Summary
Application: Emilie's Bakery
States :
La Boulangerie d'Émilie, located in the heart of Lyon, wants to optimize its baguette sales. Currently, their purchase price (PA HT) is €0,50 per unit, and their sale price (PV HT) is €1,20 per unit. The bakery sells 1000 baguettes per month. In order to improve its profitability, Émilie wants to better understand the financial indicators of its flagship products.
Work to do :
- Calculate the margin rate for a baguette.
- Determine the mark rate applied to the baguettes.
- What would be the new tax-free sales price to achieve a 30% markup rate?
- Calculate the total monthly margin made on baguettes.
- Emilie wants to introduce a new pricing strategy with a unit margin increased by €0,10. What would then be the new selling price excluding tax per baguette?
Proposed correction:
-
To calculate the margin rate, we apply the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting, ((1,20 – 0,50) ÷ 0,50) x 100 = 140%.
The margin rate for a baguette is therefore 140%. -
To determine the markup rate, the following formula is used:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Substituting, ((1,20 – 0,50) ÷ 1,20) x 100 = 58,33%.
The markup rate applied to a baguette is 58,33%. -
To obtain a markup rate of 30%, we use the formula:
PV HT = PA HT ÷ (1 – Mark rate).
Substituting, 0,50 ÷ (1 – 0,30) = €0,71.
The new selling price excluding VAT should be €0,71 to achieve a mark-up rate of 30%.
-
The overall margin is determined by the formula:
Overall margin = Unit margin x quantity sold.
Substituting, (1,20 – 0,50) x 1000 = €700.
The total monthly margin on baguettes is €700. -
If the unit margin increases by €0,10, then:
New PV HT = PA HT + new unit margin.
Substituting, 0,50 + (1,20 – 0,50 + 0,10) = €1,30.
The new selling price excluding tax per baguette would be €1,30.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT for brand rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x quantity sold |
| New PV HT | PA HT + new unit margin |
Application: HighTech Innovations
States :
HighTech Innovations is a company specializing in electronic gadgets. It has just launched a new model of digital tablet. The purchase costs excluding VAT amount to €150 per unit, while the selling price excluding VAT is €250. The company sells about 200 units per month and wants to analyze the performance of this product as well as its implications for its pricing strategy.
Work to do :
- Calculate the unit profit made on each tablet sold.
- What is the margin rate for this tablet model?
- If HighTech Innovations wanted to achieve a selling price of €275 excluding VAT, what would the new margin rate be?
- How much would the overall monthly margin be if sales increased by 20%?
- Let's discuss the strategic impact of increasing the selling price to €300 excluding VAT on customer perception and on the margin.
Proposed correction:
-
The unit profit is calculated by the difference between the PV HT and the PA HT:
Unit profit = PV HT – PA HT.
Substituting, 250 – 150 = €100.
Each tablet sold generates a unit profit of €100. -
For the margin rate, use the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting, ((250 – 150) ÷ 150) x 100 = 66,67%.
The margin rate for this tablet is 66,67%. -
For a selling price excluding tax of €275, the new margin rate is:
((275 – 150) ÷ 150) x 100 = 83,33%.
The new margin rate would be 83,33%.
-
For a 20% increase in sales:
New quantity = 200 x (1 + 0,20) = 240 units.
Overall margin = Unit margin x new quantity = 100 x 240 = €24.
The overall monthly margin would then be €24. -
Increasing the selling price to €300 excluding VAT could improve the unit margin to €150, but could also change customer perception, as the product could appear more premium, but also less competitive. It is essential to have a good understanding of the target market before making this increase.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit profit | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Quantity with increase | Initial quantity x (1 + rate of increase) |
| Overall margin | Unit margin x new quantity |
Application: Modern Kitchen
States :
Cuisine Moderne, a store specializing in kitchen equipment, is looking to review its pricing strategy for its flagship product, the food processor. Currently, the purchase cost of the robot is €120 and it is sold at a price of €200 excluding VAT. Each month, 500 robots are sold. Management wants to evaluate different financial scenarios to optimize its profits.
Work to do :
- Calculate the unit margin amount for each robot sold.
- What is the markup rate applied to this product?
- If the competition lowers its prices, at what minimum price excluding tax can the robot be sold while maintaining a margin rate of 50%?
- Determine the effect on overall margin if sales increase by 50%.
- Come up with a short action plan to persuade customers to buy the robot even if a price increase is considered.
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV HT – PA HT.
Substituting, 200 – 120 = €80.
The unit margin for each robot sold is €80. -
For the markup rate, use the formula:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Substituting, ((200 – 120) ÷ 200) x 100 = 40%.
The applied markup rate is 40%. -
To maintain a 50% margin rate, apply:
PV HT = PA HT x (1 + margin rate) = 120 x (1 + 0,50) = €180.
The minimum price excluding tax is therefore €180.
-
If sales increase by 50%:
New quantity = 500 x 1,50 = 750 units.
Overall margin = Unit margin x new quantity = 80 x 750 = €60.
The new monthly overall margin would be €60. -
To convince customers of a price increase, consider extending warranties, offering free demonstrations, organizing private cooking workshops, or relying on advantageous financing plans. All of this will ensure that customers see the added value of this investment.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Minimum PV HT | PA HT x (1 + margin rate) |
| New quantity | Initial quantity x rate of increase |
| Overall margin | Unit margin x new quantity |
Application: Flash Mode
States :
Mode Éclair, a ready-to-wear company, is repricing its latest collection of jackets. The cost of purchasing a jacket is €40. Currently, they sell for €70 excluding tax per unit. The company sells an average of 300 jackets per month. Evaluating these sales will help better guide Mode Éclair's future strategic decisions.
Work to do :
- Calculate the unit gross margin per jacket.
- Evaluate the margin rate associated with the sale of jackets.
- At what selling price excluding VAT should the jackets be marketed to achieve a 25% markup rate?
- Suppose the company temporarily offers a 10% discount on the PV excluding VAT, what will be the new unit profit?
- Discuss how an advertising campaign might influence price sensitivity for Mode Éclair's customers.
Proposed correction:
-
The unit gross margin is calculated as follows:
Unit margin = PV HT – PA HT.
Substituting, 70 – 40 = €30.
The gross margin per unit for each jacket sold is €30. -
The margin rate is calculated by the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Substituting, ((70 – 40) ÷ 40) x 100 = 75%.
The margin rate for jackets is 75%. -
For a markup rate of 25%, we apply:
PV HT = PA HT ÷ (1 – Markup rate) = 40 ÷ (1 – 0,25) = €53,33.
The new PV excluding tax for a markup rate of 25% would be €53,33.
-
With a 10% discount:
New PV excluding tax = 70 x (1 – 0,10) = €63.
New unit profit = 63 – 40 = €23.
The new unit profit after reduction is €23. -
An effective advertising campaign would make customers less sensitive to price fluctuations by increasing the perception of the value of jackets. A campaign focusing on quality, unique design or sustainable materials could strengthen this perception and effectively counterbalance the sensitivity to higher prices.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT for brand | PA HT ÷ (1 – Mark rate) |
| New PV after reduction | Initial PV x (1 – Reduction Rate) |
Application: Fit&Well
States :
Fit&Well, a gym and wellness center, sells a range of nutritional supplements. Their production cost is €8 per unit, while they are sold at €19 excluding VAT. With monthly sales of 600 units, the company wants to optimize pricing and explore promotional strategies.
Work to do :
- What is the gross profit per unit sold?
- Determine the markup rate for this product.
- If a loyalty campaign is launched with a 15% discount, calculate the new selling price excluding VAT.
- Estimate the impact of a 25% increase in sales volume on total margin.
- Propose a communication strategy to potentially increase the perception of the value of the supplements, justifying a possible higher selling price.
Proposed correction:
-
The gross profit per unit is:
Gross profit = PV excluding tax – Production cost.
That is 19 – 8 = €11.
The gross profit per unit is €11. -
Using the formula for markup rate:
Markup rate = ((PV HT – Production cost) ÷ PV HT) x 100.
Which gives ((19 – 8) ÷ 19) x 100 = 57,89%.
The markup rate is 57,89%. -
With a 15% reduction, the new PV HT is:
New PV excluding tax = 19 x (1 – 0,15) = €16,15.
The new selling price excluding VAT, after reduction, would be €16,15.
-
For a 25% increase in sales:
New quantity = 600 x 1,25 = 750 units.
Total Margin = Gross Profit x New Quantity = 11 x 750 = €8.
The total margin after this increase would be €8. -
By improving the perception of value through satisfied customer testimonials, clinical studies, and celebrity influencers, Fit&Well could justify a price increase. Incorporating current health trends into campaigns and offering online seminars can strengthen the supplements' brand image.
Formulas Used:
| Title | Formulas |
|---|---|
| Gross profit | PV HT – Production cost |
| Brand taxes | ((PV HT – Production cost) ÷ PV HT) x 100 |
| New PV with reduction | Initial PV x (1 – Reduction Rate) |
| New quantity | Initial quantity x (1 + Rate of increase) |
| Total margin | Gross profit x new quantity |
Application: Les Classiques Bookstore
States :
Librairie Les Classiques sells a wide range of literary books. For one of its best-selling books, the purchase cost is €12, and it is sold at a price of €22 excluding VAT. Selling around 350 copies per month pushes management to evaluate the commercial performance of this book to guide its profits.
Work to do :
- Calculate the total monthly sales margin made on sales of this book.
- What is the markup rate for the book sold?
- If a reprint reduces the purchase cost to €10, what would be the new effect on the margin rate?
- Provide an effective way to maintain customer loyalty during a more flexible pricing strategy.
- What would be the impact of a 10% increase in sales on monthly revenue?
Proposed correction:
-
The total monthly commercial margin is calculated as follows:
Total margin = (PV HT – PA HT) x quantity sold.
Substituting, (22 – 12) x 350 = €3.
The total commercial margin per month is €3. -
The markup rate for this sale is:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Which gives ((22 – 12) ÷ 22) x 100 = 45,45%.
The markup rate for the book is 45,45%. -
With a reduction in the purchase cost to €10:
Margin rate = ((PV HT – new PA HT) ÷ new PA HT) x 100.
So ((22 – 10) ÷ 10) x 100 = 120%.
The new margin rate would be 120%.
-
Offering a loyalty program with personalized rewards can maintain customer loyalty. Offering discounts for future purchases based on a certain number of books purchased strengthens loyalty even if prices fluctuate.
-
With a 10% increase in monthly sales:
New quantity = 350 x 1,10 = 385 units.
Turnover = PV HT x new quantity = 22 x 385 = €8.
The increase in sales would result in a monthly turnover of €8.
Formulas Used:
| Title | Formulas |
|---|---|
| Total margin | (PV HT – PA HT) x quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Margin rate | ((PV HT – new PA HT) ÷ new PA HT) x 100 |
| New quantity | Initial quantity x (1 + percentage increase) |
| Turnover | PV HT x new quantity |
Application: Agro'Vital Company
States :
Agro'Vital, an SME specializing in organic products, has introduced a new range of fruit juices. The production cost per liter is €1,80, and the current selling price is €4,50 excluding VAT. With an average monthly distribution of 1 liters, management is seeking to better understand the financial impact of this new product line.
Work to do :
- Estimate the unit margin per liter of juice sold.
- What is the margin rate for this product?
- If a promotion brings the sale price down to €4,00 excluding VAT, what is the new margin per litre?
- Determine the financial impact of increasing sales volume by 15%.
- Suggest improvements to increase the sustainable and fair perception of these juices.
Proposed correction:
-
For the unit margin:
Unit margin = PV excluding tax – production cost.
Substituting, 4,50 – 1,80 = €2,70.
The unit margin per litre of juice sold is €2,70. -
Calculate the margin rate via:
Margin rate = ((PV HT – production cost) ÷ production cost) x 100.
Which gives ((4,50 – 1,80) ÷ 1,80) x 100 = 150%.
The margin rate for this product is 150%. -
With a promotion that brings the PV down to €4,00 excluding VAT:
New margin = 4,00 – 1,80 = €2,20.
The new margin per litre is €2,20.
-
For a 15% increase in sales:
New volume = 1 x 200 = 1,15 liters.
