VAT commercial calculations: 11 corrected exercises

Application: Chic En Vogue Boutique

States :

Boutique Chic En Vogue is a small business that sells luxury clothing. The boutique applies a VAT rate of 20%. It has started selling a new dress at a purchase price excluding VAT of €150. Due to the exclusivity of the product, the boutique has set a margin rate of 60%.

1. Calculate the selling price excluding VAT of this dress.
2. Calculate the amount of VAT to be added to the PV excluding VAT.
3. Calculate the selling price including tax of this dress.
4. If the dress is sold at €230 including tax, what is the effective markup rate?
5. If the store wants to have a margin rate of 70% instead of 60%, what should it set the selling price excluding tax for this dress?

Work to do :

1. Calculate the selling price excluding VAT
2. Calculate the VAT amount.
3. Calculate the sales price including tax.
4. Calculate the effective markup rate.
5. Calculate the new PV HT based on the desired margin rate.

Proposed correction:

1. The selling price excluding VAT is calculated as follows: PV excluding VAT = PA excluding VAT + (PA excluding VAT x Margin rate). That is: PV excluding VAT = €150 + (€150 x 60%) = €240.

2. The amount of VAT is calculated using the formula: VAT = PV excluding VAT x VAT rate. That is: VAT = €240 x 20% = €48.

3. The sales price including tax is obtained by adding VAT to the sales price excluding tax. That is: Sales price including tax = Sales price excluding tax + VAT = €240 + €48 = €288.

4. The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. That is: Markup rate = ((€230 – €48 – €150) ÷ €230) x 100 = 13,91%.

5. The new PV HT with a margin rate of 70% is calculated as follows: PV HT = PA HT + (PA HT x Margin rate). That is: PV HT = €150 + (€150 x 70%) = €255.

Summary of Formulas Used:

Packages	Explanations
PV excluding tax = PA excluding tax + (PA excluding tax x Margin rate)	Formula for calculating the sales price excluding tax (PV HT) based on the purchase price excluding tax (PA HT) and the margin rate.
VAT = PV excluding VAT x VAT rate	Formula for calculating the amount of VAT based on the sales price excluding tax (SVP HT) and the VAT rate.
PV including VAT = PV excluding VAT + VAT	Formula for calculating the sales price including all taxes (PV TTC) by adding VAT to the sales price excluding tax (PV HT).
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100	Formula for calculating the markup rate based on the sales price excluding tax (PV HT) and the purchase price excluding tax (PA HT).

Application: Economax Supermarket

States :

The Économax supermarket specializes mainly in the sale of food products. The products in their price range are subject to varying VAT rates. To simplify, we will only consider two products: a bottle of red wine (VAT rate of 20%) and frozen products (VAT rate of 5.5%).

Here is the information on these two products:

– Bottle of red wine: Price including tax => €9,60
– Frozen products: Price excluding VAT => €15

Work to do :

1. Calculate the price excluding tax of the bottle of red wine.
2. Calculate the price including tax of frozen products.
3. Calculate the VAT amount for each product.
4. If the supermarket sells 200 bottles of red wine and 300 frozen products, what is the total amount of VAT?
5. If the Économax supermarket wants to achieve a turnover excluding tax of €10000 (by selling only these two products), how many of each product should it sell (considering that it sells the same amount of each product)?

Proposed correction:

1. The price excluding tax of the bottle of red wine = €9,60 ÷ (1 + (20 ÷ 100)) = €8

2. The price including tax of frozen products = €15 x (1 + (5.5 ÷ 100)) = €15.825, or approximately €15,83

3. Amount of VAT for the bottle of red wine = €9,60 – €8 = €1.6
VAT amount for frozen products = €15,83 – €15 = €0.83

4. Total VAT amount = (200 x €1.6) + (300 x €0.83) = €320 + €249 = €569

5. If we assume that the supermarket sells as much of each product to reach a turnover of €10000 excluding VAT, we must first calculate the average price excluding VAT of the two products: (€8 (bottle of red wine excluding VAT) + €15 (frozen products excluding VAT)) ÷ 2 = €11.5. Therefore, to achieve a turnover of €10000 excluding VAT, the supermarket must sell 10000 ÷ 11,5 = approximately 870 units. That is approximately 435 units of each product (870 ÷ 2).

