Summary
Application: Artisanal Gourmet
States :
Artisanal Gourmet, a premium jam manufacturer, wants to evaluate its pricing strategies and costs. The company produces a special jam made from exotic fruits. Currently, the purchase price excluding tax (PA HT) of a jar of jam is €2,50, and the sales price excluding tax (PV HT) is set at €4,00. The company wants to analyze its margins in order to maximize its profits for next year.
Work to do :
- Calculate the markup rate for the special jam.
- Determine the margin rate for the same product.
- If Artisanal Gourmet wants to increase the margin rate to 70%, what would be the new sales price excluding tax?
- The company plans to sell 10 jars. Calculate the overall margin for this quantity.
- Analyze the strategic implications of an increase in the margin rate on commercial positioning and competition.
Proposed correction:
-
To calculate the markup rate, we use the formula:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Substitute:((4,00 – 2,50) ÷ 4,00) x 100 = 37,5%.
The mark rate of the special jam is 37,5%. -
The margin rate is calculated as follows:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
That is: ((4,00 – 2,50) ÷ 2,50) x 100 = 60%.
Therefore, the current margin rate for special jam is 60%. -
To obtain a margin rate of 70%, the formula is:
PV HT = PA HT ÷ (1 – Margin rate).
Substituting: 2,50 ÷ (1 – 0,70) = €8,33.
The new sales price excluding tax should be €8,33.
-
The unit margin is: PV HT – PA HT = 4,00 – 2,50 = €1,50.
For 10 pots: Total margin = €000 x 1,50 = €10.
The overall margin for this quantity is €15. -
An increase in the margin rate can strengthen the premium brand image. However, it could reduce price competitiveness, and it is crucial to assess the potential risk of losing market share to competitors offering similar products at lower prices.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT for a targeted rate | PA HT ÷ (1 – Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: FutureTech Innovations
States :
FutureTech Innovations develops and markets electronic gadgets. One of their flagship products is a smartwatch. Currently, the production cost (PA HT) of a unit is €50, and the sales price excluding taxes (PV HT) is €100. The company wants to analyze its margins and think about new strategies.
Work to do :
- Establish the current margin rate for the smartwatch.
- Determine the markup rate for this product.
- FutureTech wants to reduce the markup rate to 40% to increase sales. What would be the new HT PA if the sales price remains unchanged?
- Calculate the overall margin if the company sells 5 units.
- Consider the potential impacts on customer perception and cost structure if the markup rate is reduced to 40%.
Proposed correction:
-
Let's calculate the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing: ((100 – 50) ÷ 50) x 100 = 100%.
Currently the margin rate is 100%. -
The markup rate is calculated as follows:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Let's replace: ((100 – 50) ÷ 100) x 100 = 50%.
Therefore, the markup rate is currently 50%. -
For a markup rate of 40%, the rearranged formula is:
PA HT = PV HT ÷ (1 + Mark rate).
Replacing: 100 ÷ (1 + 0,40) = €71,43.
The new PA excluding tax should be €71,43 if the PV excluding tax remains at €100.
-
Calculation of the unit margin: PV HT – PA HT = 100 – 50 = 50 €.
So, Total Margin = 50 x 5 = €000.
The overall margin for this quantity is €250. -
Reducing the markup rate could improve customers’ perception of value for money and boost sales. However, this decision must be accompanied by an analysis of the cost model to ensure that margins remain sustainable in the long term.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PA HT for a targeted rate | PV HT ÷ (1 + Mark rate) |
| Overall margin | Unit margin x Quantity sold |
App: HealthFit Equipment
States :
HealthFit Equipment is a company specializing in the manufacture of fitness equipment. Their best-selling treadmill has a purchase cost excluding tax (PA HT) of €700 and is sold at €1 excluding tax. The company is considering changing its prices and wants to assess the impact on its profitability.
Work to do :
- Calculate the current margin rate for the treadmill.
- Determine the markup rate applied for this product.
- If HealthFit wants to offer a 10% discount on the pre-tax sales price, what will the new pre-tax sales price be?
- Calculate the overall margin if 300 units are sold, taking into account the discount.
- Analyze the impact of discounting on product perception and customer loyalty.
Proposed correction:
-
Calculation of the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
So: ((1 – 000) ÷ 700) x 700 = 100%.
The current margin rate is 42,86%. -
Calculation of the markup rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacement: ((1 – 000) ÷ 700) x 1 = 000%.
Thus, the mark rate is 30%. -
The new discount results in a reduction in the selling price excluding VAT:
New PV HT = PV HT x (1 – Discount).
That is: 1 x (000 – 1) = €0,10.
The new pre-tax sales price is €900.
-
Calculation of unit margin with discount: €900 – €700 = €200.
Overall margin with 300 units: €200 x 300 = €60.
