Summary
Application: Urban Bikes
States :
The company “Vélos Urbains” specializes in selling electric bikes to city dwellers looking to adopt eco-friendly means of transportation. It is currently offering an attractive promotion to boost its sales. Here are the key data for this flagship product: the purchase price excluding tax (PP excluding tax) of a bike is €850, and the sales price excluding tax (SRP excluding tax) is €1. The quantity of bikes sold during this promotion is 200 units.
Work to do :
- Calculate the margin rate made on the bicycles sold by the company.
- Determine the total amount of overall margin earned on all sales during the promotion.
- Evaluate the markup rate applied to the sale price of the bikes.
- If the company wants to maintain a margin rate of 30%, what should the new selling price excluding tax be?
- Analyze the impact that a reduction of €100 in the PV excluding tax would have on the margin rate.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's substitute the values: ((1 – 200) ÷ 850) x 850 = 100%.
The margin rate achieved on bicycles is 41,18%. -
Overall margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (1 – 200) x 850 = €300.
The overall margin obtained on all sales is €105. -
Mark rate:
Let’s use the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Let's replace: ((1 – 200) ÷ 850) x 1 = 200%.
The applied markup rate is 29,17%.
-
Selling price for a margin rate of 30%:
Let’s use the formula: PV HT = PA HT x (1 + Margin rate).
Let’s calculate: 850 x (1 + 0,30) = €1.
The new PV excluding tax should be €1. -
Impact of a reduction of €100 on the PV excluding tax:
New PV excluding tax = 1 – 200 = €100.
Let's use the formula: Margin rate = ((1 – 100) ÷ 850) x 850.
Let's calculate: (250 ÷ 850) x 100 = 29,41%.
A reduction of €100 brings the margin rate to 29,41%.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Selling price excluding tax | PA HT x (1 + Margin rate) |
Application: Gourmets and Delights
States :
Gourmets et Délices, a high-end pastry shop, wants to analyze the profitability of its new fruit tarts. The purchase price of the ingredients for a tart is €5,50, and it was sold at a price of €11 excluding tax. During the last month, 500 tarts were sold. The applicable VAT is 5,5%.
Work to do :
- Calculate the margin rate of the fruit tarts sold.
- Determine the overall margin made on all sales for the month.
- Calculate the selling price including tax of a pie.
- If Gourmets et Délices wants a markup rate of 40%, what should the new PV excluding tax be?
- What will be the unit margin available if the purchase price increases by €1 while maintaining the same PV excluding tax?
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((11 – 5,50) ÷ 5,50) x 100 = 100%.
The margin rate on pies is 100%. -
Overall margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (11 – 5,50) x 500 = €2.
The overall margin obtained is €2. -
PV including tax:
Let’s use the formula: PV TTC = PV HT x (1 + VAT rate).
Let’s calculate: 11 x (1 + 0,055) = €11,605.
The VAT-inclusive price of a pie is €11,605.
-
New PV HT for a mark rate of 40%:
Let’s use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Let’s calculate: 5,50 ÷ (1 – 0,40) = €9,17.
The new PV excluding tax must be €9,17. -
Impact of a €1 increase in the purchase price:
New PA HT = 5,50 + 1 = 6,50 €.
Unit margin = 11 – 6,50 = €4,50.
The available unit margin will be €4,50.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| New PV HT | PA HT ÷ (1 – Mark rate) |
| Unit margin | PV HT – PA HT |
Application: Eco-Furniture
States :
Eco-Mobilier, an online store specializing in eco-friendly furniture, sells tables made from recycled materials. The manufacturing cost per unit is €95, and the selling price excluding tax is €180. The store sold 1 tables during the year.
Work to do :
- Calculate the margin rate per unit of table sold.
- Determine the overall annual margin obtained on sales.
- What would be the impact on overall margin if sales volume increased by 20%?
- If the company wants to lower its selling price excluding tax by 10%, what would the new margin rate be?
- Analyze the financial consequences of an increase in production costs of €10 per unit on the unit margin.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((180 – 95) ÷ 95) x 100 = 89,47%.
The margin rate per table unit sold is 89,47%. -
Overall margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (180 – 95) x 1 = €500.
The overall annual margin obtained is €127. -
Impact of a 20% increase in sales:
New quantity sold = 1 x (500 + 1) = 0,20.
New overall margin = 85 x 1 = €800.
With a 20% increase, the overall margin would be €153.
-
New margin rate after 10% drop in the PV excluding tax:
New PV excluding tax = 180 x (1 – 0,10) = €162.
New margin rate = ((162 – 95) ÷ 95) x 100 = 70,53%.
The new margin rate would be 70,53%. -
Impact of a €10 increase in production costs:
New PA HT = 95 + 10 = 105 €.
New unit margin = 180 – 105 = €75.
The increase in costs reduces the unit margin to €75.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| New quantity sold | Initial quantity x (1 + Percentage increase) |
| New margin rate | ((New PV HT – PA HT) ÷ PA HT) x 100 |
| New unit margin | PV HT – New PA HT |
Application: Tech Innov
States :
Tech Innov is a technology company that recently launched a new smartphone model. The production cost of each device is €300, and it is sold at €750 excluding VAT. In one year, 10 units have been sold.
