Summary
Application: The Modern Brewery
States :
"La Brasserie Moderne" is a company specializing in the distribution of craft beers in France. Their varied range is appreciated by amateurs. In order to optimize its commercial strategy, the company wishes to analyze its financial parameters for better decision-making.
Work to do :
- Calculate the margin rate achieved on a beer sold for €6 excluding tax, knowing that the purchase price excluding tax is €4.
- Determine the sales price including VAT if the applicable VAT rate is 20%.
- Calculate the overall margin for 500 units sold in the month.
- If the annual storage cost is €2 per unit and the expected annual demand is 1 units, find the QEC.
- Analyze the implications of a 50% margin rate on the company's competitiveness.
Proposed correction:
-
The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's substitute the data: Margin rate = ((6 – 4) ÷ 4) x 100 = 50%.
The margin rate is 50%. -
The sales price including VAT is calculated by adding VAT to the sales price excluding VAT. This gives:
Selling price including tax = PV excluding tax x (1 + VAT) = 6 x (1 + 0,20) = €7,20.
The sales price including VAT is €7,20. -
To calculate the overall margin, the formula is: Overall margin = Unit margin x Quantity sold.
With a unit margin of €2 (€6 – €4), we have: Overall margin = €2 x 500 = €1.
The overall margin for 500 units is €1.
-
The QEC is given by the formula: QEC = ?((2 x Annual demand x Ordering cost) ÷ Storage cost).
Using the data provided, we find: QEC = ?((2 x 1 x 000) ÷ 4) = ?2 = 4 units.
The QEC is approximately 63 units. -
A margin rate of 50% indicates that the company earns half of the purchase price on each sale, which can mean a competitive position if the quality justifies it, but could be high for some market segments.
This rate may require an effective marketing strategy to maintain a competitive advantage.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Sales price including tax | PV HT x (1 + VAT) |
| Overall margin | Unit margin x Quantity sold |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: TekNet Solutions
States :
“TekNet Solutions” is a company specializing in IT solutions for SMEs. The company mainly sells management software that has seen high demand. It is considering reviewing its pricing strategies for 2024.
Work to do :
- Calculate the markup rate of software sold for €500 excluding VAT, knowing that the purchase price excluding VAT is €350.
- What would be the selling price excluding tax to obtain a markup rate of 30% if the purchase price excluding tax remains at €350?
- If the company plans to sell 200 software packages at this new price, what will the overall margin be?
- For cost optimization, find the QEC if the annual storage cost per software is €8, and the annual demand is 1 units.
- Analyze the price reduction strategy on the company's brand image.
Proposed correction:
-
The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Let's substitute the data: Markup rate = ((500 – 350) ÷ 500) x 100 = 30%.
The markup rate is 30%. -
To obtain a markup rate of 30%, we use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Let’s replace: PV HT = 350 ÷ (1 – 0,30) = 500 €.
The selling price excluding tax must be €500 to obtain a markup rate of 30%. -
The unit margin is (500 – 350) = €150. For 200 units, we have:
Overall margin = €150 x 200 = €30.
The overall margin for 200 units is €30.
-
To calculate the QEC, let's use this formula: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost).
Using: QEC = ?((2 x 1 x 200) ÷ 4) = ?8 = 1 units.
The QEC is approximately 35 units. -
A price reduction strategy can be perceived differently by different customer segments. It can expand the potential market by making products more attractive, but also position the products as an economical alternative.
This will require clear communication to maintain the perception of quality.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT for given mark rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x Quantity sold |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: Oxygen Fitness
States :
“Oxygène Fitness” is an innovative gym that offers fitness sessions guided by virtual trainers. It also offers a store selling sports clothing and accessories. The management team wants to analyze its rates for its premium subscriptions.
Work to do :
- Determine the margin rate for a subscription sold for €120 including tax, at a cost price of €75, knowing that the applicable VAT is 20%.
- Calculate the markup rate for this subscription.
- If the room sells 350 subscriptions in a month, what is the approximate overall margin generated?