The overall margin, with discount and for 300 units, amounts to €60. -
Applying a discount can enhance the attractiveness of the product and boost sales in the short term. It can also improve customer satisfaction, but care must be taken not to diminish the perceived value of the product and compromise the company's position in the market.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT with discount | PV HT x (1 – Discount) |
| Overall margin | Unit margin x Quantity sold |
Application: GreenLife Organics
States :
GreenLife Organics offers a wide range of ready-to-eat vegetarian products. One of their flagship products is the vegetarian lasagna dish. Each dish costs €5 excluding tax to make, and is sold at €12 excluding tax. The company is considering changing its pricing strategy and needs to understand the implications on its margins.
Work to do :
- Determine the markup rate for the vegetarian lasagna dish.
- Calculate the current margin rate for this product.
- If GreenLife decides to maintain a margin rate of 100% while reducing the net selling price by 10%, what will be the net purchase cost allowed?
- The monthly production is 20 dishes. What is the overall margin with current production?
- Explain how reducing the selling price could impact the financial sustainability of the company.
Proposed correction:
-
For the mark rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacing: ((12 – 5) ÷ 12) x 100 = 58,33%.
The product's markup rate is 58,33%. -
Calculation of the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Using: ((12 – 5) ÷ 5) x 100 = 140%.
The margin rate for this product is 140%. -
To achieve a margin rate maintained at 100% with a 10% reduction on the PV excluding tax:
New PV excluding tax = 12 x 0,90 = €10,80.
PA HT permit = New PV HT ÷ 2.
That is: 10,80 ÷ 2 = €5,40.
-
Unit margin: €12 – €5 = €7.
Monthly overall margin: €7 x €20 = €000.
The overall margin for monthly production is €140. -
Reducing the selling price can increase sales volume and access new market segments. However, it is important to analyze the impact on the unit margin to avoid a deterioration in financial results and preserve resources for future investments.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PV HT with reduction | PV HT x (1 – Reduction) |
| PA HT allowed for target margin | New PV HT ÷ 2 |
| Overall margin | Unit margin x Quantity sold |
Application: EcoRide Cycles
States :
EcoRide Cycles is a company specializing in the marketing of electric bicycles for urban use. The "Urban Lite" model has a manufacturing cost of €300 excluding taxes, with a sales price set at €600 excluding taxes. In a booming sector, the company is looking at how its margins could affect its competitiveness.
Work to do :
- Calculate the margin rate for the “Urban Lite” model.
- Determine the markup rate applied for this bike.
- What would be the impact on the tax-free selling price if EcoRide decides to reduce its margin rate to 50% while maintaining the same manufacturing cost?
- If the annual production is 2 bikes, what would be the overall margin for the year?
- Discuss the strategic implications for EcoRide and its competitors if margins decline on this model.
Proposed correction:
-
Let's calculate the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing: ((600 – 300) ÷ 300) x 100 = 100%.
The current margin rate for “Urban Lite” is 100%. -
For the mark rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replace: ((600 – 300) ÷ 600) x 100 = 50%.
Therefore, the markup rate is set at 50%. -
If the margin rate is reduced to 50%:
New PV HT = PA HT + (PA HT x 0,50).
So: 300 + (300 x 0,50) = €450.
The sales price excluding tax, with a 50% margin, would be €450.
-
Unit margin: €600 – €300 = €300.
Overall margin for 2 units: €000 x 300 = €2.
The annual margin is €600 with current production. -
Reducing the margin could make the bike more attractive in terms of price, potentially increasing sales volumes. It could also force competitors to re-evaluate their offerings. However, EcoRide must ensure that its margins remain sufficient to cover fixed costs and support its development.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT for target margin | PA HT + (PA HT x Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: SolarMax Energies
States :
SolarMax Energies is a company that installs solar panels in private homes. A solar panel kit has a cost price of €4 excluding VAT, while the selling price excluding VAT for the installation is set at €000. With the energy transition, SolarMax wants to review its profitability.
Work to do :
- Calculate the margin rate currently being realized on a solar panel kit.
- Determine the markup rate for this product.
- If the objective is to reduce the cost price by 10% without affecting the selling price, what would be the new cost price excluding tax?
- What is the overall margin if SolarMax sells 850 systems in a year?
- Discuss the potential benefits to SolarMax of adjusting cost while maintaining the same selling price.
Proposed correction:
-
To calculate the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting: ((8 – 500) ÷ 4) x 000 = 4%.
The current margin rate is 112,5%. -
Calculation of the markup rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
That is: ((8 – 500) ÷ 4) x 000 = 8%.
The markup rate is therefore 52,94%. -
To achieve a 10% lower cost price:
New cost price excluding tax = PA excluding tax x (1 – Reduction).
That is: 4 x 000 = €0,90.
The new cost price would be €3.
-
Calculation of unit margin: €8 – €500 = €4.
For 850 units: €4 x 500 = €850.
