Summary
Application: Gastronomic Harmony
States :
The company Harmonie Gastronomique specializes in the distribution of luxury food products. To make an informed decision about selling their gourmet baskets, they want to analyze various financial indicators. They provide you with the following information:
- Purchase price excluding tax for a basket: €80
- Sale price excluding VAT of a basket: €120
- Quantity sold: 500 units
- Order cost: €50
- Annual storage cost: €2 per unit
Work to do :
- Calculate the unit margin of a basket.
- Determine the margin rate made on each basket sold.
- Evaluate the markup rate applied to the basket.
- What is the overall margin made on the sale of baskets?
- Calculate the QEC (Economic Order Quantity) to optimize inventory management.
Proposed correction:
-
The unit margin is calculated by the difference between the selling price excluding tax and the purchase price excluding tax.
Unit margin = €120 – €80 = €40.
Each basket sold brings a margin of €40. -
The margin rate is calculated using the formula: ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€120 – €80) ÷ €80) x 100 = (€40 ÷ €80) x 100 = 50%.
The margin rate on each basket is 50%. -
The markup rate is obtained by the formula: ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€120 – €80) ÷ €120) x 100 = (€40 ÷ €120) x 100 = 33,33%.
The applied markup rate is 33,33%.
-
The overall margin is obtained by multiplying the unit margin by the quantity sold.
Overall margin = €40 x 500 = €20.
The overall margin achieved is €20. -
The QEC (Economic Order Quantity) is given by: ?((2 x Annual demand x Order cost) ÷ Storage cost).
Let QEC = ?((2 x 500 x 50) ÷ 2) = ?(50) = 000 units.
The optimal QEC is 224 units (rounded up to the next whole number).
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| 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 |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: TechNoir Solutions
States :
TechNoir Solutions, an innovative startup in green technologies, wants to adjust its pricing strategies. Here is the information made available to you:
- Purchase price excluding tax of an innovative device: €200
- Selling price excluding tax of a device: €350
- Number of devices sold: 300
- Stable resources: €150
- Stable jobs: €120
Work to do :
- Calculate the margin rate on each device sold.
- Determine the markup rate for the devices.
- Evaluate the overall margin obtained from the sale of the devices.
- Find out the company's Net Working Capital (NWC).
- Suggest a strategy to improve margin or markup if they want.
Proposed correction:
-
The margin rate is obtained by ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€350 – €200) ÷ €200) x 100 = (€150 ÷ €200) x 100 = 75%.
The margin rate is 75% per device. -
The markup rate is calculated with ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€350 – €200) ÷ €350) x 100 = (€150 ÷ €350) x 100 = 42,86%.
The applied markup rate is 42,86%. -
The overall margin is calculated by Unit Margin x Quantity Sold.
Unit margin = €150, therefore overall margin = €150 x 300 = €45.
The overall margin achieved is €45.
-
The Net Working Capital (NWC) is given by Stable Resources – Stable Jobs.
FRNG = €150 – €000 = €120.
The FRNG is €30. -
A strategy to improve margin or markup could include increasing the selling price, reducing purchasing costs through negotiations, or reducing indirect costs related to production or distribution.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |
| FRNG | Stable Resources – Stable Jobs |
Application: Fashion Loop
States :
Fashion Loop, a company specializing in the manufacture of eco-friendly clothing, analyzes the profitability of one of its best-sellers. Here is the available data:
- Purchase price excluding VAT per unit: €15
- Selling price excluding VAT per unit: €45
- Sales made: 1 units
- Annual storage cost: €1,50 per unit
- Order cost: €75
- Annual demand: 1 units
Work to do :
- Determine the margin rate for each garment sold.
- Calculate the markup rate applied to this product.
- What is the overall margin made on these sales?
- Evaluate the economic order quantity (EOQ).
- Analyze how the company could increase its profitability.
Proposed correction:
-
The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€45 – €15) ÷ €15) x 100 = (€30 ÷ €15) x 100 = 200%.
The clothes are sold with a 200% margin. -
The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€45 – €15) ÷ €45) x 100 = (€30 ÷ €45) x 100 = 66,67%.
The product is marketed with a brand rate of 66,67%. -
The overall margin is Unit Margin x Quantity Sold.
Unit margin = €30, therefore overall margin = €30 x 1 = €000.
Fashion Loop thus achieved an overall margin of €30.
-
The QEC is determined by: ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost).
QEC = ?((2 x 1 x 000) ÷ 75) = ?(1,50) = 100.
