Summary
Application: The Flavors of the Vegetable Garden
States :
Les Saveurs du Potager is a grocery store specializing in organic products. The grocery store wants to evaluate its profitability for fresh vegetables this year. The store purchased its organic carrots at a purchase price (PA HT) of €2,00 per kilo. The current selling price (PV HT) is €3,50 per kilo. The store sold 1200 kg of carrots over the year.
Work to do :
- Calculate the unit margin for one kilo of carrots.
- Determine the margin rate for carrots.
- What is the overall margin made on the 1200 kg of carrots sold?
- Calculate the selling price including tax of a kilo of carrots, knowing that the VAT rate is 5,5%.
- Consider the impact of an increase in the purchase price on sales profitability if the selling price remains unchanged.
Proposed correction:
-
The unit margin is obtained by subtracting the purchase price excluding tax from the sale price excluding tax.
Unit margin = PV HT – PA HT = €3,50 – €2,00 = €1,50 per kilo.
So, each kilo of carrots sold generates a margin of €1,50. -
The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting, Margin rate = ((€3,50 – €2,00) ÷ €2,00) x 100 = 75%.
The carrot margin rate is therefore 75%. -
The overall margin is the unit margin multiplied by the quantity sold.
Overall margin = Unit margin x Quantity sold = €1,50 x 1200 kg = €1800.
The grocery store made an overall margin of €1800 on carrot sales.
-
To find the sales price including tax, we apply VAT to the sales price excluding tax.
PV incl. VAT = PV excl. VAT x (1 + VAT rate) = €3,50 x (1 + 0,055) = €3,50 x 1,055 = €3,6925.
The selling price including tax for a kilo of carrots is therefore €3,69. -
If the purchase price increases and the selling price remains the same, the unit margin will decrease, which will reduce the profitability of sales. This may require a review of the selling price or negotiations with suppliers to maintain satisfactory margins and ensure good profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: TechnoStore
States :
TechnoStore, a store specializing in the sale of electronic products, wants to analyze the profitability of a new smartphone model. The purchase price (PA HT) of each smartphone is €400, and the current selling price (PV HT) is set at €600. Over one month, TechnoStore sold 300 units.
Work to do :
- Determine the unit margin made on each smartphone sold.
- Calculate the markup rate for this product.
- What is the net turnover achieved on smartphone sales?
- Estimate the overall margin obtained from these sales.
- Analyze the impact on profitability if production costs increase by 15%, without changing the sales price.
Proposed correction:
-
The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT.
Unit margin = PV excluding tax – PA excluding tax = €600 – €400 = €200.
For each smartphone sold, TechnoStore makes a unit margin of €200. -
The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Substituting, Markup rate = ((€600 – €400) ÷ €600) x 100 = 33,33%.
The markup rate for the smartphone is 33,33%. -
The net turnover corresponds to the multiplication of the sales price by the number of units sold.
Net sales = Net sales x Quantity sold = €600 x 300 = €180.
TechnoStore's net turnover for this smartphone model is €180.
-
The overall margin is calculated by multiplying the unit margin by the quantity sold.
Overall margin = Unit margin x Quantity sold = €200 x 300 = €60.
TechnoStore achieved an overall margin of €60 on sales of this smartphone. -
If production costs increase by 15%, the purchase price would increase to €460. The new unit margin would be €600 – €460 = €140, which would decrease profitability. To maintain current margins, TechnoStore could consider increasing the sales price or negotiating a better purchase rate with its suppliers.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
Application: Shoes&Co
States :
Chaussures&Co, a fashion brand, is evaluating the profitability of new heeled ankle boots. Each pair has a purchase price (PA excluding VAT) of €50 and sells for a sale price (SRP excluding VAT) of €90. This season, the store sold 500 pairs.
Work to do :
- Calculate the unit margin made on each pair of boots.
- Determine the margin rate for these boots.
