Summary
Application: Sweet Coffee
States :
You are the manager of “Café Douceur”, a small business selling specialty coffee. “Mixe Maison” coffee is sold in 1 kg packs. You must analyze the different commercial and financial components related to this product to improve the profitability of your business.
Work to do :
- Calculate the sales price including tax of a packet of “Mixe Maison” coffee if the sales price excluding tax is €18. The applicable VAT rate is 5,5%.
- Determine the unit margin excluding tax if the purchase price excluding tax is €12 for each pack.
- Calculate the margin rate on the product.
- If you sell 200 packs per month, what is the overall monthly margin achieved?
- Identify opportunities for improving overall margin by analyzing results.
Proposed correction:
-
To calculate the sales price including tax, we use the formula:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €18 x (1 + 0,055) = €18 x 1,055 = €18,99.
The sales price including tax is therefore €18,99. -
The unit margin excluding tax is calculated using the formula:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €18 – €12 = €6.
The unit margin excluding tax is €6. -
The margin rate is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€18 – €12) ÷ €12) x 100 = (€6 ÷ €12) x 100 = 50%.
The margin rate is 50%.
-
The monthly overall margin is calculated by:
Overall margin = Unit margin x quantity sold
Overall margin = €6 x 200 = €1.
The overall monthly margin is therefore €1. -
To improve the overall margin, you might consider negotiating better rates with suppliers to reduce the cost of purchase. You can also offer promotions that increase sales volume. Optimizing storage costs can also be a way forward, as well as expanding the product range to attract a wider customer base.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: TechnoPlus
States :
TechnoPlus, an electronics sales company, wants to analyze the financial performance of its flagship product, an intelligent voice assistant, for which the selling price is crucial in establishing a competitive strategy in the market.
Work to do :
- Determine the sales price including tax of a voice assistant if it is offered at €250 excluding tax and the applicable VAT rate is 20%.
- Evaluate the unit margin excluding tax knowing that the purchase cost excluding tax is €180.
- Calculate the markup rate of this device.
- Assuming TechnoPlus sells 500 units per quarter, what is the total value of the quarterly margins?
- Suggest strategies that TechnoPlus could adopt to increase these margins.
Proposed correction:
-
The sales price including tax is calculated as follows:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €250 x (1 + 0,20) = €250 x 1,20 = €300.
So, the sales price including tax is €300. -
The unit margin excluding tax is given by:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €250 – €180 = €70.
The unit margin excluding tax is €70. -
The markup rate is determined by the formula:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Markup rate = ((€250 – €180) ÷ €250) x 100 = (€70 ÷ €250) x 100 = 28%.
The markup rate is 28%.
-
The total value of quarterly margins is calculated by:
Overall margin = Unit margin x quantity sold
Overall margin = €70 x 500 = €35.
The total value of the quarterly margins is therefore €35. -
TechnoPlus could adopt several strategies to increase its margins, such as adopting new technological features to increase the selling price, improving the efficiency of supply chains to reduce the cost of purchase, and increasing sales volume through targeted marketing campaigns.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: Chic Fashion
States :
“Mode Chic” is an online store specializing in women’s fashion accessories. You have recently introduced a new line of leather handbags and would like to assess their profitability potential in order to decide whether to keep them or remove them from the catalog.
Work to do :
- Calculate the selling price including tax of a handbag sold for €120 excluding tax with a VAT rate of 20%.
- Find the unit margin excluding tax if each handbag costs €75 to manufacture.
- Calculate the margin rate for these handbags.
- If you sell 350 bags per year, what is the overall annual margin?
- Briefly discuss the prospects for increasing the profitability of bags.
Proposed correction:
-
The sales price including tax is calculated by applying VAT:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €120 x (1 + 0,20) = €120 x 1,20 = €144.
The sales price including tax is therefore €144. -
The unit margin excluding tax is obtained as follows:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €120 – €75 = €45.
The unit margin excluding tax is €45. -
The margin rate is determined by the following formula:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€120 – €75) ÷ €75) x 100 = (€45 ÷ €75) x 100 = 60%.
The margin rate is 60%.
-
The annual overall margin is calculated as follows:
Overall margin = Unit margin x quantity sold
Overall margin = €45 x 350 = €15.
The overall annual margin is therefore €15. -
To increase the profitability of the bags, "Mode Chic" could explore expanding the product range to target new customer segments, as well as optimizing production costs through increasing volumes and negotiating with suppliers for better rates.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
App: GreenLife Essentials
States :
GreenLife Essentials, an eco-friendly company, sells a range of organic products, including “Eco Lunch Boxes”. They plan to further develop their market based on an analysis of commercial margins.