Summary of Formulas Used:

Formulas	Explanation
Price excluding VAT = Price including VAT ÷ (1 + (VAT rate ÷ 100))	Allows you to find the price excluding tax from the price including all taxes.
Price including VAT = Price excluding VAT x (1 + (VAT rate ÷ 100))	Allows you to calculate the price including all taxes from the price excluding tax.
VAT amount = Price including VAT – Price excluding VAT	Allows you to calculate the amount of VAT.

Application: Jenny's Shop

States :

Jenny's Shop is a small business located in Paris that specializes in selling handcrafted products. You are in charge of some of the company's accounting tasks, including calculating VAT. Jenny recently purchased a large quantity of wool to make scarves that she plans to resell in her shop. She paid €5000 excluding VAT for 1000 skeins of wool. She has decided to set the resale price excluding VAT at €10 per skein.

Work to do :

1. Calculate the margin rate on each skein sold.
2. Calculate the markup rate on each skein sold.
3. Calculate the sales price including tax of each skein by applying a VAT rate of 20%.
4. Calculate the overall margin if she sells all the skeins of wool.
5. Calculate the total VAT collected if she sells all the skeins of wool.

Proposed correction:

1. Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100) = ((10 – 5) ÷ 5) x 100 = 100%.
2. Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100) = ((10 – 5) ÷ 10) x 100 = 50%.
3. Sales price including VAT = Sales price excluding VAT x (1 + (VAT rate/100)) = 10 x (1 + (20/100)) = €12.
4. Overall margin = Unit margin x quantity sold = (10-5) x 1000 = €5.
5. Total VAT collected = PV including VAT – PV excluding VAT = (12-10) x 1000 = €2.

Summary of Formulas Used:

Packages	Description
Selling price including tax = Selling price excluding tax + (Selling price excluding tax x VAT rate)	Formula for calculating the sales price including all taxes
Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate)	Formula for calculating the sales price excluding tax from the price including tax
VAT amount = Sales price including VAT – Sales price excluding VAT	Formula for calculating the amount of VAT
VAT rate = (Sales price including tax – Sales price excluding tax) ÷ Sales price excluding tax	Formula for calculating the VAT rate

Application: Fresh Fruits Company

States :

The company "Les Fruits Frais" specializes in the sale of fruit and wishes to adjust its prices including and excluding tax to comply with VAT legislation. Currently, the selling price including tax of an apple is €1,20 and the VAT rate is set at 5,5%.

Work to do :

1. How much VAT is on an apple?
2. What is the selling price excluding tax of the apple?
3. If the company wants to set a sales price including tax of €2,00 for a kiwi, what would the price excluding tax be?
4. If the selling price of a pear excluding VAT is €1,50, how much would it cost including VAT?
5. What is the amount of VAT on a pear sold for €1,50 excluding VAT?

Proposed correction:

1. The amount of VAT on an apple is calculated using the formula: VAT amount = Sales price including VAT – Sales price excluding VAT. To obtain the sales price excluding VAT, we use the formula: Sales price excluding VAT = Sales price including VAT ÷ (1 + VAT rate) = €1,20 ÷ (1 + 5,5/100) ? €1,14. then VAT amount = €1,20 – €1,14 ? €0,06.

2. The selling price of the apple excluding VAT is approximately €1,14 (as calculated previously).

3. For a sales price including tax of €2,00 for a kiwi, the price excluding tax would be: €2,00 ÷ (1 + 5,5/100) ? €1,90.

4. If the selling price of the pear is €1,50, the price including tax would be: €1,50 x (1 + 5,5/100) ? €1,58.

5. The amount of VAT on a pear sold at €1,50 excluding VAT would be: €1,58 (including VAT) – €1,50 (excluding VAT) ? €0,08.