The economic order quantity is therefore 317 units. -
To increase its profitability, Fashion Loop could explore strategies such as expanding its product range to attract more customers, negotiating better purchase rates, or increasing its prices while communicating the eco-responsible added value of the products.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: GreenMed Supply
States :
GreenMed Supply, a specialist in eco-friendly medical supplies, recently launched a new stethoscope. Here are the financial data available:
- Purchase price excluding VAT of a stethoscope: €45
- Selling price excluding VAT of a stethoscope: €75
- Initial stock: 400 units
- Final stock: 150 units
- Order cost: €30
- Storage cost per unit per year: €4
Work to do :
- Determine the margin rate value for the stethoscope.
- Calculate the markup rate applied to this product.
- Estimate the total quantity sold during the period.
- Calculate QEC to optimize inventory costs.
- Discuss how an increase in storage costs might impact business decisions.
Proposed correction:
-
The margin rate is obtained by ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€75 – €45) ÷ €45) x 100 = (€30 ÷ €45) x 100 = 66,67%.
The stethoscope's margin rate is 66,67%. -
The markup rate is calculated with ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€75 – €45) ÷ €75) x 100 = (€30 ÷ €75) x 100 = 40%.
The applied markup rate is 40%. -
The total quantity sold is the opening inventory minus the ending inventory.
Quantity sold = 400 – 150 = 250 units.
GreenMed Supply sold 250 units of stethoscopes.
-
The QEC is given by: ?((2 x Annual demand x Ordering cost) ÷ Storage cost).
With an estimated annual demand of 250 units, QEC = ?((2 x 250 x 30) ÷ 4) = ?(3) = 750.
The QEC amounts to 62 units. -
An increase in the cost of storage could lead GreenMed to reduce its inventory levels to avoid high charges. This could involve ordering more frequently, but in smaller quantities, perhaps affecting economies of scale.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Quantity sold | Initial stock – Final stock |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: EcoLuminaire
States :
EcoLuminaire, an expert in energy-efficient lighting, is looking to determine the cost-effectiveness of its high-end LED bulbs. Here is their report:
- Purchase price excluding tax of a bulb: €10
- Selling price excluding tax of a bulb: €25
- Quantity sold: 2 units
- Total storage cost over one year: €500
- Order cost: €60
- Circulating resources: €48
- Circulating jobs: €30
Work to do :
- Calculate the markup rate for each bulb sold.
- Evaluate the markup on bulbs.
- Determine the overall margin made on these bulb sales.
- Develop the company's Working Capital Requirement (WCR).
- Propose solutions to reduce ÉcoLuminaire’s Working Capital Requirement.
Proposed correction:
-
The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€25 – €10) ÷ €25) x 100 = (€15 ÷ €25) x 100 = 60%.
The markup rate for bulbs is 60%. -
The margin rate is calculated by ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€25 – €10) ÷ €10) x 100 = (€15 ÷ €10) x 100 = 150%.
The margin rate reaches 150%. -
The overall margin is found by Unit Margin x Quantity Sold.
Unit margin = €15, therefore overall margin = €15 x 2 = €000.
The overall margin achieved is €30.
-
The BFR is the result of Current Jobs – Current Resources.
WCR = €30 – €000 = -€48.
ÉcoLuminaire has a WCR of -€18, indicating a surplus of resources. -
To reduce its working capital requirement, ÉcoLuminaire could improve its customer debt recovery times or negotiate longer payment terms with suppliers, while reducing its stocks.
Formulas Used:
| Title | Formulas |
|---|---|
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| BFR | Circulating Jobs – Circulating Resources |
Application: BioVégé
States :
BioVégé, dedicated to the distribution of organic and local products, wishes to maximize its profitability on its basket of seasonal fruits. Here is the data provided:
- Purchase price excluding VAT per basket: €12
- Selling price excluding tax per basket: €20
- Annual sales: 3 baskets
- Order cost: €20
- Annual storage cost per basket: €1
- Current assets: €65
- Current liabilities: €50
Work to do :
- Calculate the margin rate for each basket of fruit sold.
- Evaluate the markup rate applied to these baskets.
- Determine the overall margin achieved over the year.
- Calculate the company's working capital requirement.
- Propose measures to reduce the WCR and improve BioVégé’s liquidity.
Proposed correction:
-
The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€20 – €12) ÷ €12) x 100 = (€8 ÷ €12) x 100 = 66,67%.
Thus, the margin rate per basket is 66,67%. -
The mark rate is obtained by ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€20 – €12) ÷ €20) x 100 = (€8 ÷ €20) x 100 = 40%.
The baskets are marketed with a 40% brand rate. -
The overall margin is Unit Margin x Quantity Sold.
Unit margin = €8, therefore overall margin = €8 x 3 = €500.
BioVégé achieved an overall margin of €28.
-
The WCR is determined by Current assets – Current liabilities.
WCR = €65 – €000 = €50.