- What is the total sales excluding VAT for this product?
- Evaluate the overall margin from these sales.
- Discuss the implications of a 10% reduction in selling price on pairwise profitability.
Proposed correction:
-
The unit margin is calculated by subtracting the HT PA from the HT PV.
Unit margin = PV excluding tax – PA excluding tax = €90 – €50 = €40.
Chaussures&Co makes a margin of €40 per pair of boots sold. -
The margin rate is determined using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting, Margin rate = ((€90 – €50) ÷ €50) x 100 = 80%.
The margin rate for boots is 80%. -
The total sales excluding tax are obtained by multiplying the PV excluding tax by the quantity sold.
Total sales excluding tax = PV excluding tax x Quantity sold = €90 x 500 = €45.
The total sales excluding tax for the boots is €45.
-
The overall margin is calculated by multiplying the unit margin by the number of pairs sold.
Overall margin = Unit margin x Quantity sold = €40 x 500 = €20.
The overall margin generated by the sales of boots is €20. -
A 10% reduction in the net sales price is equivalent to a new net sales price of €81. This reduces the unit margin to €31. If sales remain stable, the overall margin on the 500 pairs would become €15, a decrease in profitability. It would be wise to compensate for the decrease by increasing sales volume or reducing costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Total sales excluding VAT | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
Application: Gourmet Delights
States :
Gourmet Délices is a gourmet restaurant looking to assess the profitability of its signature dish, pan-fried foie gras. The purchase cost (TOE excluding VAT) to prepare a plate is €10, and the selling price (SRP excluding VAT) is €25. Over the past month, 450 plates were sold.
Work to do :
- Calculate the unit margin per plate sold.
- Determine the markup rate for this signature dish.
- What is the net turnover generated by the sales of this dish?
- Evaluate the overall margin achieved through these sales.
- What would be the impact of an increase in the VAT rate from 5,5% to 10% on the sales price including tax?
Proposed correction:
-
The unit margin is obtained by subtracting the pre-tax purchase cost from the pre-tax selling price.
Unit margin = PV excluding tax – CA excluding tax = €25 – €10 = €15.
The restaurant makes a margin of €15 per plate sold. -
The markup rate is calculated as follows: Markup rate = ((PV HT – CA HT) ÷ PV HT) x 100.
Substituting, Markup rate = ((€25 – €10) ÷ €25) x 100 = 60%.
The markup rate for pan-fried foie gras is 60%. -
The net turnover is the product of the sales price and the quantity sold.
Net sales = Net sales x Quantity sold = €25 x 450 = €11.
The net turnover generated by this dish is €11.
-
The overall margin is calculated by multiplying the unit margin by the number of plates sold.
Overall margin = Unit margin x Quantity sold = €15 x 450 = €6.
The overall margin made from these sales is €6. -
With an increase in VAT to 10%, the new sales price including VAT would be calculated as follows:
PV incl. VAT = PV excl. VAT x (1 + VAT rate) = €25 x (1 + 0,10) = €27,50.
This increase requires a reassessment of prices to maintain commercial attractiveness.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – CA HT |
| Brand taxes | ((PV HT – AC HT) ÷ PV HT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
| Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: OpticsVision
States :
OptiqueVision is a store specializing in the sale of sunglasses. A particular pair costs €30 to purchase (PA excluding VAT), and it is sold at a sale price (PV excluding VAT) of €70. In the last quarter, the company sold 200 pairs.
Work to do :
- Calculate the unit margin taken on each pair of glasses sold.
- Determine the margin rate for these glasses.
- What is the total net turnover for these sales?
- Evaluate the overall margin achieved during the quarter.
- Consider the implications of reducing the selling price by 15% to increase sales by 25%.
Proposed correction:
-
The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT.
Unit margin = PV excluding tax – PA excluding tax = €70 – €30 = €40.
The margin made on each pair sold is €40. -
The margin rate is calculated by dividing the unit margin by the pre-tax purchase price and multiplying by 100.