Summary of Formulas Used:

Packages	Description
Selling price including tax = Selling price excluding tax + (Selling price excluding tax x VAT rate)	Calculate the selling price including VAT
Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate)	Calculate the selling price excluding VAT from the price including VAT
VAT amount = Sales price including VAT – Sales price excluding VAT	Determine the amount of VAT

Application: GoodAffair Supermarket

States :

The company Supermarché BonneAffaire, specialized in the sale of food products, carries out commercial calculations to analyze its financial health.

The BonneAffaire Supermarket sold 3000 bottles of orange juice at a purchase price excluding VAT of €1,20 per unit and a sale price excluding VAT of €1,80 per unit. The applicable VAT is 5,5%.

Work to do :

1. What is the total amount excluding tax of the purchase of bottles of orange juice by the BonneAffaire Supermarket?
2. What is the unit margin made on each bottle of orange juice?
3. What is the margin rate made on each bottle of orange juice?
4. How much VAT is collected on each bottle of orange juice sold?
5. What is the price including tax of each bottle of orange juice for sale?

Proposed correction:

1. The total amount excluding tax of the purchase is calculated by: Quantity x PA excluding tax = 3000 x €1,20 = €3.

2. The unit margin is calculated by: PV HT – PA HT = €1,80 – €1,20 = €0,60.

3. The margin rate is calculated by: ((PV HT – PA HT) ÷ PA HT) x 100 = ((1,80 € – 1,20 €) ÷ 1,20 €) x 100 = 50%.

4. The amount of VAT collected is calculated by: PV HT x VAT rate = €1,80 x 5,5% = €0,099 ? €0,10.

5. The price including tax of each bottle of orange juice is calculated by: PV excluding tax + VAT amount = €1,80 + €0,10 = €1,90.

Summary of Formulas Used:

Formulas	Description
Quantity x PA HT	Calculation of the total amount excluding tax of the purchase
PV HT – PA HT	Calculation of unit margin
((PV HT – PA HT) ÷ PA HT) x 100)	Calculation of the margin rate
PV excluding VAT x VAT rate	Calculation of the VAT amount
PV excluding tax + VAT amount	Calculation of the price including tax

Application: Home Electronics Company

States :

The company "Electronique Maison" sells electronic products for home improvement. Following positive market activity, the company anticipates a planned increase in sales of some of its products, and in particular its flagship product: the CA345 automatic coffee machine. The product is currently purchased tax-free at €125 per unit from the supplier and sold tax-free at €230. The applicable VAT is 20%.

Work to do :

1. Calculate the amount of the VAT rate applicable to the purchase and sale of product CA345.
2. What is the purchase price including VAT and the sale price including VAT of the CA345 automatic coffee machine?
3. What is the amount of the unit margin excluding tax on product CA345?
4. Calculate the margin rate and the markup rate on product CA345.
5. If the company sells 25 units of CA345 in the month, what is the overall margin?

Proposed correction:

1. The VAT rate is 20%, so the VAT amount for the PA is €125 x 20% = €25 and for the PV is €230 x 20% = €46.

2. The purchase price including tax is therefore €125 (PA excluding tax) + €25 (VAT) = €150. The sale price including tax is therefore €230 (PV excluding tax) + €46 (VAT) = €276.

3. The unit margin excluding tax is calculated by subtracting the purchase price excluding tax from the sale price excluding tax. Therefore, the margin is €230 – €125 = €105.

4. The margin rate is calculated by the formula ((PV HT – PA HT) ÷ PA HT) x 100, so the margin rate is ((230€ – 125€) ÷ 125€) x 100 = 84%. The markup rate is calculated by the formula: ((PV HT – PA HT) ÷ PV HT) x 100, so the markup rate is ((230€ -125€) ÷ 230€) x 100 = 45,65%.

5. The overall margin is calculated by multiplying the unit margin by the quantity sold. Therefore, the overall margin is €105 x 25 = €2625.