BioVégé has a working capital requirement of €15. -
To reduce the WCR, BioVégé can optimize stock rotation, renegotiate supplier payment deadlines, and improve the management of customer receivables to strengthen its liquidity.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |
| BFR | Current assets – Current liabilities |
Application: SmartEdu
States :
SmartEdu, an innovative company in digital education solutions, evaluates the profitability of its latest online course module. Here is the information:
- Purchase price excluding tax of a module: €100
- Selling price excluding tax of a module: €200
- Modules sold: 450
- Order cost: €90
- Annual storage cost per module: €8
- Very Active (TA): €30
- Very Passive (TP): €10
Work to do :
- Calculate the margin rate for each module sold.
- Determine the markup rate on this online course.
- Evaluate the overall margin achieved by these sales.
- Calculate QEC to improve module management.
- Calculate the company's Net Cash Flow (NCF) and discuss a strategy to improve profitability.
Proposed correction:
-
The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€200 – €100) ÷ €100) x 100 = (€100 ÷ €100) x 100 = 100%.
The margin rate for each module is 100%. -
The markup rate is calculated with ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€200 – €100) ÷ €200) x 100 = (€100 ÷ €200) x 100 = 50%.
The applied markup rate is 50%. -
The overall margin is Unit Margin x Quantity Sold.
Unit margin = €100, therefore overall margin = €100 x 450 = €45.
The overall margin obtained is €45.
-
The QEC is given by: ?((2 x Annual demand x Ordering cost) ÷ Storage cost).
With an annual demand of 450, QEC = ?((2 x 450 x 90) ÷ 8) = ?(10) = 125.
The optimal QEC for the module is 101 units (rounded). -
Net Cash (NC) is calculated by TA – TP.
TN = €30 – €000 = €10.
To be more profitable, SmartEdu may consider diversifying its modules or adapting its pricing model based on demand.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
| TN | TA – TP |
Application: ArtBranche
States :
ArtBranche specializes in online art workshops. The company wants to analyze the profitability of its latest training program. Here are the figures:
- Purchase price excluding VAT per program: €30
- Selling price excluding VAT per program: €60
- Programs sold: 750
- Annual storage cost per program: €2
- Order cost: €40
- Stable liabilities: €90
- Stable assets: €70
Work to do :
- Calculate the margin rate per program sold.
- Evaluate the markup rate applied.
- Determine the overall margin made from these sales.
- Examine the company's Total Net Working Capital (TNWC).
- Provide an analysis of the financial implications of an increase in ordering cost.
Proposed correction:
-
The margin rate is obtained by ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€60 – €30) ÷ €30) x 100 = (€30 ÷ €30) x 100 = 100%.
The margin rate on each program is therefore 100%. -
The markup rate is calculated with ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€60 – €30) ÷ €60) x 100 = (€30 ÷ €60) x 100 = 50%.
The program has a 50% markup rate. -
The overall margin is calculated by Unit Margin x Quantity Sold.
Unit margin = €30, therefore overall margin = €30 x 750 = €22.
So the overall margin is €22.
-
The Net Working Capital (NWC) is given by Stable Liabilities – Stable Assets.
FRNG = €90 – €000 = €70.
ArtBranche has a FRNG of €20. -
An increase in the ordering cost could push ArtBranche to reduce the frequency of orders to reduce the total associated costs, while evaluating the impact on the availability of programs in their e-store.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |
| FRNG | Stable liabilities – Stable assets |
Application: SolarKitchen
States :
CuisineSolaire is a major player in solar cooking equipment. The company wants to analyze its financial results to better plan its strategies. Here are the details:
- Purchase price excluding tax of a solar oven: €50
- Selling price excluding tax of an oven: €125
- Sales: 1 units
- Order cost: €100
- Annual storage cost per oven: €5
- Very Active: €45
- Very Passive: €25
Work to do :
- Determine the margin rate applied to each solar oven sold.
- Calculate the markup rate for these ovens.
- What is the overall margin achieved by CuisineSolaire on these sales?
- Develop a strategy to maintain optimal BFR if it turns out to be negative.
- Propose a strategy to improve working capital based on financial analysis.
Proposed correction:
-
The margin rate is calculated by ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€125 – €50) ÷ €50) x 100 = (€75 ÷ €50) x 100 = 150%.
Each solar oven generates a margin rate of 150%. -
The markup rate uses the formula ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€125 – €50) ÷ €125) x 100 = (€75 ÷ €125) x 100 = 60%.
The markup rate is therefore 60%. -
The overall margin is obtained by Unit Margin x Quantity Sold.
Unit margin = €75, therefore overall margin = €75 x 1 = €200.
The overall margin achieved is €90.
-
If the WCR is negative, a strategy could include improving inventory turnover, reducing payment terms of receivables, or optimizing the short-term financing structure.
-
To improve working capital, CuisineSolaire could increase payment terms negotiated with suppliers while retaining sufficient liquidity to meet its short-term obligations, or strengthen its high-margin sales.
Formulas Used:
| Title | Formulas |
|---|---|
| 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 |