- Estimate the net profit if the monthly fixed charges amount to €10.
- Analyze how an increase in subscription rates could have implications for customer retention strategy.
Proposed correction:
-
For the margin rate, we first remove the VAT from the sales price including tax, i.e.:
PV HT = 120 ÷ 1,20 = €100.
The margin rate is therefore: ((100 – 75) ÷ 75) x 100 = 33,33%.
The margin rate reaches approximately 33,33%. -
The markup rate is calculated as follows: ((PV excluding VAT – Cost price) ÷ PV excluding VAT) x 100.
For this subscription: ((100 – 75) ÷ 100) x 100 = 25%.
The markup rate is 25%. -
The unit margin is (100 – 75) = €25. For 350 subscriptions:
Overall margin = €25 x 350 = €8.
The overall margin is €8.
-
Net profit is obtained by subtracting fixed costs from the overall margin:
Net profit = Total margin – Fixed costs = €8 – €750 = -€10.
The gym would make a monthly loss of €1 in its current state. -
Increasing subscription rates could lead to increased perceptions of prestige if coupled with an increase in perceived value (e.g., improvements in services or facilities).
However, it could also reduce the loyal customer base if this added value is not clearly communicated.
Formulas Used:
| Title | Formulas |
|---|---|
| PV HT | PV incl. VAT ÷ (1 + VAT) |
| Margin rate | ((PV HT – Cost price) ÷ Cost price) x 100 |
| Brand taxes | ((PV HT – Cost price) ÷ PV HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Net profit | Overall margin – Fixed charges |
Application: Ecology and Habitat
States :
"Écologie et Habitat" is a company that sells water-saving devices for individuals and businesses. To better understand its margins and optimize its offers, it wants to carry out a detailed analysis of its sales prices and purchase costs.
Work to do :
- Determine the margin rate on a water fountain sold for €150 excluding VAT, if the purchase price excluding VAT is €100.
- Calculate the sales price including VAT with a VAT rate of 5,5%.
- Estimate the overall margin if 400 water fountains are sold.
- Calculate the break-even point in units if the annual fixed costs are €15.
- Discuss the implications for competitive advantage if the firm reduces its production costs.
Proposed correction:
-
To calculate the margin rate, use: ((PV HT – PA HT) ÷ PA HT) x 100.
This gives: ((150 – 100) ÷ 100) x 100 = 50%.
The margin rate is therefore 50%. -
The sales price including tax is determined as follows: PV including tax = PV excluding tax x (1 + VAT) = 150 x 1,055 = €158,25.
The sales price including tax is therefore €158,25. -
The unit margin is (150 – 100) = €50. For 400 units:
Overall margin = €50 x 400 = €20.
The overall margin is €20.
-
The break-even point is the level of sales at which the company makes neither profit nor loss. It is calculated as follows:
Break-even point (in units) = Fixed costs ÷ Unit margin = 15 ÷ 000 = 50 units.
The company needs to sell 300 fountains to reach its break-even point. -
Reducing production costs could allow the company to adjust its prices to be more competitive, or improve its profit margin while maintaining a stable price, which would strengthen its market position.
This requires a strategy on the optimal use of the savings made.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV including tax | PV HT x (1 + VAT) |
| Overall margin | Unit margin x Quantity sold |
| Break-even point (in units) | Fixed charges ÷ Unit margin |
Application: Dreams of Elsewhere
States :
"Rêves d'Ailleurs" is a travel agency specializing in tourist circuits in Europe. Its managers wish to study the price structure to improve competitiveness and profitability.
Work to do :
- Calculate the margin rate on a circuit sold at €1, knowing that the cost price is €200.
- Determine the markup rate associated with this circuit.
- Calculate the overall margin if the agency manages to sell 80 tours.
- If the monthly fixed costs amount to €24, estimate the monthly net profit.
- Propose and detail the benefits to competitiveness if the agency increased the diversity of its offerings.
Proposed correction:
-
The margin rate is calculated using the formula: ((PV HT – Cost price) ÷ Cost price) x 100.