Summary of Formulas Used:

VAT rate	VATp = PA HT x VAT rate VAT = PV HT x VAT rate
Unit margin excluding tax	MU HT = PV HT – PA HT
Margin rate	Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Brand taxes	Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Overall margin	Overall margin = Unit margin x quantity sold

Application: Roseraie Pharmacy

States :

Pharmacie de la Roseraie is a healthcare facility located in the city center. It sells various products ranging from prescription drugs to beauty products. It must calculate VAT on various items that it sells every day.

The following information was collected on two products sold by Pharmacie de la Roseraie:

1. The purchase price (excluding VAT) of a tube of moisturizing cream is €10. The retailer applies a margin of 40% on this product. The applicable VAT rate is 20%.

2. The purchase price (excluding VAT) of a pack of surgical masks is €5,5. The margin applied is 20%. The applicable VAT rate is 5,5%.

Work to do :

1. What is the sales price excluding tax (SRP) of the tube of moisturizer and the pack of surgical masks?
2. What is the amount of VAT for each product?
3. What is the sales price including all taxes (PV TTC) for each product?
4. How much does Pharmacie de la Roseraie earn on each product sold (overall margin)?
5. What are the margin and markup rates for each product?

Proposed correction:

1. The sales price excluding tax (SRP HT) is calculated by adding the margin to the purchase price. For the moisturizer: SRP HT = PA HT + (PA HT x margin) = €10 + (€10 x 0,4) = €14. For the mask pack, it is the same calculation: SRP HT = €5,5 + (€5,5 x 0,2) = €6,6.

2. To calculate the VAT of a product, we must multiply the PV HT by the VAT rate. For the moisturizer, VAT = PV HT x VAT rate = €14 x 0,20 = €2,8. For the mask pack, the VAT is €6,6 x 0,055 = €0,363.

3. To find the VAT-inclusive price, simply add the VAT to the VAT-exclusive price. So, for the moisturizer: VAT-inclusive price = VAT-exclusive price + VAT = €14 + €2,8 = €16,8. For the mask pack: VAT-inclusive price = €6,6 + €0,363 = €6,963.

4. The overall margin is the profit made on each product sold, which is equivalent to the difference between the PV excluding VAT and the PA excluding VAT. For the moisturizer: Overall margin = PV excluding VAT – PA excluding VAT = €14 – €10 = €4. For the mask pack: Overall margin = €6,6 – €5,5 = €1,1.

5. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100. For the moisturizer: Margin rate = ((€14 – €10) ÷ €10) x 100 = 40%. For the mask pack: Margin rate = ((€6,6 – €5,5) ÷ €5,5) x 100 = 20%. The brand rate is ((PV HT – PA HT) ÷ PV HT) x 100. For the moisturizer: Brand rate = ((€14 – €10) ÷ €14) x 100 = 28,57%. For the mask pack: Brand rate = ((€6,6 – €5,5) ÷ €6,6) x 100 = 16,67%.

Summary of Formulas Used:

Formula	Description
PV HT = PA HT + (PA HT x margin)	Calculation of the Sales Price excluding taxes
VAT = PV excluding VAT x VAT rate	Calculation of Value Added Tax
PV including VAT = PV excluding VAT + VAT	Calculation of the Sale Price All Taxes Included
Overall margin = PV HT – PA HT	Calculation of margin (profit)
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100	Calculation of the margin rate (profitability compared to the purchase cost)
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100	Calculation of the markup rate (profitability compared to the selling price)

Application: Local Gastronomy Company

States :

The Société Gastronomie du Terroir, a local produce shop, sold 500 jars of honey. Each jar was purchased from a local beekeeper at a price of €6 per unit excluding tax. Their sales price excluding tax is €12 per unit.

The company is subject to a VAT rate of 5,5%.

Work to do :

1. Calculate the total purchase cost excluding taxes.
2. Calculate the total selling price excluding taxes.
3. Calculate the VAT amount.
4. Calculate the sales price including tax.
5. Calculate the overall margin.

Proposed correction:

1. The total purchase cost excluding taxes is the unit purchase price excluding taxes multiplied by the quantity. That is €6 x 500 = €3.

2. The total sales price excluding tax is the unit sales price excluding tax multiplied by the quantity. That is €12 x 500 = €6.

