is determined by the formula: Selling Price excluding VAT = Purchase Price excluding VAT + Unit Margin. Therefore, Selling Price excluding VAT = 10 + 8 = €18 excluding VAT.

3) The sales price including tax is calculated using the formula: Sales price including tax = Sales price excluding tax * (1 + VAT rate/100). Therefore, Sales price including tax = 18 * (1 + 20/100) = €21,6 including tax.

4) The margin rate and the markup rate are different. The markup rate is calculated by the formula: Markup rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) / Sale Price excluding VAT) * 100. Therefore, Markup rate = ((18 – 10) / 18) * 100 = 44,44%. We can clearly see that 44,44% ? 80%.

5) The overall margin is calculated by the formula: Overall margin = Unit margin * Quantity sold. Therefore, Overall margin = 8 * 1000 = €8000.

Summary of Formulas Used:

1) Margin rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) / Purchase Price excluding VAT) * 100.
2) Selling price excluding tax = Purchase price excluding tax + Unit margin.
3) Sales price including tax = Sales price excluding tax * (1 + VAT rate/100).
4) Markup rate = ((Sale Price excluding VAT – Purchase Price excluding VAT) / Sale Price excluding VAT) * 100.
5) Overall margin = Unit margin * Quantity sold.

Application The General Trading Company (GC)

States :

Société Générale de Commerce (GC) is a company specializing in the sale of electronic equipment. Several types of products are marketed by the company. The following information was provided by the company:

1. The purchase price excluding tax (PA HT) of a laptop model is €750.
2. GC Company wishes to obtain a margin rate of 35% on this product.
3. The VAT rate applicable to this product is 20%.

Work to do :

1. What is the sales price excluding tax (SVP) that GC should set to achieve a margin rate of 35%?
2. What will be the sales price including all taxes (PV TTC) of this product?
3. What is the unit margin on this product?
4. What is the overall margin if GC sells 100 units of the laptop?
5. What is the markup rate of this product?

Proposed correction:

1. The PV HT is calculated by the formula: PV HT = (PA HT x (1 + Margin rate)). By replacing with the given values, we obtain PV HT = (750 x (1 + 35/100)) = €1.

2. The PV including tax is obtained by adding the VAT to the PV excluding tax. So, PV including tax = PV excluding tax x (1 + VAT rate). Which gives: PV including tax = 1 x (012,50 + 1/20) = €100.

3. The unit margin is calculated by the formula:

Unit margin = PV HT – PA HT, i.e. Unit margin = €1 – €012,50 = €750.

4. To calculate the overall margin, we multiply the unit margin by the quantity sold. So, Overall margin = Unit margin x Quantity sold = €262,50 x 100 = €26.

5. The formula for calculating the markup rate is: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. Therefore, Markup rate = ((€1 – €012,50) ÷ €750) x 1 = 012,50%.

Summary of Formulas Used:

1. PV HT = (PA HT x (1 + Margin rate))
2. PV including tax = PV excluding tax x (1 + VAT rate)
3. Unit margin = PV excluding tax – PA excluding tax
4. Overall margin = Unit margin x Quantity sold
5. Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100

Fashion Trend Application

States :

In times of severe economic crisis, the clothing retail company "Fashion Trend" seeks to maintain its operations and profitability. It needs to determine the selling price of its products based on the margin rate it has set. The following data are available for a particular item, a men's winter coat of the brand "Zeta":

– Purchase price: €120
– The margin determined by the company policy: 40%
– VAT rate: 20%

Fashion Trend wants to know if it can offer 10% discounts on the coat without jeopardizing its profitability strategy.

Work to do :

1. Calculate the selling price excluding tax (PV HT) of the item according to the desired margin rate.
2. Calculate the all-tax-inclusive sales price (PV TTC) of the item.
3. Calculate the new PV including VAT if the company offers a 10% discount.
4. What is the new impact on the company's margin after the discount offered?
5. Is it possible for Fashion Trend to offer the discount while maintaining its profitability strategy?

Proposed correction:

1. The formula for calculating the PV HT from the margin rate is: PV HT = PA HT / (1 – margin rate). Then PV HT = €120 / (1 – 0,40) = €200.

2. The VAT-inclusive PV is calculated by adding the VAT to the VAT-exclusive PV: VAT-inclusive PV = VAT-exclusive PV + (VAT-exclusive PV * VAT rate). Then VAT-inclusive PV = €200 + (€200 * 0,20) = €240.

3. If a 10% discount is offered, the new VAT PV would be the initial VAT PV minus 10% of its value. Therefore, new VAT PV = €240 – (€240 * 10/100) = €216.

4. The new impact on the margin after the discount can be calculated using the margin rate formula which is: Margin rate = ((PV HT – PA HT) / PA HT) * 100. The PV HT after the discount can be calculated by subtracting the VAT from the new PV TTC: New PV HT = €216 / 1,2 = €180. Therefore, the new margin rate = ((€180 – €120) / €120) * 100 = 50%.

5. Despite the discount, Fashion Trend manages to maintain a margin of 50%, which is higher than its target margin of 40%. It can therefore offer the discount without compromising its profitability strategy.