Work to do :
- Calculate the margin rate of this smartphone model.
- Estimate the total margin earned on annual sales of this product.
- If the company expects sales to increase by 15%, what will the new overall margin be?
- Determine the new selling price excluding tax required if the company wishes to increase its unit margin by €50.
- Discuss the strategic consequences of a €50 reduction in the net selling price on turnover.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((750 – 300) ÷ 300) x 100 = 150%.
The margin rate of this smartphone is 150%. -
Total margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (750 – 300) x 10 = €000.
The total margin obtained is €4. -
New overall margin after 15% increase in sales:
New quantity sold = 10 x (000 + 1) = 0,15.
New overall margin = 450 x 11 = €500.
The new overall margin would be €5.
-
New PV excluding tax to increase the unit margin by €50:
New unit margin = 450 + 50 = €500.
New PV excluding tax = 300 + 500 = 800 €.
The new PV excluding tax must be €800. -
Consequences of a €50 reduction in the PV excluding tax:
New PV excluding tax = 750 – 50 = 700 €.
New unit margin = 700 – 300 = €400.
Margin reduction of €50, potentially impacting total turnover.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Total margin | Unit margin x Quantity sold |
| New quantity sold | Initial quantity x (1 + Percentage increase) |
| New PV HT | PA HT + New unit margin |
| New unit margin | New PV HT – PA HT |
Application: Naturally Organic
States :
Naturellement Bio, an organic products store, is launching a special offer on its essential oils. Currently, the cost price for a bottle is €7 and the selling price excluding tax is €20. 1 units are sold per month.
Work to do :
- Establish the current margin rate per bottle of essential oil.
- Calculate the overall monthly margin for these sales.
- State the new margin rate if the purchase price increases by €2 but the net sales tax remains constant.
- Calculate the sales price including tax applied with a VAT of 5,5%.
- Consider possible strategies if forecasts show a 10% drop in demand next month.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((20 – 7) ÷ 7) x 100 = 185,71%.
The current margin rate is 185,71%. -
Monthly overall margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (20 – 7) x 1 = €200.
The overall monthly margin is €15. -
New margin rate with a €2 increase in PA:
New PA HT = 7 + 2 = 9 €.
Margin rate = ((20 – 9) ÷ 9) x 100 = 122,22%.
The new margin rate will be 122,22%.
-
PV including tax:
Let’s use the formula: PV TTC = PV HT x (1 + VAT rate).
Let’s calculate: 20 x (1 + 0,055) = €21,10.
The PV including tax is €21,10. -
Strategies for a 10% drop in demand:
New predicted quantity sold = 1 x (200 – 1) = 0,10 units.
Possible strategies: adjust stock, offer promotions or diversify the offer.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Monthly overall margin | Unit margin x Quantity sold |
| PV including tax | PV excluding VAT x (1 + VAT rate) |
| New quantity sold | Initial quantity x (1 – Percentage of demand decline) |
| New margin rate | ((PV HT – New PA HT) ÷ New PA HT) x 100 |
Application: Sport and Health
States :
Sport et Santé, a chain of sports stores, decides to promote its new cutting-edge running shoes. The purchase cost is €45 excluding VAT per pair and the sale price is €85 excluding VAT. For a special event, 800 pairs were sold through their various stores.
Work to do :
- Calculate the average margin rate made on each pair of shoes.
- Estimate the total margin generated by this event.
- If a store wants to increase sales by 25%, how many more pairs should it sell?
- Determine the markup rate applied to the sale price.
- Imagine that the purchase cost increased by 10%, what impact will this have on the initial margin rate?
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((85 – 45) ÷ 45) x 100 = 88,89%.
The average margin rate is 88,89%. -
Total margin:
Let's use the formula: Unit Margin x Quantity Sold.
Let’s calculate: (85 – 45) x 800 = €32.
The total margin generated is €32. -
Additional sales to increase by 25%:
Extra pairs = 800 x 0,25 = 200.
To increase by 25%, the store must sell 200 additional pairs.
-
Mark rate:
Let’s use the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Let's calculate: ((85 – 45) ÷ 85) x 100 = 47,06%.
The applied markup rate is 47,06%. -
Impact of a 10% increase in purchase cost:
New PA HT = 45 x 1,10 = €49,50.
New margin rate = ((85 – 49,50) ÷ 49,50) x 100 = 71,72%.
The increase in cost reduces the margin rate to 71,72%.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Total margin | Unit margin x Quantity sold |
| Additional pairs | Quantity sold x Percentage increase |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New margin rate | ((PV HT – New PA HT) ÷ New PA HT) x 100 |
Application: Light & Design
States :
The company “Lumière & Design,” specializing in creative lighting, is offering a limited edition of an eco-friendly floor lamp. The production cost is €110 excluding VAT, and they retail for €250 excluding VAT. A total of 600 floor lamps were produced for this edition.
