Welcome to this article on exercises on business calculations and more specifically on 11 exercises on how to calculate the gross margin. You will find here no less than 11 detailed corrected management exercises on commercial calculations for Operational Management.
At the end of this article, you will know how to achieve a unit margin, an overall margin, a PV excluding tax, a PV including tax, a margin rate, a brand rate, a turnover excluding tax and including tax without any worries.
In this section:
- Application: Duval Company
- Application: ZebraTech Company
- Application: LeDomaine Company
- Application: Bakery “Au Pain Quotidien”
- Application: Chocolat'Délice Shop
- Application: Mécano Pro Company
- Application: La Belle Epoque Company
- Application: Luna Supermarket
- Application: Company selling “Design & Modernity” furniture.
- Application: The company “Les Gourmandises de Clara”
- Application: Emerald Products Company
Application: Duval Company
States :
Duval Company is a small company that produces and sells premium jams. Following the introduction of a new product, Damascus Plum Jam, the company provided the following financial information:
Purchase price excluding tax (PA HT): €2,60
Quantity purchased: 3000 units
Sale price excluding tax (PV HT): €5,50
Quantity sold: 2800 units
VAT: 20%
Work to do :
1. Calculate the unit margin
2. Calculate the overall margin
3. Determine the margin rate.
4. Calculate the mark rate.
5. Estimate the amount of VAT.
Proposed correction:
1. The unit margin is obtained by the formula: Unit margin = PV HT – PA HT. Here, Unit margin = €5,50 – €2,60 = €2,90
2. The overall margin is obtained by the formula: Overall margin = Unit margin x quantity sold. Therefore, Overall margin = €2,90 x €2800 = €8120.
3. The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100). Which gives: Margin rate = ((€5,50 – €2,60) ÷ €2,60) x 100 = 111,54%.
4. The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100). Which gives: Markup rate = ((€5,50 – €2,60) ÷ €5,50) x 100 = 52,73%.
5. The VAT amount is obtained by the formula: VAT amount = (PV HT x VAT rate) x Quantity sold. Therefore, VAT amount = (€5,50 x 20%) x 2800 = €3080.
Summary of Formulas Used:
| Packages | Explanations |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | This formula is used to calculate the margin made on the sale of each unit of product. |
| Overall margin = Unit margin x quantity sold | This formula is used to calculate the total margin made on all sales. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | This formula is used to calculate the margin rate, i.e. the proportion of margin in the purchase price. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | This formula is used to calculate the markup rate, i.e. the proportion of margin in the selling price. |
| VAT amount = (PV HT x VAT rate) x Quantity sold | This formula is used to calculate the total amount of VAT on all sales. |
Application: ZebraTech Company
States :
ZebraTech, a company specializing in the sale of computer equipment, wishes to evaluate its financial performance. The director of ZebraTech provides you with the following information concerning product A, one of its best-selling products:
– Purchase price excluding tax (PA excluding tax): €400,00
– Sales price excluding tax (PV HT): €600,00
– Quantity sold: 150
Work to do :
1. How to calculate the unit margin of item A in euros?
2. What is the unit margin amount of this product?
3. How to calculate the overall margin of product A?
4. What is the overall margin of product A?
5. What is the margin rate for product A?
Proposed correction:
1. The unit margin is calculated by subtracting the purchase price excluding tax (PA HT) from the sale price excluding tax (PV HT): Unit margin = PV HT – PA HT.