Work to do :
- What is the VAT applied to an Eco Lunch Box sold for €20 excluding VAT, with a VAT rate of 5,5%?
- Find the unit margin excluding VAT if the purchase cost excluding VAT of a box is €13.
- Determine the brand rate of the lunch box.
- Calculate the overall margin for 400 boxes sold on annual average.
- Suggest potential actions to improve margins while maintaining an ethical approach.
Proposed correction:
-
The VAT to be applied is calculated as follows:
VAT = PV excluding VAT x VAT rate
VAT = €20 x 0,055 = €1,10.
The VAT applied is therefore €1,10. -
The unit margin excluding tax is defined by:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €20 – €13 = €7.
The unit margin excluding tax is €7. -
The markup rate is calculated by:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Markup rate = ((€20 – €13) ÷ €20) x 100 = (€7 ÷ €20) x 100 = 35%.
The markup rate is 35%.
-
The overall margin for 400 boxes is calculated as follows:
Overall margin = Unit margin x quantity sold
Overall margin = €7 x 400 = €2.
The overall margin is therefore €2. -
To improve margins without compromising ethics, GreenLife Essentials could focus on digital marketing to reach a larger audience without significant additional costs, collaborate with sustainability influencers to strengthen their brand, or develop recyclability or sustainability guarantees for premiums on the sales price.
Formulas Used:
| Title | Formulas |
|---|---|
| VAT | PV excluding VAT x VAT rate |
| Unit margin excluding tax | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: Gourmet Bakery
States :
"Boulangerie Gourmande," located in the heart of Paris, wants to analyze the profits made on its famous "gourmet croissants." This artisanal bakery would also like to plan a possible increase in production in order to meet growing demand.
Work to do :
- Calculate the selling price including tax of a croissant sold for €1,50 excluding tax with a VAT of 5,5%.
- Establish the unit margin excluding tax if the manufacturing cost excluding tax is €0,90 per croissant.
- Determine the margin rate for gourmet croissants.
- If 1 gourmet croissants are sold monthly, what is the overall monthly margin?
- Suggest ways to increase profits while maintaining craftsmanship.
Proposed correction:
-
The sales price including tax is calculated as follows:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €1,50 x (1 + 0,055) = €1,50 x 1,055 = €1,58.
The sales price including tax is therefore €1,58. -
The unit margin excluding tax is calculated by:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €1,50 – €0,90 = €0,60.
The unit margin excluding tax is €0,60. -
The margin rate is given by:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€1,50 – €0,90) ÷ €0,90) x 100 = (€0,60 ÷ €0,90) x 100 = 66,67%.
The margin rate is 66,67%.
-
The monthly overall margin is:
Overall margin = Unit margin x quantity sold
Overall margin = €0,60 x 1 = €000.
The overall monthly margin is therefore €600. -
To increase profits while maintaining quality, “Boulangerie Gourmande” could invest in more efficient equipment to increase production capacity, diversify the product range by adding seasonal or limited flavors, and strengthen customer relationships through loyalty.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: HighTech Vision
States :
HighTech Vision is an e-commerce company specializing in innovative electronic gadgets. With the arrival of their new tablet, they want to evaluate margins to adjust their sales strategy and optimize profits.
Work to do :
- Calculate the selling price including tax of a tablet sold for €320 excluding tax with a VAT of 20%.
- Evaluate the unit margin excluding tax if the purchase price excluding tax is €250.
- Determine the markup rate of this tablet.
- If the company sells 300 tablets in a quarter, what is the overall quarterly margin?
- Propose measures to maintain high margins despite competitive pressures.
Proposed correction:
-
Calculate the sales price including VAT first:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €320 x (1 + 0,20) = €320 x 1,20 = €384.
The sales price including tax is therefore €384. -
The unit margin excluding VAT is obtained as follows:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €320 – €250 = €70.
The unit margin excluding tax is €70. -
The markup rate can be calculated by:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Markup rate = ((€320 – €250) ÷ €320) x 100 = (€70 ÷ €320) x 100 = 21,87%.
The markup rate is 21,87%.
-
The quarterly overall margin is calculated as follows:
Overall margin = Unit margin x quantity sold
Overall margin = €70 x 300 = €21.
The overall quarterly margin is therefore €21. -
To maintain high margins, HighTech Vision could adopt strategies such as product differentiation (unique software updates or additional services), reducing procurement costs through long-term contracts with suppliers, and emphasizing after-sales support to strengthen brand loyalty.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: Artisan Delights
States :
Artisan Délices is a small business making homemade organic jams. Strawberry jam is their flagship product, and understanding profitability is crucial for future sales planning.