Work to do :
- Calculate the margin rate for each lamp sold.
- If all the street lamps are sold, what will be the total margin made?
- Suppose the company has to apply a 20% discount on the selling price, what will be the margin rate after discount?
- Evaluate the strategic impact if only 75% of the streetlights are sold.
- Estimate the selling price required to achieve a 50% markup rate.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((250 – 110) ÷ 110) x 100 = 127,27%.
The margin rate for each street lamp is 127,27%. -
Total margin if all sold:
Let's use the formula: Unit Margin x Quantity Sold.
Calculation: (250 – 110) x 600 = €84.
The total margin would be €84. -
Margin rate after 20% discount:
Price after discount = 250 x (1 – 0,20) = €200.
New margin rate = ((200 – 110) ÷ 110) x 100 = 81,82%.
The margin rate after discount is 81,82%.
-
Impact if only 75% are sold:
Quantity sold = 600 x 0,75 = 450.
Total margin = (250 – 110) x 450 = €63.
A 75% sale leads to a total margin of €63. -
PV required for a 50% mark rate:
Let’s use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Let’s calculate: 110 ÷ (1 – 0,50) = €220.
The required sale price would be €220.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Total margin | Unit margin x Quantity sold |
| New margin rate | ((New PV – HT PA) ÷ HT PA) x 100 |
| PV HT required | PA HT ÷ (1 – Mark rate) |
| Quantity sold | Initial Quantity x Sales Percentage |
Application: Zen and Spa
States :
Zen et Spa sells high-end wooden hot tubs. The production cost is €1 excluding VAT per unit, and they are sold at €200 excluding VAT each. This year, 3 baths were sold.
Work to do :
- Determine the margin rate generated per hot tub sold.
- Calculate the total margin generated by annual sales.
- If the company wants to encourage purchases by offering a discount of €300 per bath, what will the new margin rate be?
- Project the overall margin if the company manages to sell 20 additional baths at this reduced price.
- Take a position on the launch of an intermediate range with a production cost of €850 and a PV excluding tax of €1.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((3 – 000) ÷ 1) x 200 = 1%.
The margin rate per bath is 150%. -
Total margin:
Let's use the formula: Unit Margin x Quantity Sold.
Calculation: (3 – 000) x 1 = €200.
The total margin generated is €270. -
New margin rate after reduction:
New PV = 3 – 000 = €300.
New margin rate = ((2 – 700) ÷ 1) x 200 = 1%.
The new margin rate is 125%.
-
Overall margin with 20 additional sales:
New quantity = 150 + 20 = 170.
New overall margin = (2 – 700) x 1 = €200.
With 20 additional sales, the overall margin would be €255. -
Launch of an intermediate range:
Unit margin: 1 – 800 = €850.
Margin rate = ((1 – 800) ÷ 850) x 850 = 100%.
An intermediate range offers a margin rate of 111,76%.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Total margin | Unit margin x Quantity sold |
| New margin rate | ((New PV – HT PA) ÷ HT PA) x 100 |
| New overall margin | (New PV – PA HT) x New quantity sold |
| Intermediate unit margin | New PV HT – PA HT |
Application: Sophie's Delights
States :
Les Délices de Sophie, a bakery chain, analyzes the profitability of its nut breads. The cost of ingredients per loaf is €0,75, and they are sold for €2,50 excluding VAT. The bakery sells 5 each month.
Work to do :
- Calculate the margin rate on nut breads.
- Estimate the monthly margin obtained from these sales.
- If a competitor forces you to lower the selling price to €2,00 excluding VAT, what will the new margin rate be?
- Forecast the overall margin if monthly sales volume increased by 30%.
- Determine a plan to improve profitability by reducing ingredient costs by €0,10.
Proposed correction:
-
Margin rate:
Let’s use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Let's calculate: ((2,50 – 0,75) ÷ 0,75) x 100 = 233,33%.
The margin rate on bread is 233,33%. -
Monthly margin:
Let's use the formula: Unit Margin x Quantity Sold.
Calculation: (2,50 – 0,75) x 5 = €000.
The monthly margin obtained is €8. -
New margin rate if PV drops to €2,00:
New PV excluding VAT = €2,00.
New margin rate = ((2,00 – 0,75) ÷ 0,75) x 100 = 166,67%.
The new margin rate is 166,67%.
-
Overall margin after 30% increase in sales:
New quantity = 5 x 000 = 1,30.
New overall margin = (2,50 – 0,75) x 6 = €500.
A 30% increase would bring the overall margin to €11. -
Plan to improve profitability:
New PA HT = 0,75 – 0,10 = 0,65 €.
New unit margin = 2,50 – 0,65 = €1,85.
With a cost reduction, the unit margin would be €1,85.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Monthly margin | Unit margin x Quantity sold |
| New margin rate | ((New PV HT – PA HT) ÷ PA HT) x 100 |
| New overall margin | Unit Margin x New Quantity Sold |
| New unit margin | PV HT – New PA HT |