2. Unit margin = €600,00 – €400,00 = €200,00
3. The overall margin is calculated by multiplying the unit margin by the quantity sold: Overall margin = Unit margin x Quantity sold
4. Total margin = €200,00 x 150 = €30000,00
5. The margin rate is calculated by dividing the unit margin by the purchase price excluding tax, multiplied by 100 to obtain a percentage: Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
5. Margin rate = ((€600,00 – €400,00) ÷ €400,00) x 100 = 50%
Summary of Formulas Used:
– Unit margin = PV HT – PA HT
– Overall margin = Unit margin x Quantity sold
– Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100
| Formulas | Explanation |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | The unit margin corresponds to the difference between the sales price excluding tax and the purchase price excluding tax. It allows you to assess the profit made on a unit of product sold. |
| Overall margin = Unit margin x Quantity sold | The overall margin is the product of the unit margin and the quantity sold. It indicates the total profit made on all units sold. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate is the ratio between the unit margin and the purchase price excluding tax. Expressed as a percentage, it allows you to assess the profitability of the item in relation to the price at which it was purchased. |
Application: LeDomaine Company
States :
LeDomaine is a wine company specializing in the production and sale of premium wines. They recently acquired 1 bottles of an exceptional wine for a total of €000 (purchase price excluding tax considering a VAT rate of 20%). The wine is then sold at retail for €000 excluding tax per bottle.
Work to do :
1. What is the unit purchase price excluding tax of the bottle of wine?
2. What is the gross unit margin on the cost of each bottle of wine (sale price excluding VAT minus purchase price excluding VAT)?
3. What is the overall gross margin made by LeDomaine on the sale of 1 bottles of wine?
4. What is the margin rate achieved by LeDomaine on these 1 bottles of wine?
5. What is the markup rate achieved by LeDomaine on these 1 bottles of wine?
Proposed correction:
1. The unit purchase price excluding VAT of the bottle of wine is €20 / 000 bottles = €1/bottle.
2. The gross unit margin on the cost of each bottle of wine is €35 – €20 = €15.
3. The overall gross margin made by LeDomaine on the sale of 1 bottles of wine is €000 x 15 = €1.
4. The margin rate achieved by LeDomaine on these 1 bottles of wine is ((€000 – €35) ÷ €20) x 20 = 100%.
5. The markup rate achieved by LeDomaine on these 1 bottles of wine is ((€000 – €35) ÷ €20) x 35 = 100%.
Summary of Formulas Used:
Unit purchase price excluding VAT = Total purchase excluding VAT / Quantity purchased
Gross unit margin = Unit selling price excluding VAT – Unit purchase price excluding VAT
Overall margin = Unit margin x quantity sold
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
| Formulas | Description |
|---|---|
| Unit purchase price excluding VAT = Total purchase excluding VAT / Quantity purchased | This formula is used to calculate the purchase price excluding tax per unit. |
| Gross unit margin = Unit selling price excluding VAT – Unit purchase price excluding VAT | This formula is used to calculate the gross margin on the cost of each unit sold. |
| Overall margin = Unit margin x quantity sold | This formula is used to calculate the overall gross margin of the operation. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | This formula is used to calculate the margin rate on the transaction. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | This formula is used to calculate the markup rate of the operation. |
Application: Bakery “Au Pain Quotidien”
States :
The bakery "Au Pain Quotidien" makes artisanal breads. The following information is available for country bread:
– Purchase price (PA excluding VAT): €0,70 per unit
– Selling price (excluding VAT): €1,50 per unit
– Quantity sold per day: 200 units
– VAT rate: 20%
Work to do :
1. Calculate the unit margin.
2. Calculate the overall margin.
3. Evaluate the margin rate.
4. Calculate the mark rate.
5. Determine the sales price including tax.
Proposed correction:
1. The unit margin is obtained by the difference between the sales price excluding tax (SPT) and the purchase price excluding tax (PP). Which gives: Unit margin = SPT – PP = €1,50 – €0,70 = €0,80.
2. The overall margin is calculated by multiplying the unit margin by the quantity sold. Which gives: Overall margin = Unit margin x quantity sold = €0,80 x 200 = €160.
3. The margin rate is assessed by dividing the unit margin by the purchase price excluding tax, multiplied by 100. This gives: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = (€0,80 ÷ €0,70) x 100 = 114,29%.
4. The markup rate is determined by dividing the unit margin by the sales price excluding tax, multiplied by 100. This gives: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = (€0,80 ÷ €1,50) x 100 = 53,33%.
5. The sales price including tax is calculated by adding the value added tax (VAT) to the sales price excluding tax. First, we calculate the amount of VAT: VAT = PV excluding tax x VAT rate = €1,50 x 20% = €0,30. The sales price including tax is therefore: PV including tax = PV excluding tax + VAT = €1,50 + €0,30 = €1,80.