Work to do :
- Calculate the selling price including tax of a jar of jam sold for €4,50 excluding tax, with a VAT of 5,5%.
- Determine the unit margin excluding tax if the production cost excluding tax amounts to €2,80.
- Calculate the margin rate for this product.
- What is the overall margin for selling 5 pots per year?
- Discuss the steps that allow Artisan Délices to expand its customer base while maintaining its margins.
Proposed correction:
-
The sales price including tax is calculated by:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €4,50 x (1 + 0,055) = €4,50 x 1,055 = €4,75.
The sales price including tax is therefore €4,75. -
The unit margin excluding tax is given by:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €4,50 – €2,80 = €1,70.
The unit margin excluding tax is €1,70. -
The margin rate is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€4,50 – €2,80) ÷ €2,80) x 100 = (€1,70 ÷ €2,80) x 100 = 60,71%.
The margin rate is 60,71%.
-
The overall margin for 5 pots is:
Overall margin = Unit margin x quantity sold
Total margin = €1,70 x €5 = €000.
The overall annual margin is therefore €8. -
To expand its customer base while maintaining margins, Artisan Délices could invest in targeted online marketing campaigns, establish partnerships with specialty grocery stores or launch monthly product subscriptions to attract loyal customers while ensuring consistent volume.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: Sport Plus
States :
Sport Plus is a specialist retailer of sporting goods. With summer approaching, they have increased their stocks of premium camping tents and want to do a full analysis of their profitability.
Work to do :
- Calculate the selling price including tax for a tent sold for €200 excluding tax with a VAT rate of 20%.
- Evaluate the unit margin excluding VAT if the purchase price excluding VAT of a tent is €140.
- What is the markup rate for these tents?
- Calculate the overall margin for selling 150 units during the summer.
- Suggest possible improvements to maximize margins during busy seasons.
Proposed correction:
-
The sales price including tax is calculated by applying:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €200 x (1 + 0,20) = €200 x 1,20 = €240.
The sales price including tax is therefore €240. -
The unit margin excluding tax is:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €200 – €140 = €60.
The unit margin excluding tax is €60. -
The markup rate is determined by:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Markup rate = ((€200 – €140) ÷ €200) x 100 = (€60 ÷ €200) x 100 = 30%.
The markup rate is 30%.
-
The overall margin for 150 tents is:
Overall margin = Unit margin x quantity sold
Overall margin = €60 x 150 = €9.
The overall margin for the season is therefore €9. -
To maximize margins, Sport Plus could consider strategic replenishments at lower costs, consolidating the supply chain to reduce delivery times and costs, and implementing limited promotions to move excess inventory more quickly, thereby reducing storage costs.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
Application: Eco Home Solutions
States :
Eco Home Solutions is a company that creates sustainable household solutions. They are launching a limited line of biodegradable cleaning products and need to analyze margins to better target their marketing efforts.
Work to do :
- Calculate the sales price including tax of a product sold for €8 excluding tax, with a VAT of 5,5%.
- Find the unit margin excluding tax if the production cost of a product excluding tax is €5.
- Calculate the margin rate for this product.
- What is the overall margin for 2 products sold during the year?
- List marketing approaches that Eco Home Solutions could adopt to maximize visibility and sales while preserving margins.
Proposed correction:
-
The sales price including tax is calculated as follows:
PV including VAT = PV excluding VAT x (1 + VAT rate)
PV including tax = €8 x (1 + 0,055) = €8 x 1,055 = €8,44.
The sales price including tax is therefore €8,44. -
The unit margin excluding tax is calculated by:
Unit margin excluding tax = PV excluding tax – PA excluding tax
Unit margin excluding tax = €8 – €5 = €3.
The unit margin excluding tax is €3. -
The margin rate is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€8 – €5) ÷ €5) x 100 = (€3 ÷ €5) x 100 = 60%.
The margin rate is 60%.
-
The overall margin for 2 products is:
Overall margin = Unit margin x quantity sold
Total margin = €3 x €2 = €000.
The overall annual margin is therefore €6. -
Eco Home Solutions could invest in online awareness campaigns to increase product awareness, develop an engaged community around sustainability through interactive online events, and offer free trials or samples to encourage potential consumers to discover and adopt their products.
Formulas Used:
| Title | Formulas |
|---|---|
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| Unit margin excluding tax | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |