Summary
Application: Clara's Jams
States :
Les Confitures de Clara is a craft company specializing in the production of organic jams. The jams are sold in 300 gram jars. The company wants to calculate the financial viability of its sales of strawberry jam, a flagship product. The objective is to determine the margin and the profitability threshold of this product.
Work to do :
- Calculate the sales price including tax of a pot if the sales price excluding tax (PV HT) is €3,50 and the VAT rate is 5,5%.
- Determine the unit margin if the purchase price excluding tax (PA HT) is €2,00.
- What would be the margin rate for the product?
- Calculate the break-even point in number of pots if the annual fixed costs are €10.
- Discuss the financial implications if the purchase price increases by 10%.
Proposed correction:
-
The sales price including tax (PV TTC) is calculated by multiplying the sales price excluding tax (PV HT) by (1 + VAT rate).
So, €3,50 x (1 + 0,055) = €3,50 x 1,055 = €3,70.
The selling price including tax for a pot is €3,70. -
The unit margin is obtained by subtracting the purchase price excluding tax (PA HT) from the sale price excluding tax (PV HT).
So, €3,50 – €2,00 = €1,50.
The unit margin is €1,50. -
The margin rate is calculated as follows: ((PV HT – PA HT) ÷ PA HT) x 100.
((€3,50 – €2,00) ÷ €2,00) x 100 = 75%.
The margin rate for this jam is 75%.
-
The break-even point in number of pots is determined by dividing fixed costs by the unit margin.
€10 ÷ €000 = 1,50 pots (rounded).
The break-even point is 6 pots. -
If the purchase price increases by 10%, the new PA excluding tax will be €2,00 x €1,10 = €2,20.
This would reduce the unit margin to €3,50 – €2,20 = €1,30, and would directly influence the break-even point, which would be higher. It is crucial to re-evaluate the pricing strategy to maintain profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Sales price including tax | PV HT x (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Break-even point (number of pots) | Fixed charges ÷ Unit margin |
Application: TechnoGadget
States :
TechnoGadget, an online technology gadget retailer, wants to improve its pricing strategy for the launch of its new product, the DroneX. The management wants to assess the sales margin, the potential profit and consider price reduction options if necessary.
Work to do :
- Calculate the total cost of the DroneX if the purchase price is €120 and import costs represent 10% of the purchase price.
- Determine the selling price excluding tax required to obtain a unit margin of €50.
- What would be the markup rate with this sale price?
- If a 10% price reduction is applied to the net selling price, what would be the new impact on the margin?
- Analyze the effect on product positioning if the selling price exceeds that of competitors by 20%.
Proposed correction:
-
The import fee is 10% of the purchase price, or €120 x 0,10 = €12.
The total cost would therefore be €120 + €12 = €132. -
To determine the PV HT with a unit margin of €50, we use the formula: PV HT = PA HT + Margin.
So, €132 + €50 = €182.
The required selling price excluding VAT is €182. -
The markup rate is calculated as follows: ((PV HT – PA HT) ÷ PV HT) x 100.
So, ((€182 – €132) ÷ €182) x 100 ? 27,47%.
The markup rate would be 27,47%.
-
A 10% reduction in the PV excluding VAT means a new PV excluding VAT of €182 x 0,9 = €163,80.
The new margin is therefore €163,80 – €132 = €31,80.
The unit margin falls to €31,80. -
If the DroneX is 20% more expensive than competitors, this can position it as a premium product. However, this could deter price-sensitive customers, requiring a clear justification of the added value to maintain sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Total cost of ownership | PA HT + (PA HT x import costs %) |
| PV HT for margin | PA HT + Margin |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT after reduction | PV HT x (1 – reduction %) |
Application: Vivid Modes
States :
Modes Éclatants is a ready-to-wear company that has just launched a new summer collection. It wants to calculate several financial indicators to optimize its inventory and price management, particularly for the Dolce dress.
Work to do :
- Determine the turnover including tax for 100 dresses sold if the selling price excluding tax of a dress is €50 and the VAT rate is 20%.
- Calculate the overall margin if the purchase price excluding tax per dress is €30.
- What is the break-even point in terms of margins for 200 dresses if fixed costs amount to €6?
- If the number of dresses sold increases by 30%, how does that affect the overall margin?
- Discuss the benefits of reducing the selling price by 5% to attract more customers.
Proposed correction:
-
The turnover including tax is calculated by multiplying the sales price including tax by the number of dresses sold.
PV including VAT = PV excluding VAT x (1 + VAT) = €50 x 1,20 = €60.
So, for 100 dresses: 100 x €60 = €6. -
Overall margin = Unit margin x Quantity sold.
Unit margin = PV excluding tax – PA excluding tax = €50 – €30 = €20.
For 100 dresses: 100 x €20 = €2. -
The break-even point (in terms of margins for 200 dresses) is reached when the overall margin reaches the fixed costs.
So, 200 x Unit Margin = Fixed Costs.
200 x €20 = €4, which is less than €000.
You would have to sell 300 dresses to reach exactly €6 in margins.
-
If the number of dresses sold increases by 30%, the total becomes 130 dresses. The new overall margin = 130 x €20 = €2.
Increasing the number of dresses sold directly increases the overall margin. -
Reducing the selling price by 5% can attract more customers by positioning the product as more advantageous. However, such a reduction must be analyzed in relation to the impact on unit margin and overall profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Turnover including tax | Number of units sold x PV incl. VAT |
| Overall margin | Unit margin x Quantity sold |
| Break-even point (margins) | Fixed charges ÷ Unit margin |
Application: Flavors of the World
States :
Saveurs du Monde is a restaurant chain specializing in international dishes. The company seeks to optimize the price of its menus to maximize its profits while remaining competitive. To do this, it wants to evaluate the impact of the cost of raw materials on its sales prices and analyze its commercial performance.
Work to do :
- Calculate the markup rate for a menu with a gross sales price of €25 and a gross sales volume of €15.
- Determine the new PV HT envisaged if the director wishes to increase the mark rate to 50%.
- If the restaurant sells 300 menus per month, what is the overall margin?
- Analyze the impact on margins if raw materials increase by 5%, making the net PA €15,75.
- Consider creating combo menus to increase average spend per customer.
Proposed correction:
-
The markup rate is calculated using the following formula: ((PV HT – PA HT) ÷ PV HT) x 100.
((€25 – €15) ÷ €25) x 100 = 40%.
The menu markup rate is 40%. -
To obtain a markup rate of 50%, the formula is: PV HT = PA HT ÷ (1 – Markup rate).
€15 ÷ (1 – 0,50) = €30.
The new PV excluding tax must be €30 to reach a markup rate of 50%. -
The overall margin = (PV HT – PA HT) x Quantity sold.
(€25 – €15) x 300 = €3.
The overall monthly margin on the menus is €3.
-
With a 5% increase in the cost of raw materials, the new PA excluding tax is €15,75.
The new overall margin is (€25 – €15,75) x 300 = €2.
Increasing costs reduce the overall margin. -
The introduction of combo menus can increase the average basket by offering a combination perceived as having greater value. Strategic, this choice requires an analysis of the impacts on the margin while keeping customers satisfied.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT | PA HT ÷ (1 – Desired markup rate) |
| Overall margin | (PV HT – PA HT) x Quantity sold |
Application: Games and Toys
States :
Jeux et Jouets is a store specializing in the sale of educational games for children. It plans to introduce a new series of games for the start of the school year and wants to calculate the profitability of this series. This requires understanding the impact of the cost of production and pricing strategies.
Work to do :
- Calculate the margin rate if the PV excluding tax is €45 and the production cost excluding tax is €30.
- What should the PV HT be if management wants to increase the margin rate to 70% while keeping the production cost constant?
- If 500 games are sold in a month, what is the overall margin?
- Evaluate the impact of a 15% reduction in the initial PV excluding VAT on the margin rate.
- Suggest a thought on expanding the range to capture a wider audience.
Proposed correction:
-
The margin rate is calculated by: ((PV HT – PA HT) ÷ PA HT) x 100.
((€45 – €30) ÷ €30) x 100 = 50%.
The margin rate is 50%. -
For a margin rate of 70%, we use the formula: PV HT = PA HT x (1 + Margin rate).
€30 x (1 + 0,70) = €51.
The PV excluding tax to obtain a margin rate of 70% is €51. -
The overall margin = (PV HT – PA HT) x Quantity sold.
(€45 – €30) x 500 = €7.
The overall margin for one month is €7.
-
Reducing the PV excluding tax by 15% gives a new price of: €45 x 0,85 = €38,25.
New margin rate = ((€38,25 – €30) ÷ €30) x 100 = 27,5%.
The price reduction lowers the margin rate to 27,5%. -
Expanding the game lineup can attract a wider customer base and diversify revenue streams. However, a thorough analysis of development and production costs is necessary to ensure the profitability of this expansion.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PV HT for margin | PA HT x (1 + Desired margin rate) |
| Overall margin | (PV HT – PA HT) x Quantity sold |
Application: Bakery Pastry Lavender
States :
Boulangerie Pâtisserie Lavande, located in the heart of the city, is known for its selection of artisan breads and pastries. The company wants to improve its understanding of margins and cost structure for its best-selling apple pies.
Work to do :
- Calculate the sales price including tax if the PV excluding tax is €8 and the applicable VAT rate is 5,5%.
- Determine the unit margin knowing that the PA excluding tax is €3,50 per tart.
- What is the margin rate obtained on each pie sold?
- If 200 pies are sold each week, what is the overall weekly margin?
- Discuss options to optimize production costs while maintaining quality.
Proposed correction:
-
The PV including tax is calculated by: PV excluding tax x (1 + VAT).
€8 x 1,055 = €8,44.
The selling price including tax for a tart is €8,44. -
The unit margin is: PV HT – PA HT.
8 € – 3,50 € = 4,50 €.
The unit margin per pie is €4,50. -
The margin rate is calculated as follows: ((PV HT – PA HT) ÷ PA HT) x 100.
((€8 – €3,50) ÷ €3,50) x 100 = 128,57%.
The margin rate per pie is 128,57%.
-
The overall weekly margin is: Unit margin x Quantity sold.
€4,50 x 200 = €900.
The overall weekly margin is €900. -
To optimize production costs, it might be useful to purchase ingredients in larger quantities to benefit from discounts, or to review recipes to reduce losses without compromising quality.
Formulas Used:
| Title | Formulas |
|---|---|
| Sales price including tax | PV HT x (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Amigo Office Equipment
States :
Amigo Office Equipment is a company specializing in the sale of office supplies and furniture. The company wants to invest in a high-end product line and analyze the impact of variable and fixed costs on its future profitability.
Work to do :
- Calculate the total cost of goods if the unit cost is €75 and 150 units were produced.
- Determine the selling price excluding tax to apply to ensure a margin of €30 per unit.
- What would be the markup rate calculated with the necessary selling price?
- If the cost of raw materials increases by 10%, what should the new selling price excluding tax be to maintain the same unit margin?
- Consider the strategic impact of entering the premium market for Amigo.
Proposed correction:
-
The total cost is: Unit cost x Quantity.
€75 x 150 = €11.
The total cost of the goods produced is €11. -
To ensure a margin of €30, the PV excluding tax is: PA excluding tax + Margin.
75 € + 30 € = 105 €.
The applicable sales price excluding tax is €105. -
The markup rate is calculated by: ((PV HT – PA HT) ÷ PV HT) x 100.
((€105 – €75) ÷ €105) x 100 = 28,57%.
The markup rate would be 28,57%.
-
Increase in the cost of raw materials: €75 x 1,10 = €82,50.
New PV excluding tax for constant margin = €82,50 + €30 = €112,50.
The new PV excluding tax to keep a margin of €30 will be €112,50. -
Entering the premium market can position Amigo as a quality leader and diversify its customer base. However, it may require a significant marketing investment to change consumer perceptions.
Formulas Used:
| Title | Formulas |
|---|---|
| Total cost of goods | Unit Cost x Quantity |
| PV HT for margin | PA HT + Margin |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Green Energy Solutions
States :
Énergie Verte Solutions is a company specializing in residential solar installations. With a new range of more efficient solar panels, it wants to solve profitability and supply issues to maximize its competitiveness.
Work to do :
- Calculate the value of the turnover including tax if 400 panels are sold at a PV excluding tax of €300 per panel with a VAT of 20%.
- Determine the unit margin if the PA excluding tax is €250 per panel.
- What is the generic margin rate on this product?
- If the company considers a 5% cost optimization, what impact would this have on the unit margin?
- Analyze the impact of volume acquisition savings on Green Energy Solutions' profitability.
Proposed correction:
-
Turnover including tax = Number of units sold x PV including tax = 400 x (€300 x 1,20).
PV incl. VAT = €360. Therefore, 400 x €360 = €144.
The turnover including tax for 400 panels is €144. -
Unit margin = PV HT – PA HT.
300 € – 250 € = 50 €.
The unit margin per panel is €50. -
The margin rate is calculated by: ((PV HT – PA HT) ÷ PA HT) x 100.
((€300 – €250) ÷ €250) x 100 = 20%.
The margin rate for this product is 20%.
-
Optimizing cost prices by 5% reduces the cost to:
€250 x 0,95 = €237,50.
The new unit margin = €300 – €237,50 = €62,50.
The optimization improves the unit margin to €62,50. -
Volume acquisition economies reduce unit costs by increasing profit margins, which strengthens the company's competitiveness in the face of growing demand.
Formulas Used:
| Title | Formulas |
|---|---|
| Turnover including tax | Number of units sold x PV incl. VAT |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Luxury Coastal Hotels
States :
Hôtels de Luxe du Littoral is an exclusive hotel chain that offers all-inclusive stays. For the summer season, management wants to understand the relationships between package pricing, operational cost and profitability, in order to better prepare sales campaigns.
Work to do :
- Calculate the total booking cost for a 5-night stay if the daily rate excluding VAT is €150 and the VAT rate is 10%.
- Determine the overall margin on a batch of 100 reservations if the operational cost per reservation is €500.
- What would be the margin rate on each booking in this case?
- Discuss options to maximize room occupancy during the off-season.
- Suggest thoughts on integrating additional paid services to increase profitability.
Proposed correction:
-
Total booking cost (including VAT) = Number of nights x (daily rate excluding VAT x (1 + VAT)).
5 x (€150 x 1,10) = 5 x €165 = €825.
The total cost of booking for 5 nights is €825. -
Overall margin = (Number of reservations x Price excluding tax – Number of reservations x Operating cost).
(100 x €150 x 5) – (100 x €500) = €75 – €000 = €50.
The overall margin of 100 reservations is €25. -
Margin rate = ((PV – Cost) ÷ Cost) x 100.
((€750 – €500) ÷ €500) x 100 = 50%.
The margin rate on each booking is 50%.
-
Maximizing occupancy rates in the low season could include promotions on the length of stays, attractive packages with local partners, or a specific offer to retain business customers.
-
Integrating additional services such as excursions, spa treatments, or exclusive dining options can provide additional revenue opportunities and enhance the customer experience while boosting profit margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Total booking cost | Number of nights x (Daily rate excluding VAT x (1 + VAT)) |
| Overall margin | (Number of reservations x Price excluding VAT) – (Number of reservations x Operational cost) |
| Margin rate | ((PV – Cost) ÷ Cost) x 100 |