Summary of Formulas Used:
– Unit margin = PV HT – PA HT
– Overall margin = Unit margin x quantity sold
– Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100
– Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100
– VAT = PV HT x VAT rate
– PV incl. VAT = PV excl. VAT + VAT
| Packages | Meanings |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Margin on a unit of product |
| Overall margin = Unit margin x quantity sold | Total margin on all products sold |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Margin rate on a unit of product |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Markup rate on a product unit |
| VAT = PV excluding VAT x VAT rate | Amount of value added tax |
| PV including VAT = PV excluding VAT + VAT | Selling price including all taxes |
Application: Chocolat'Délice Shop
States :
The Chocolat'Délice boutique, which specializes in selling artisanal chocolates, sold a certain quantity of chocolates during the month of December. The sales price excluding tax (PV HT) for each piece was €1,50 and the purchase price excluding tax (PA HT) was €0,90. The quantity sold is 2000 pieces.
VAT applied is 20%.
Work to do :
1. What is the unit gross margin?
2. What is the overall gross margin?
3. What is the margin rate?
4. What is the markup rate?
5. What is the total amount of VAT?
Proposed correction:
1. The unit gross margin is obtained by subtracting the purchase price excluding tax (PA HT) from the sale price excluding tax (PV HT).
Unit gross margin = PV excluding tax – PA excluding tax
= €1,50 – €0,90
= 0,60 €
2. The overall gross margin is obtained by multiplying the unit gross margin by the quantity sold.
Overall gross margin = Unit margin x quantity sold
= €0,60 x 2000
£1
3. The margin rate is calculated by dividing the unit gross margin by the purchase price excluding tax (PA HT) and multiplied by 100 to obtain a percentage.
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((€1,50 – €0,90) ÷ €0,90) x 100
= 66,67%
4. The markup rate is calculated by dividing the unit gross margin by the selling price excluding tax (SVP HT) and multiplied by 100 to obtain a percentage.
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
= ((€1,50 – €0,90) ÷ €1,50) x 100
= 40%
5. The total amount of VAT is calculated by multiplying the sales price excluding tax (PV HT) by the VAT rate.
Total VAT = PV excluding VAT x VAT rate
= €1,50 x 20%
= €0,30 per unit
= €0,30 x 2000 (for the total quantity sold)
= €600 (total VAT for all units sold)
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| Unit gross margin = PV excluding tax – PA excluding tax | Calculation of unit gross margin |
| Overall gross margin = Unit margin x quantity sold | Calculation of overall gross margin |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Calculation of the margin rate |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Calculation of the mark rate |
| Total VAT = PV excluding VAT x VAT rate | Calculation of total VAT |
Application: Mécano Pro Company
States :
The Mécano Pro Company, specializing in the sale of spare parts for cars, has produced the following report for a range of brake discs: Purchase price excluding tax (PA HT) of the discs: €30, sale price excluding tax (PV HT): €45, quantity sold: 1000 discs.
Work to do :
1. What is the unit margin made on the sale of records?
2. What is the overall margin for all records sold?
3. What is the margin rate achieved?
4. What added value does this range of discs create?
5. What would be the amount of the overall margin if Société Mécano Pro decided to increase the selling price excluding tax to €50 while maintaining the same sales volume?
Proposed correction:
1. The unit margin is calculated by the difference between the sales price excluding tax and the purchase price excluding tax. Here, we therefore have a unit margin of €45 – €30 = €15 per disc.
2. The overall margin is calculated by multiplying the unit margin by the quantity sold. We therefore have an overall margin of €15 x 1000 = €15 for all records sold.
3. The margin rate is calculated by ((PV HT – PA HT) ÷ PA HT) x 100). Here the margin rate is therefore ((45€ – 30€) ÷ 30€) x 100 = 50%.
4. The added value is equal to the overall margin here, so €15.
5. If the selling price excluding tax increases to €50, the unit margin becomes €50 – €30 = €20. The overall margin would therefore be €20 x 1000 = €20.
Summary of Formulas Used:
Unit margin = PV excluding tax – PA excluding tax
Overall margin = Unit margin x Quantity sold
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
| Packages | Description |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | The unit margin is calculated by taking the difference between the selling price excluding tax and the purchase price excluding tax. |
| Overall margin = Unit margin x Quantity sold | The overall margin is calculated by multiplying the unit margin by the quantity sold |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate allows you to know the share of the unit margin in the purchase price excluding taxes |
Application: La Belle Epoque Company
States :
La Belle Epoque Company, a jewelry sales company, wants to optimize its financial management. This company has provided you with the following information for the past year:
– Sales price excluding tax (PV HT) of its products: €80 per unit.
– Purchase price excluding tax (PA HT) of its products: €60 per unit.
– Quantity of products sold: 10 units.
Work to do :
1. Calculate the unit margin of each product sold.
2. Calculate the company's overall margin for the year.
3. What is the company's margin rate?
4. What is the company's markup rate?
5. What strategy could the company adopt to improve its margin?
Proposed correction:
1. The unit margin is calculated using the formula: Unit margin = PV HT – PA HT
Which gives: Unit margin = €80 – €60 = €20
2. The overall margin corresponds to the unit margin multiplied by the quantity sold:
Overall margin = Unit margin x quantity sold = €20 x 10 = €000
3. The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100
Which gives: Margin rate = ((€80 – €60) ÷ €60) x 100 = 33,33%
4. The markup rate is calculated using the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100
Which gives: Markup rate = ((€80 – €60) ÷ €80) x 100 = 25%
5. To improve its margin, the company could consider several options: increase the selling price of its products, negotiate better purchase prices with its suppliers to reduce its costs, or try to sell in larger quantities.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Calculation of unit margin |
| Overall margin = Unit margin x quantity sold | Calculation of the overall margin |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Calculation of the margin rate |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Calculation of the mark rate |
Application: Luna Supermarket
States :
The Luna supermarket chain, specializing in organic and fair trade products, aims to be close to its customers by offering affordable prices, while respecting producers and the environment. Its best-seller is a local honey sold at €15 per unit (VAT included).
The costs associated with the purchase of this product are as follows: the unit purchase price excluding tax is €7 and the Luna supermarket sells 800 units per month. The VAT rate is 20%.
Work to do :
1. Calculate the tax-free selling price of the honey.
2. Calculate the total purchase cost of the honey.
3. Calculate the overall gross margin on honey.
4. Calculate the margin rate on honey.
5. Calculate the markup rate on the honey.
Proposed correction:
1. The sales price excluding tax (PVHT) is calculated by dividing the sales price including all taxes (PV TTC) by 1 + the VAT rate. Here, this gives: 15 ÷ (1 + 20/100) = €12,5. The sales price excluding tax of honey is therefore €12,5.
2. The total purchase cost is calculated by multiplying the purchase price excluding tax (PAHT) by the quantity sold. In this case, this is equivalent to: 7 x 800 = €5600. The total purchase cost of the honey is therefore €5600.
3. The overall gross margin is the difference between the total revenue excluding taxes and the total purchase cost. Here, this gives: (12,5 x 800) – 5600 = €4400. Luna supermarket therefore makes an overall gross margin of €4400 on honey.
4. The margin rate is calculated using the formula: ((PV HT – PA HT) ÷ PA HT) x 100. In this case, this gives: ((12,5 – 7) ÷ 7) x 100 = 78,57%. The margin rate on honey is therefore 78,57%.
5. The markup rate, for its part, is calculated with the formula: ((PV HT – PA HT) ÷ PV HT) x 100. Here, this gives: ((12,5 – 7) ÷ 12,5) x 100 = 44%. The markup rate on honey is therefore 44%.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| PV incl. VAT ÷ (1 + VAT rate/100) | Calculation of the sales price excluding taxes |
| PA HT x Quantity sold | Calculating the total purchase cost |
| (PV HT x Quantity sold) – Total purchase cost | Calculation of overall gross margin |
| ((PV HT – PA HT) ÷ PA HT) x 100 | Calculation of the margin rate |
| ((PV HT – PA HT) ÷ PV HT) x 100 | Calculation of the mark rate |
Application: Company selling “Design & Modernity” furniture.
States :
The company "Design & Modernité", specializing in the sale of contemporary furniture, buys designer chairs from a supplier for a unit price excluding tax (PA HT) of €30. The transport costs amount to €100 per order, regardless of the quantity of chairs ordered. The company "Design & Modernité" resells each chair for €60 excluding tax (PV HT). It sold 150 chairs over a period.
Work to do :
1. Calculate the total cost of an order excluding taxes (CT HT)
2. Calculate the unit margin excluding tax (MU HT)
3. Calculate the overall margin excluding taxes
4. Calculate the margin rate
5. Calculate the markup rate
Proposed correction:
1. The total cost of an order excluding taxes (CT HT) is calculated by multiplying the unit purchase price excluding taxes (€30) by the quantity (150 chairs), and adding the transport costs (€100):
CT HT = (PA HT x Quantity) + Transport cost = (€30 x 150) + €100 = €4.
2. The unit margin excluding tax (MU HT) is the difference between the selling price excluding tax (PV HT) and the unit cost excluding tax (CU HT), which is the total cost of the order divided by the quantity of chairs:
MU HT = PV HT – (CT HT ÷ Quantity) = €60 – (€4 ÷ 600) = €150 – €60 = €30,67.
3. The overall margin excluding tax is calculated by multiplying the unit margin excluding tax by the quantity sold:
Overall margin = MU HT x Quantity = €29,33 x 150 = €4.
4. The margin rate is the ratio between the unit margin excluding VAT and the purchase cost excluding VAT, multiplied by 100 to obtain a percentage. Using the unit cost instead of the unit purchase cost:
Margin rate = ((PV excluding tax – CU excluding tax) ÷ CU excluding tax) x 100 = ((€60 – €30,67) ÷ €30,67) x 100 = 95,74%.
5. The markup rate is the ratio between the unit margin excluding tax and the selling price excluding tax, multiplied by 100 to obtain a percentage:
Markup rate = ((PV HT – CU HT) ÷ PV HT) x 100 = ((€60 – €30,67) ÷ €60) x 100 = 48,88%.
Summary of Formulas Used:
| Formulas | Explanation |
|---|---|
| CT HT = (PA HT x Quantity) + Transport cost | Allows you to calculate the total cost excluding tax of an order |
| MU HT = PV HT – (CT HT ÷ Quantity) | Allows you to calculate the unit margin excluding tax |
| Overall margin = MU HT x Quantity | Allows you to calculate the overall HT margin |
| Margin rate = ((PV excluding tax – CU excluding tax) ÷ CU excluding tax) x 100 | Allows you to calculate the margin rate |
| Mark rate = ((PV HT – CU HT) ÷ PV HT) x 100 | Allows you to calculate the mark rate |
Application: The company “Les Gourmandises de Clara”
States :
The company "Les Gourmandises de Clara" is a bakery-pastry shop that produces and sells a wide variety of breads, pastries, and cakes. You are the financial manager of this company and you are in charge of calculating the gross margin on certain products.
The company offers a range of macarons. The unit price excluding tax (HT) of the macarons is €0,90 and the unit purchase cost excluding tax is €0,40. Over the last month, the company sold 5000 macarons.
Work to do :
1. Calculate the unit margin on a macaron.
2. Calculate the overall margin on the sale of macarons for the last month.
3. Calculate the margin rate.
4. Calculate the mark rate.
5. What can you conclude about the profitability of macarons?
Proposed correction:
1. The unit margin is calculated by subtracting the unit purchase cost excluding VAT from the unit sale price excluding VAT. For macarons, this is therefore €0,90 – €0,40 = €0,50.
2. The overall margin is obtained by multiplying the unit margin by the quantity sold. For the macaroons sold last month, this gives: €0,50 x 5000 = €2.
3. The margin rate is calculated by dividing the unit margin by the unit purchase cost excluding tax, then multiplying by 100 to obtain a percentage. For macaroons, this is ((€0,50 ÷ €0,40) x100) = 125%.
4. The markup rate is calculated by dividing the unit margin by the unit selling price excluding tax, and multiplying by 100. For macaroons, this is therefore ((€0,50 ÷ €0,90) x 100) = 55,56%.
5. Macarons are very profitable for the company. The margin rate of 125% and the markup rate of 55,56% indicate good profitability. In addition, the overall margin of €2 shows that the sale of macaroons contributes significantly to the company's turnover.
Summary of Formulas Used:
Unit margin = Unit PV HT – Unit PA HT
Overall margin = Unit margin x quantity sold
Margin rate = ((Unit HT PV – Unit HT PA) ÷ Unit HT PA) x 100
Mark rate = ((Unit HT PV – Unit HT PA) ÷ Unit HT PV) x 100
| Formulas | Explanation |
|---|---|
| Unit margin = Unit PV HT – Unit PA HT | The unit margin is the difference between the unit selling price excluding tax and the unit purchasing price excluding tax. It represents the profit made on the sale of a single unit of product. |
| Overall margin = Unit margin x quantity sold | The overall margin is the product of the unit margin and the quantity sold. It represents the total profit made on the sale of all products. |
| Margin rate = ((Unit HT PV – Unit HT PA) ÷ Unit HT PA) x 100 | The margin rate is the ratio between the unit margin and the unit purchase price excluding tax, expressed as a percentage. It is used to measure the proportion of the unit margin in the purchase cost excluding tax. |
| Mark rate = ((Unit HT PV – Unit HT PA) ÷ Unit HT PV) x 100 | The markup rate is the ratio between the unit margin and the unit selling price excluding tax, expressed as a percentage. It is used to measure the proportion of the unit margin in the selling price excluding tax. |
Application: Emerald Products Company
States :
The company Des produits Emeraude imports and sells precious stones. The company recently sold 500 emeralds. The following information is available:
– Unit purchase price excluding tax for emeralds: €75
– Unit sale price excluding tax for emeralds: €150
– Applicable VAT rate: 20%
Work to do :
1. What is the total amount excluding taxes for the purchase of the emeralds?
2. What is the total amount excluding tax of the sale of the emeralds?
3. What is the gross margin per unit made on the sale of each emerald (excluding VAT)?
4. What is the company's margin rate (excluding VAT)?
5. What is the company's markup rate (excluding VAT)?
Proposed correction:
1. The total amount excluding tax for the purchase of the emeralds is 500 x 75 € = 37 €.
2. The total amount excluding tax for the sale of the emeralds is 500 x 150 € = 75 €.
3. The gross unit margin made on the sale of each emerald (excluding VAT) is €150 – €75 = €75.
4. The company's margin rate (excluding VAT) is ((PV excluding VAT – PA excluding VAT) ÷ PA excluding VAT) x 100 or ((€150 – €75) ÷ €75) x 100 = 100%.
5. The company's mark-up rate (excluding VAT) is ((PV excluding VAT – PA excluding VAT) ÷ PV excluding VAT) x 100 or ((€150 – €75) ÷ €150) x 100 = 50%.
Summary of Formulas Used:
Gross margin per unit = Unit selling price excluding VAT – Unit purchase price excluding VAT
Margin rate (excl. VAT) = ((Unit selling price excl. VAT – Unit purchase price excl. VAT) ÷ Unit purchase price excl. VAT) x 100
Markup rate (excl. VAT) = ((Unit selling price excl. VAT – Unit purchase price excl. VAT) ÷ Unit selling price excl. VAT) x 100
| Formulas | Description |
|---|---|
| Gross margin per unit = Unit selling price excluding VAT – Unit purchase price excluding VAT | Calculation of gross margin on unit sale |
| Margin rate (excl. VAT) = ((Unit selling price excl. VAT – Unit purchase price excl. VAT) ÷ Unit purchase price excl. VAT) x 100 | Calculation of the margin rate excluding tax |
| Markup rate (excl. VAT) = ((Unit selling price excl. VAT – Unit purchase price excl. VAT) ÷ Unit selling price excl. VAT) x 100 | Calculation of the mark rate excluding tax |