3. The amount of VAT is the total sales price excluding tax multiplied by the VAT rate. That is €6 x 000/5,5 = €100.

4. The sales price including tax is the total sales price excluding tax plus the amount of VAT. That is €6 + €000 = €330.

5. The overall margin is the difference between the total selling price excluding taxes and the total purchase cost excluding taxes. That is, €6 – €000 = €3.

Summary of Formulas Used:

Formulas	Explanation
CHT = PA HT x Q	CHT = Total purchase cost excluding tax, PA HT = Purchase price excluding tax, Q = Quantity
PVT HT = PV HT x Q	PVT HT = Total selling price excluding tax, PV HT = Selling price excluding tax, Q = Quantity
VAT = PVT HT x VAT rate	VAT = VAT amount, PVT HT = Total sales price excluding tax, VAT rate = VAT rate
PVT including tax = PVT excluding tax + VAT	PVT TTC = Total sales price including all taxes, PVT HT = Total sales price excluding tax, VAT = VAT amount
Overall margin = PVT excluding tax – CHT	Total margin = difference between the total selling price excluding taxes and the total purchase cost excluding taxes

Application: The Chic Boutique

States :

Boutique Chic is a company specializing in the sale of high-end clothing. You are the financial manager of Boutique Chic and you must regularly analyze the company's VAT. Here is some information you need to take into account:

– Standard VAT is 20%.

– You have the following information on the products:

Chic pants at €120,00 incl. VAT.

Chic Dress is €150,00 including tax.

Chic coat at €300,00 incl. VAT.

Work to do :

1. Calculate the VAT for the Chic Pants.

2. Calculate the price excluding VAT for the Chic Dress.

3. Calculate the price including tax for the Chic Coat if the price excluding tax was €250,00.

4. Calculate the total VAT for all three products.

5. Compare the prices excluding VAT and including VAT for all three products.

Proposed correction:

1. VAT for the Chic Pants can be calculated as follows: VAT = (Price including VAT – Price excluding VAT) = €120,00 – (€120,00 ÷ 1,20) = €20,00.

2. The price excluding VAT for the Chic Dress is: Price excluding VAT = Price including VAT ÷ (1 + VAT rate) = €150,00 ÷ 1,20 = €125,00.

3. The price including tax for the Chic Coat from the price excluding tax is: Price including tax = Price excluding tax x (1 + VAT rate) = €250,00 x 1,20 = €300,00.

4. The total VAT for all three products is: VAT Chic Pants (€20,00) + VAT Chic Dress (€25,00) + VAT Chic Coat (€50,00) = €95,00.

5. The prices excluding and including VAT for all three products are:

– Chic Pants: Price excluding VAT = €100,00, Price including VAT = €120,00
– Chic Dress: Price excluding VAT = €125,00, Price including VAT = €150,00
– Chic Coat: Price excluding VAT = €250,00, Price including VAT = €300,00

Summary of Formulas Used:

Packages	Descriptions
VAT = (Price including VAT – Price excluding VAT)	Formula for calculating VAT from the price including VAT and the price excluding VAT.
Price excluding VAT = Price including VAT ÷ (1 + VAT rate)	Formula for deducting the price excluding VAT from the price including VAT and the VAT rate
Price including tax = Price excluding tax x (1 + VAT rate)	Formula for calculating the price including tax from the price excluding tax and the VAT rate.

Application: Glamour and Co Company

States :

The company Glamour et Co, which specializes in the sale of luxury perfumes, received an invoice from its supplier showing the following information: an order for 400 perfumes with a unit purchase price (UPP) of €25, a VAT rate of 20% and transport costs amounting to €250 excluding VAT.

The company plans to resell the perfumes at a unit sales price (PV excluding VAT) of €45.

Work to do :

1. Calculate the amount of VAT on the purchase
2. Calculate the total purchase cost including VAT (including transport costs)
3. Calculate the amount of VAT on the expected sale
4. Calculate the overall margin amount
5. Calculate margin and markup rates

Proposed correction:

1. The amount of VAT on the purchase can be calculated using the formula: (PA HT x Quantity) x VAT rate. Therefore, (€25 x €400) x 20% = €2000.