Let's replace: ((1 – 200) ÷ 900) x 900 = 100%.
The margin rate is 33,33%. -
The markup rate is calculated as follows: ((PV excluding VAT – Cost price) ÷ PV excluding VAT) x 100.
For this circuit: ((1 – 200) ÷ 900) x 1 = 200%.
The markup rate is 25%. -
The unit margin is (1 – 200) = €900. For 300 circuits:
Overall margin = €300 x 80 = €24.
The overall margin is €24.
-
Monthly net profit is obtained by subtracting fixed costs from the overall margin:
Net profit = €24 – €000 = €24.
The travel agency reaches its break-even point without generating additional profits. -
By diversifying its offerings, the agency could satisfy a wider range of clients, adapt to market trends, and activate specific traveler niches.
This could help to differentiate itself from the competition and attract a more varied clientele.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – Cost price) ÷ Cost price) x 100 |
| Brand taxes | ((PV HT – Cost price) ÷ PV HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Net profit | Overall margin – Fixed charges |
Application: Fashion Glow
States :
“Éclat De Mode” is a fashion brand that introduces annual collections of innovative clothing. It wants to recalibrate its prices to support its growth and increase its international sales.
Work to do :
- Calculate the margin rate for a dress sold for €180 including tax, knowing that the purchase price excluding tax is €100 with a VAT of 20%.
- Rate the markdown rate for this dress.
- If the company sells 120 dresses, what will be the overall margin?
- Set the break-even point in value if the annual fixed charges amount to €36.
- Discuss the consequences of cooperating with fashion influencers on brand image.
Proposed correction:
-
The selling price excluding VAT is: PV excluding VAT = PV including VAT ÷ (1 + VAT) = 180 ÷ 1,20 = €150.
The margin rate is: ((150 – 100) ÷ 100) x 100 = 50%.
The margin rate is 50%. -
The markup rate is calculated as follows: ((PV HT – PA HT) ÷ PV HT) x 100.
This gives: ((150 – 100) ÷ 150) x 100 = 33,33%.
The markup rate is 33,33%. -
The unit margin is (150 – 100) = €50. For 120 dresses:
Overall margin = €50 x 120 = €6.
The overall margin is €6.
-
The break-even point in value is calculated with: Fixed costs ÷ Margin rate (in €).
Substituting the values: 36 ÷ 000 = €0,5.
The company must reach a turnover of €72 to avoid making losses. -
Working with fashion influencers can boost brand visibility and appeal, reaching new and engaged audiences.
However, such a partnership must be carefully chosen to remain consistent with the brand identity.
Formulas Used:
| Title | Formulas |
|---|---|
| PV HT | PV incl. VAT ÷ (1 + VAT) |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Break-even point in value | Fixed charges ÷ Margin rate in € |
Application: Health Light
States :
“Lumière de Santé” is a light therapy company producing therapeutic lamps designed to improve mental health and well-being. As it expands rapidly, the company wants to review its pricing policy.
Work to do :
- Calculate the margin rate of a lamp sold at €220 excluding tax, while its production cost is €160.
- Find the sales price including VAT, considering a VAT of 20%.
- Calculate the overall margin if 250 lamps are sold in a quarter.
- Determine the break-even point in units if the annual fixed costs are €50.
- Analyze how a 10% discount on the pre-tax price could affect customer perception and sales volume.
Proposed correction:
-
The margin rate is obtained by the formula: ((PV HT – Production cost) ÷ Production cost) x 100.
Let's replace: ((220 – 160) ÷ 160) x 100 = 37,5%.
The margin rate reaches 37,5%. -
The sales price including tax is: PV including tax = PV excluding tax x (1 + VAT) = 220 x 1,20 = €264.
The sales price including tax is therefore €264. -
The unit margin is (220 – 160) = €60. For 250 lamps, this gives:
Overall margin = €60 x 250 = €15.
The overall margin is equal to €15.
-
The break-even point in units is calculated with: Fixed costs ÷ Unit margin.
Using the given values: 50 ÷ 000 = 60 units.
The company needs to sell about 834 lamps to break even. -
Reducing the pre-tax price by 10% would mean a new price of €198, which could potentially increase sales through increased demand due to the perception of better value.
However, care must be taken to ensure that the profit margin remains sufficient to avoid a significant deterioration in profits.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| PV including tax | PV HT x (1 + VAT) |
| Overall margin | Unit margin x Quantity sold |
| Break-even point (in units) | Fixed charges ÷ Unit margin |
Application: World Coffee
States :
“Café du Monde” is a boutique coffee roaster that sells premium coffees in decadent packaging. In order to maximize sales, the company is considering reviewing its margins and pricing strategies.
Work to do :
- Calculate the margin rate for a packet of coffee sold at €25 excluding tax when its purchase price is €15.
- Determine the sales price including VAT with a VAT of 5,5%.
- Estimate the overall margin if 1 packs are sold.
- Estimate how many packages would need to be sold to generate a profit of €30 after covering fixed costs of €000.
- Consider the strategic benefits of offering a monthly subscription to regular customers.
Proposed correction:
-
The margin rate is given by: ((PV HT – PA HT) ÷ PA HT) x 100.
Let's substitute the values: ((25 – 15) ÷ 15) x 100 = 66,67%.
The margin rate is 66,67%. -
The sales price including VAT is calculated as follows: PV including VAT = PV excluding VAT x (1 + VAT) = 25 x 1,055 = €26,375.
The sales price including tax is rounded to €26,38. -
The unit margin is (25 – 15) = €10. For 1 packs:
Total margin = €10 x €1 = €000.
The overall margin is €10.
-
To determine how many packages to sell to achieve a given profit, use:
(Target Profit + Fixed Costs) ÷ Unit Margin = (30 + 000) ÷ 10 = 000 packs.
The company needs to sell 4 packs to achieve the desired profit. -
A monthly subscription offering would ensure a predictable revenue stream and strengthen the relationship with loyal customers by offering them discounts or benefits.
It can also secure a regular customer base, reducing reliance on occasional sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV including tax | PV HT x (1 + VAT) |
| Overall margin | Unit margin x Quantity sold |
| Volume for sale for target | (Target profit + Fixed costs) ÷ Unit margin |
Application: Tech Innovators
States :
“Tech Innovators” is a company specializing in the manufacturing and sale of smartphone accessories. With the constant evolution of mobile technologies, the team is looking for strategies to adjust its prices and remain competitive.
Work to do :
- Calculate the margin rate for an accessory sold at €40 excluding tax, knowing that the purchase price is €28.
- Find the sales price including VAT if the VAT is 20%.
- Determine the overall margin achieved if 500 accessories are sold.
- If fixed costs amount to €15, how many units must be sold to reach the break-even point?
- Consider the possible impacts of a 5% price increase on the overall business strategy.
Proposed correction:
-
The margin rate is calculated by: ((PV HT – PA HT) ÷ PA HT) x 100.
This gives: ((40 – 28) ÷ 28) x 100 = 42,86%.
The margin rate is 42,86%. -
The sales price including tax is obtained with: PV including tax = PV excluding tax x (1 + VAT) = 40 x 1,20 = €48.
The sales price including tax is therefore €48. -
The unit margin is (40 – 28) = €12. For 500 accessories:
Overall margin = €12 x 500 = €6.
The overall margin achieved is €6.
-
The break-even point in units is calculated with: Fixed costs ÷ Unit margin.
Substituting, we get: 15 ÷ 000 = 12 units.
The company needs to sell 1 units to reach break-even. -
A 5% price increase could improve the margin per unit if demand elasticity is low. However, it could also reduce sales if customers are price sensitive.
This strategy must be aligned with a stronger value proposition to be effective.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV including tax | PV HT x (1 + VAT) |
| Overall margin | Unit margin x Quantity sold |
| Break-even point (in units) | Fixed charges ÷ Unit margin |