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((70 € – 30 €) ÷ 30 €) x 100 = 133,33%.
The margin rate for glasses is 133,33%. -
The net turnover is obtained by multiplying the sales price by the quantity sold.
Net sales = Net sales x Quantity sold = €70 x 200 = €14.
The total turnover excluding tax is €14.
-
The overall margin is calculated by multiplying the unit margin by the number of pairs sold.
Overall margin = Unit margin x Quantity sold = €40 x 200 = €8.
The overall margin for the quarter is €8. -
If the selling price is reduced by 15%, it becomes €59,50. With a 25% increase in sales, 250 pairs would be sold. The unit margin would be €29,50, and the overall margin would be €7. The reduction would reduce margins, but could be offset by the increase in sales volume. A reflection on the competitiveness of the market might be appropriate.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
Application: EcoCycle
States :
EcoCycle is a company selling electric bicycles. The purchase price (PA HT) of a bicycle is €900, while the proposed sale price (PV HT) is €1. This quarter, EcoCycle sold 500 bicycles.
Work to do :
- Determine the unit margin for each bike.
- Calculate the markup rate for this product.
- What turnover did HT ÉcoCycle achieve?
- Estimate the overall margin resulting from these sales.
- Consider the strategic implications if the market sees increasingly aggressive price competition.
Proposed correction:
-
The unit margin is found by subtracting the HT PA from the HT PV.
Unit margin = PV excluding tax – PA excluding tax = €1 – €500 = €900.
Each bike sold generates a unit margin of €600. -
The markup rate is determined by the formula:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Substituting, Markup rate = ((€1 – €500) ÷ €900) x 1 = 500%.
The markup rate is 40%. -
The net turnover is obtained by multiplying the sale price by the number of bicycles sold.
Net sales = Net sales x Quantity sold = €1 x 500 = €80.
The turnover excluding tax for this quarter is €120.
-
The overall margin is calculated by multiplying the unit margin by the number of bikes.
Overall margin = Unit margin x Quantity sold = €600 x 80 = €48.
The overall margin for sales is €48. -
Increased competition with lower prices could force EcoCycle to review its margins or offer extras such as free services or an extended warranty. A strategic analysis to differentiate the offer could help maintain profitability while remaining attractive compared to the competition.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
App: Artisan' Thoughts
States :
Artisan' Thoughts is a small business specializing in the creation and sale of artisanal candles. The manufacturing cost (CF HT) of a candle is €5, while the selling price (PV HT) is €12. During the last semester, the company sold 1500 candles.
Work to do :
- Calculate the unit margin for each candle.
- Determine the markup rate for these candles.
- What is the net turnover on these sales?
- Evaluate the overall margin generated by these sales.
- Consider the economic implications of moving to online sales with an additional cost of €1 per candle.
Proposed correction:
-
The unit margin is obtained by subtracting the CF HT from the PV HT.
Unit margin = PV HT – CF HT = €12 – €5 = €7.
Each candle sold generates a margin of €7. -
The markup rate is calculated using the following formula:
Mark rate = ((PV HT – CF HT) ÷ PV HT) x 100.
Substituting, Markup rate = ((€12 – €5) ÷ €12) x 100 = 58,33%.
The candles have a brand rate of 58,33%. -
The net turnover is calculated by multiplying the sales price by the quantity sold.
Net sales = Net sales x Quantity sold = €12 x 1500 = €18.
The turnover excluding tax is €18.
-
The overall margin is the multiplication of the unit margin by the quantity of candles sold.
Overall margin = Unit margin x Quantity sold = €7 x 1500 = €10.