Summary of Formulas Used:

– PV HT = PA HT / (1 – margin rate)
– VAT inclusive = VAT exclusive + (VAT exclusive * VAT rate)
– Margin rate = ((PV HT – PA HT) / PA HT) * 100
– New PV HT = New PV TTC / 1,2
– New margin rate = ((New PV HT – PA HT) / PA HT) * 100

The Little Delight Application

States :

The company "Le P'tit délice", which specializes in the marketing of bakery products, has in its product range a chocolate cake that is very popular with its customers. The manufacturing cost (the purchase cost) of this cake for the company is €10 excluding VAT.

Management wants to review its pricing policy in order to improve its margin, while remaining competitive. It has decided to apply a strategy based on a margin rate of 35%.

Work to do :

1. What will be the new selling price excluding tax of this chocolate cake following this new pricing strategy?
2. If the VAT rate is 20%, what will be the price including VAT of the cake?
3. If the company decides to sell 500 chocolate cakes per month, what will its overall margin be?
4. What is the markup rate for this chocolate cake?
5. If the company decides to reduce its margin rate to 25%, what will be the new selling price excluding tax and the corresponding mark-up rate?

Proposed correction:

1. To calculate the new selling price excluding VAT, we use the formula: PV excluding VAT = PA excluding VAT + (PA excluding VAT x Margin rate). Here, PV excluding VAT = €10 + (€10 x 35/100) = €10 + €3,5 = €13,5. Therefore, the new selling price excluding VAT is €13,5.

2. The new sales price including VAT is calculated using the formula: PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate). In our case, PV including VAT = €13,5 + (€13,5 x 20/100) = €13,5 + €2,7 = €16,2. Therefore, the price including VAT of the cake will be €16,2.

3. The overall margin is obtained by the formula: Overall margin = Unit margin * Quantity sold. Here, Unit margin is determined by: Unit margin = Selling price excluding VAT – Purchase price excluding VAT = €13,5 – €10 = €3,5. Therefore, Overall margin = €3,5 x 500 = €1750.

4. The markup rate is calculated by the formula: Markup rate = ((PV HT – PA HT) / PV HT) * 100. In our case, Markup rate = ((€13,5 – €10) / €13,5) * 100 = 25,93%.

5. If the company reduces its margin rate to 25%, the new selling price excluding VAT will be: PV excluding VAT = €10 + (€10 x 25/100) = €10 + €2,5 = €12,5. The corresponding markup rate will be: Markup rate = ((€12,5 – €10) / €12,5) * 100 = 20%.

Summary of Formulas Used:

1. Selling price excluding VAT = Purchase price excluding VAT + (Purchase price excluding VAT x Margin rate)
2. Sales price including tax = Sales price excluding tax + (Sales price excluding tax x VAT rate)
3. Unit margin = Selling price excluding VAT – Purchase price excluding VAT
4. Overall margin = Unit margin * Quantity sold
5. Markup rate = ((Selling price excluding VAT – Purchase price excluding VAT) / Selling price excluding VAT) * 100

YouniTech Application

States :

YouniTech, a company specializing in the sale of high-end electronic equipment, is considering introducing a new smartphone into its product catalog. After an in-depth market study and internal cost calculation, the company determined that the pre-tax (HT) purchase cost of the smartphone from its supplier would be €230 per unit.

The company has a policy of maintaining a 30% margin on all its products. The complexity of this exercise arises from the fact that the company must also take into account a VAT rate of 20%.

Work to do :

1. Calculate the company's sales price excluding tax (HT), taking into account its margin rate of 30%.
2. Calculate the amount of VAT associated with the selling price excluding VAT that you calculated in the previous step.
3. Calculate the sales price including all taxes (TTC) of the smartphone.
4. If YouniTech sells 1000 smartphones, what would be its profit?
5. If YouniTech decides to reduce its margin rate to 20%, what would be the new impact on the selling price excluding VAT, VAT, the selling price including VAT and the profit from the sale of 1000 smartphones?

Proposed correction:

1. Selling price excluding VAT = Purchase price excluding VAT ÷ (1 – Margin rate) = €230 ÷ (1 – 0,30) = €328,57.


2. VAT amount = Sales price excluding VAT x VAT rate = €328,57 x 0,20 = €65,71.


3. Sales price including tax = Sales price excluding tax + VAT amount = €328,57 + €65,71 = €394,28.


4. Profit = Margin rate x Sales volume x Sales price excluding tax = 0,30 x 1000 x €328,57 = €98.


5. With a margin rate of 20%: New sales price excluding VAT = €230 ÷ (1 – 0,20) = €287,5, new VAT = €287,5 x 0,20 = €57,5, new sales price including VAT = €287,5 + €57,5 = €345, new profit = 0,20 x 1000 x €287,5 = €57.

Summary of Formulas Used:

– Selling price excluding VAT = Purchase price excluding VAT ÷ (1 – Margin rate)
– VAT amount = Sales price excluding VAT x VAT rate
– Sales price including tax = Sales price excluding tax + VAT amount
– Profit = Margin rate x Sales volume x Selling price excluding tax