2. The total purchase cost including VAT is obtained by adding the purchase cost excluding VAT, the VAT on the purchase and the transport costs. That is: (€25 x 400) + €2000 (VAT on the purchase) + €250 = €12.

3. Similarly, the amount of VAT on the expected sale is calculated by: (PV HT x Quantity sold) x VAT rate. Therefore, (€45 x €400) x 20% = €3600.

4. To evaluate the overall margin, the formula is used: Unit margin x quantity sold. The unit margin is calculated as the difference between the PV excluding VAT and the PA excluding VAT, i.e. €45 – €25 = €20. Therefore, the overall margin is €20 x 400 = €8000.

5. The margin rate is calculated by ((PV HT – PA HT) ÷ PA HT) x 100), or ((€45 – €25) ÷ €25) x 100) = 80%. The markup rate is obtained by ((PV HT – PA HT) ÷ PV HT) x 100). Therefore, ((€45 – €25) ÷€45) x 100 = 44,44%.

Summary of Formulas Used:

Formulas	Explanation
(PA HT x Quantity) x VAT rate	This formula gives the amount of VAT on the purchase
(PV HT x Quantity sold) x VAT rate	This formula gives the amount of VAT on the sale
Unit margin x quantity sold	This formula provides the calculation of the overall margin
((PV HT – PA HT) ÷ PA HT) x 100)	Formula for calculating margin rate
((PV HT – PA HT) ÷ PV HT) x 100)	Formula to calculate the markup rate

Application: Restaurant “Chez Marcel”

States :

Marcel is the owner of a restaurant called "Chez Marcel". As part of managing his accounting, he is required to perform VAT calculations.

1. Marcel sold €450 worth of dishes with a VAT rate of 10%. He wants to calculate the VAT amount to check if everything is correct in his accounting.

2. In the case of a wine that he sells for €100 (VAT at 20%), he wants to know the price excluding tax.

3. A supplier offers Marcel to buy a bottle of Champagne for €40 excluding VAT (VAT at 20%). He wants to know how much it will cost him including VAT.

4. Marcel sold a menu for €30 including tax with a VAT rate of 10%. He wants to determine the price excluding tax of this menu.

5. His accounting indicates that Marcel collected €770 in VAT during the month. Knowing that the majority of his sales are food with a VAT of 5,5%, he wants to estimate the total amount of his sales.

Work to do :

– Calculate the amount of VAT on the dishes sold.
– Determine the price excluding tax of the wine.
– Indicate the price including tax of the bottle of champagne.
– Determine the price excluding tax of the menu.
– Estimate the total amount of sales.

Proposed correction:

1. VAT amount = (Price including VAT x VAT rate) / (1 + VAT rate)
VAT amount = (€450 x 0,10) / (1 + 0,10) = €41,67

2. Price excluding VAT = Price including VAT / (1 + VAT rate)
Price excluding VAT = €100 / (1 + 0,20) = €83,33

3. Price including tax = Price excluding tax x (1 + VAT rate)
Price including tax = €40 x (1 + 0,20) = €48

4. Price excluding VAT = Price including VAT / (1 + VAT rate)
Price excluding VAT = €30 / (1 + 0,10) = €27,27

5. Total sales amount = VAT amount / VAT rate
Total sales amount = €777 / 0,055 = €14

Summary of Formulas Used:

Formulas	Explanation
VAT amount = (Price including VAT x VAT rate) / (1 + VAT rate)	This formula allows you to calculate the amount of VAT from the price including tax and the VAT rate.
Price excluding VAT = Price including VAT / (1 + VAT rate)	This formula is used to determine the price excluding tax from the price including all taxes and the VAT rate.
Price including tax = Price excluding tax x (1 + VAT rate)	This formula is used to determine the price including all taxes from the price excluding tax and the VAT rate.
Total sales amount = VAT amount / VAT rate	This formula is used to estimate the total amount of sales when we know the total amount of VAT collected and the VAT rate in force for the majority of sales.