The overall margin for the year with this quantity is €3. -
Reducing production costs while maintaining the selling price provides an improvement in the profit margin, thereby increasing profits. In addition, this approach allows SolarMax to invest more in sales or R&D initiatives to remain at the forefront of the renewable energy market.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New cost price with reduction | PA HT x (1 – Reduction) |
| Overall margin | Unit margin x Quantity sold |
Application: Trendy Footwear
States :
Trendy Footwear is a fashion-forward footwear company. Its ComfyRunners have a production cost excluding tax of €30, and are sold for €80 excluding tax per unit. The company is exploring options to maximize profits while refreshing its product line.
Work to do :
- What is the current margin rate for “ComfyRunners”?
- Determine the markup rate for these sneakers.
- Trendy Footwear wants to maintain a selling price of €80 while increasing the cost of production by 10%. What would be the new margin rate?
- If 10 pairs are sold, what will the overall margin be?
- What strategy could be considered to maintain profitability despite the increase in production costs?
Proposed correction:
-
Calculation of the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's replace: ((80 – 30) ÷ 30) x 100 = 166,67%.
The margin rate of “ComfyRunners” is currently 166,67%. -
For the mark rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacement: ((80 – 30) ÷ 80) x 100 = 62,5%.
The markup rate is 62,5%. -
If the cost of production increases by 10%:
New PA HT = 30 x 1,10 = €33.
New margin rate = ((80 – 33) ÷ 33) x 100 = 142,42%.
The new margin rate would be 142,42%.
-
Unit margin: €80 – €30 = €50.
Overall margin for 10 units: €000 x 50 = €10.
The overall margin on the sale of 10 pairs is €000. -
To maintain profitability with increasing costs, Trendy Footwear could explore improving production efficiency, increasing perceived quality to justify a price increase, or exploring new sales channels to increase volumes.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PA HT with increase | PA HT x (1 + Increase) |
| Overall margin | Unit margin x Quantity sold |
Application: Elegance Jewelers
States :
Elegance Jewelers produces fine jewelry. Their most popular gold ring has a manufacturing cost of €150 excluding VAT, with a selling price of €400 excluding VAT. Faced with volatility in gold prices, the company wants to assess the impact on its profitability.
Work to do :
- Calculate the margin rate of the gold ring.
- Determine the markup rate for this ring.
- If the price of gold increases and the manufacturing cost increases to €175, while maintaining the current selling price, what will be the new margin rate?
- For a production of 500 rings, what will be the overall margin before and after the variation in manufacturing cost?
- Propose a strategy for Elegance Jewelers to manage raw material fluctuations while preserving margin.
Proposed correction:
-
Calculation of the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing: ((400 – 150) ÷ 150) x 100 = 166,67%.
The current margin rate is 166,67%. -
Calculation of the markup rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
That is: ((400 – 150) ÷ 400) x 100 = 62,5%.
The markup rate is 62,5%. -
New PA HT = €175 with constant PV HT:
New margin rate = ((400 – 175) ÷ 175) x 100 = 128,57%.
The new margin rate would be 128,57%.
-
Original unit margin = €400 – €150 = €250.
Original overall margin: €250 x €500 = €125.
New unit margin: €400 – €175 = €225.
New overall margin: €225 x 500 = €112.
Before the increase, the overall margin is €125 and after it is €000. -
To offset commodity volatility, Elegance Jewelers could implement future purchases to secure prices, diversify materials used in manufacturing, or reinforce the perception of brand value to justify a possible price increase.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New margin rate | ((PV HT – New PA HT) ÷ New PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
App: BioFresh Groceries
States :
BioFresh Groceries, a chain of organic stores, sells a basket of fresh produce for €30 excluding VAT. The purchase cost of this basket is €18 excluding VAT. With the move upmarket of products, the brand wants to analyze its pricing strategy.
Work to do :
- Establish the margin rate for the fresh produce basket.
- Determine the markup rate for this basket.
- If the price of the basket increases by 20% while keeping the same purchase cost, what will be the new margin rate?
- For a monthly sale of 1 baskets, calculate the overall margin before and after the price increase.
- What pricing positioning strategy could BioFresh adopt in the face of its local competitors?
Proposed correction:
-
Calculation of the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
As a replacement: ((30 – 18) ÷ 18) x 100 = 66,67%.
The current margin rate is 66,67%. -
For the mark rate:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacing: ((30 – 18) ÷ 30) x 100 = 40%.
So the markup rate is 40%. -
With a 20% increase in the selling price:
New PV excluding tax = 30 x 1,20 = €36.
New margin rate = ((36 – 18) ÷ 18) x 100 = 100%.
The new margin rate will increase to 100%.
-
Original unit margin = €30 – €18 = €12.
Original overall margin: €12 x €1 = €200.
New unit margin = €36 – €18 = €18.
New overall margin: €18 x €1 = €200.
Before the price increase, the overall margin is €14 and after, €400. -
BioFresh could target a premium positioning for its products, emphasizing the quality and local origin of its products. The strategy could include the promise of freshness and sustainability to differentiate itself from competing offers and justify the price premium in the eyes of consumers.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT with increase | PV HT x (1 + Increase) |
| Overall margin | Unit margin x Quantity sold |