Total margin = 2,70 x 1 = €380.
The increase would result in a total monthly margin of €3. -
To strengthen the sustainable and fair perception, Agro'Vital could emphasize organic certification, educate on the positive impact of local agriculture and invest in recyclable packaging. Promoting these points through campaigns and partnerships could improve the product's image.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – production cost |
| Margin rate | ((PV HT – production cost) ÷ production cost) x 100 |
| New margin | New PV HT – production cost |
| New volume | Initial volume x (1 + percentage increase) |
| Total margin | Unit margin x new volume |
Application: TechnoSolutions
States :
TechnoSolutions offers IT maintenance services. With a cost of services provided of €100 per intervention, the services are billed at €250 excluding VAT. The company carries out an average of 150 interventions monthly. To better plan its growth strategies, TechnoSolutions must analyze its margins and rates.
Work to do :
- Calculate the unit gross margin per intervention.
- Determine the service margin rate.
- If TechnoSolutions wants to achieve a 40% markup rate, what price should it charge?
- Estimate the effect of a 20% increase in interventions on total profit.
- Offer ways to retain customers while maintaining a high price.
Proposed correction:
-
The unit gross margin is given by:
Unit margin = PV excluding tax – cost of services.
So 250 – 100 = €150.
The gross unit margin per intervention is €150. -
The margin rate is obtained using the formula:
Margin rate = ((PV HT – cost of services) ÷ cost of services) x 100.
Which comes to ((250 – 100) ÷ 100) x 100 = 150%.
The service margin rate is 150%. -
For a markup rate of 40%:
PV HT = Cost of services ÷ (1 – markup rate) = 100 ÷ (1 – 0,40) = €166,67.
The price to reach a 40% markup rate must be €166,67.
-
With a 20% increase in interventions:
New number = 150 x 1,20 = 180 interventions.
Total profit = Unit margin x new number = 150 x 180 = €27.
The increase would result in a total profit of €27. -
Maintaining a high price by building loyalty can be done through exceptional replacement services, extended maintenance contracts, a loyalty program with exclusive benefits, and rapid response to incidents, ensuring constant customer satisfaction.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – cost of services |
| Margin rate | ((PV HT – cost of services) ÷ cost of services) x 100 |
| PV HT for brand | cost of services ÷ (1 – markup rate) |
| New number | Initial number of interventions x (1 + increase) |
| Total profit | Unit margin x new number |
Application: Bling&Bag
States :
Bling&Bag is an innovative brand in the luxury handbag industry. A bag costs €150 to manufacture and sells for €500 excluding VAT. With a limited production of 50 bags per month, management seeks to understand the margins practiced in order to stratify prices.
Work to do :
- Calculate the gross unit margin achieved per bag sold.
- Estimate the margin rate for these bags.
- What price should be considered to achieve a 300% margin rate?
- Analyze the impact of a limited edition strategy on brand perception.
- Determine the effect on total margin if monthly production increases to 60 bags.
Proposed correction:
-
The gross unit margin is calculated as follows:
Unit margin = PV excluding tax – manufacturing cost.
Substituting gives 500 – 150 = €350.
The unit margin per bag is €350. -
The margin rate follows the formula:
Margin rate = ((PV HT – manufacturing cost) ÷ manufacturing cost) x 100.
Substituting, ((500 – 150) ÷ 150) x 100 = 233,33%.
The margin rate of bags is 233,33%. -
Achieving a 300% margin rate requires:
PV HT = Manufacturing cost x (1 + margin rate) = 150 x (1 + 3) = €600.
A sale price of €600 should be considered.
-
A limited edition strategy can create perceived scarcity, reinforcing luxury status and exclusivity. This can then justify a premium price and potentially increase the perceived value of the brand.
-
If production increases to 60 bags:
Total margin = Unit margin x new production = 350 x 60 = €21.
The increase in production would result in a total margin of €21.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – manufacturing cost |
| Margin rate | ((PV HT – manufacturing cost) ÷ manufacturing cost) x 100 |
| PV HT for margin rate | manufacturing cost x (1 + margin rate) |
| Total margin | Unit margin x new production |