The overall margin achieved is €10. -
Moving to online sales with an additional cost of €1 per candle would lower the unit margin to €6. If sales volumes remain stable, this will reduce the overall margin. Weighing the benefits of moving to e-commerce against the costs could maximise future profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – CF HT |
| Brand taxes | ((PV HT – CF HT) ÷ PV HT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
Application: Naturally Healthy
States :
Naturellement Santé is a natural products store that wants to evaluate the profitability of a star food supplement. The supply cost (CA excluding VAT) of each box is €12, while the selling price (PV excluding VAT) is €20. This year, 2500 boxes were sold.
Work to do :
- Calculate the unit margin for each box sold.
- Determine the margin rate for this product.
- What is the total net turnover of these sales?
- What is the overall margin obtained?
- Analyze the impact if an increase in production costs reduced the unit margin by 10%.
Proposed correction:
-
The unit margin is defined as the difference between the PV excluding VAT and the CA excluding VAT.
Unit margin = PV excluding tax – CA excluding tax = €20 – €12 = €8.
Each box sold generates a unit margin of €8. -
The margin rate is calculated by dividing the unit margin by the supply cost and multiplying by 100.
Margin rate = ((PV HT – CA HT) ÷ CA HT) x 100 = ((20 € – 12 €) ÷ 12 €) x 100 = 66,67%.
The margin rate is 66,67%. -
The total net turnover results from the multiplication of the sales price and the quantity sold.
Net sales = Net sales x Quantity sold = €20 x 2500 = €50.
The turnover excluding tax is €50.
-
The overall margin is calculated by the product of the unit margin and the number of boxes sold.
Overall margin = Unit margin x Quantity sold = €8 x 2500 = €20.
The overall margin achieved is €20. -
If the unit margin drops by 10%, it would drop to €7,20. At the same sales volume, this would imply an overall margin of €18, a reduction in profitability. It is crucial to look at ways to mitigate the impact, such as increasing the selling price or improving processes to reduce costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – CA HT |
| Margin rate | ((PV excluding VAT – AC excluding VAT) ÷ AC excluding VAT) x 100 |
| Turnover excluding tax | PV HT x Quantity sold |
| Overall margin | Unit margin x Quantity sold |
Application: Emerald Gardens
States :
Jardins d'Émeraude is a nursery specializing in exotic plants. The import costs (CI HT) for a batch of 100 plants are €500. These plants are sold at a sale price (PV HT) of €15 each. This season, 800 plants were sold.
Work to do :
- Determine the unit margin for a plant.
- Calculate the overall margin for all sales for the season.
- What is the net turnover for these sales?
- Evaluate the markup rate for these plants.
- Discuss the potential impact on margins if suppliers increase costs by 10%.
Proposed correction:
-
The unit margin is obtained by subtracting the unit import cost excluding tax from the selling price excluding tax.
The unit cost is €500 ÷ 100 = €5.
Unit margin = PV excluding tax – Unit cost = €15 – €5 = €10.
So the unit margin per plant is €10. -
The overall margin is the product of the unit margin times the total quantity sold.
Overall margin = Unit margin x Quantity sold = €10 x 800 = €8.
For all sales, the overall margin is €8. -
The net sales figure is calculated by multiplying the total sales price by the quantity of plants sold.
Net sales = Net sales x Quantity sold = €15 x 800 = €12.
The net turnover for these sales is €12.
-
The markup rate is calculated using the following formula:
Markup rate = ((PV HT – Unit cost) ÷ PV HT) x 100.
Substituting, Markup rate = ((€15 – €5) ÷ €15) x 100 = 66,67%.
The markup rate for these exotic plants is 66,67%. -
If costs increase by 10%, the unit cost would increase to €5,50. The new unit margin would therefore be €9,50, which would reduce the overall margin. It is crucial to take these impacts into account to maintain or increase profitability, potentially through a sales price increase or logistics improvements.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – Unit cost |
| Overall margin | Unit margin x Quantity sold |
| Turnover excluding tax | PV HT x Quantity sold |
| Brand taxes | ((PV HT – Unit cost) ÷ PV HT) x 100 |