How to calculate interim gross margin | 9 Exercises

Application: Pro-Intérim Agency

States :

The company Pro-Intérim, a leader in the temporary work sector, would like to analyze its financial performance over the past year. Your skills are required to evaluate the gross margin generated by the temporary work services it has offered. Here is the financial data available for the year 2022:

• Turnover excluding tax: €450
• Cost of services provided: €315

Work to do :

1. Calculate Pro-Intérim's gross margin for the year 2022.
2. Determine the gross margin rate.
3. If the company wants to increase its gross margin by 15%, what would be the new gross margin amount?
4. What strategy could Pro-Intérim consider to improve its gross margin beyond this increase?
5. Analyze the implications of increasing gross margin on the company's competitiveness.

Proposed correction:

1. To calculate the gross margin, use the formula: Gross margin = Turnover excluding tax – Cost of services provided.
   €450 – €000 = €315.
   Pro-Intérim's gross margin for the year 2022 is €135.

2. To determine the gross margin rate, use the formula: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (135 ÷ 000) x 450 = 000%.
   The gross margin rate is 30%.

3. If the company wants to increase its gross margin by 15%, calculate: New gross margin target = Gross margin x (1 + percentage increase).

€135 x 000 = €1,15.
The new target gross margin amount would be €155.

4. To improve its gross margin, Pro-Intérim could consider reducing its service costs, offering services with higher added value, or negotiating better conditions with its partners.
   An effective strategy might involve optimizing internal processes.

5. An increase in gross margin means that the company is generating more profit per euro of turnover.
   This could strengthen its competitiveness by allowing it to reinvest in the quality of services or improve its market position.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of services provided
Gross margin rate	(Gross margin ÷ Net turnover) x 100

Application: Interim Express

States :

Intérim Express, a company specializing in the placement of personnel in the catering sector, asks you to analyze its profitability concerning its latest temporary assignments. Here is the data recorded for the last quarter:

• Turnover excluding tax: €120
• Total cost of missions: €84

Work to do :

1. Determine the company's gross margin for the quarter.
2. Calculate the gross margin rate for this quarter.
3. If the cost of the missions had been 5% higher, what would the gross margin have been?
4. Suggest a concrete action that Intérim Express could take to optimize its costs.
5. Explain the potential impact on the business if revenue increased by 10% without increasing costs.

Proposed correction:

1. To determine the gross margin, use the formula: Gross margin = Net sales – Total cost of missions.
   €120 – €000 = €84.
   The gross margin for the quarter is €36.

2. Use the formula: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (36 ÷ 000) x 120 = 000%.
   The gross margin rate for the quarter is 30%.

3. If the cost of the missions had been 5% higher, i.e. €84 x 000 = €1,05, the gross margin would be:

€120 – €000 = €88.
The gross margin would have been €31.

4. Intérim Express could optimize its costs by negotiating more with suppliers or by increasing the logistical efficiency of missions.
   This would help preserve or increase gross margin.

5. If revenue increased by 10%, without increasing costs, profit would improve, strengthening profitability.
   Such a situation would allow the company to reinvest in its growth.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Total cost of missions
Gross margin rate	(Gross margin ÷ Net turnover) x 100

Application: Quick-Job Solutions

States :

Quick-Job Solutions specializes in the rapid provision of temporary staff for the technology sector. It wants to evaluate the performance of its operations in the first half of 2023 with the following figures:

• Turnover excluding tax: €300
• Cost of services: €180

Work to do :

1. Calculate the gross margin for Quick-Job Solutions for this first half.
2. Calculate the gross margin rate.
3. If Quick-Job Solutions wants to achieve a gross margin of €150, what should its turnover be while maintaining the same cost of service?
4. Discuss a strategy that Quick-Job Solutions could adopt to increase its gross margin without changing its prices.
5. Analyze how a 10% increase in service costs would affect gross margin, if revenues remained constant.

Proposed correction:

1. Calculate the gross margin using the formula: Gross margin = Net turnover – Cost of services.
   €300 – €000 = €180.
   The gross margin for the first half is €120.

2. For gross margin rate, use: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (120 ÷ 000) x 300 = 000%.
   The gross margin rate is 40%.

3. To achieve a gross margin of €150, set the necessary turnover:

Required turnover = Desired gross margin + Cost of services.
€150 + €000 = €180.
The turnover must be €330.

4. Quick-Job Solutions can optimize its processes to reduce service costs, or negotiate larger volumes with partners to generate economies of scale.
   Such strategies can improve gross margin without changing prices.

5. A 10% increase in service costs, or €198, with constant turnover, would result in a new gross margin of:
   €300 – €000 = €198.
   This would reduce gross margin by €18, potentially harming profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of services
Gross margin rate	(Gross margin ÷ Net turnover) x 100
Required turnover	Desired gross margin + Cost of services

Application: Temp'Emploi Education

States :

Temp'Emploi Éducation, a temporary teacher placement company, is evaluating its financial situation to better understand its performance during the school year. Here is its recent accounting data:

• Turnover excluding tax: €200
• Cost of temporary teachers: €130

Work to do :

1. Calculate the gross margin generated by Temp'Emploi Éducation for the year.
2. Determine the gross margin rate.
3. What would have been the turnover required for a gross margin of €90 if costs were reduced by 000%?
4. What steps could the company take to simply exceed the established financial targets?
5. Discuss the potential benefits or barriers that a 5% reduction in service pricing could create.

Proposed correction:

1. The gross margin is calculated by: Gross margin = Turnover excluding tax – Cost of temporary teachers.
   €200 – €000 = €130.
   The gross margin is €70.

2. Use the formula: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (70 ÷ 000) x 200 = 000%.
   The gross margin rate is 35%.

3. If costs decrease by 10% to €117, with the desired gross margin being €000, the required turnover is:

Required revenue = Desired gross margin + Adjusted cost.
€90 + €000 = €117.
The turnover should amount to €207.

4. Measures such as expanding the customer portfolio, improving services to increase loyalty, or diversifying offerings could help exceed financial targets.
   Improvements could also include a consolidation of the user experience.

5. A 5% tariff reduction could improve competitiveness and increase sales, but it could also erode gross margin if not offset by increased sales or reduced costs.
   A good assessment would therefore be necessary to avoid a deterioration in profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of temporary teachers
Gross margin rate	(Gross margin ÷ Net turnover) x 100
Required turnover	Desired gross margin + Adjusted cost

Application: Secure Industry Interim

States :

Secure Industry Interim offers interim services for the industrial security sector. In order to improve its financial management, the company is looking to analyze certain financial aspects. Here is the data from their last financial year:

• Turnover excluding tax: €500
• Cost of security services: €350

Work to do :

1. Calculate the gross margin for Secure Industry Interim.
2. What is the gross margin rate for the financial year?
3. What should the turnover be to maintain a gross margin of 30%, while keeping the same costs?
4. Suggest key actions that Secure Industry could take to reduce costs without compromising service quality.
5. Estimate the impact of an 8% increase in revenue on gross margin, keeping costs constant.

Proposed correction:

1. To obtain the gross margin, apply: Gross margin = Net turnover – Cost of security services.
   €500 – €000 = €350.
   The gross margin is €150.

2. The calculation of the gross margin rate is carried out by: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (150 ÷ 000) x 500 = 000%.
   The gross margin rate is 30%.

3. To achieve a gross margin of 30% with the same costs, the turnover is calculated by:

Required Revenue = Cost ÷ (1 – Gross Margin Rate)
€350 ÷ 000 = €0,7.
A turnover of €500 would maintain this margin.

4. Actions such as automating certain procedures, training staff for greater efficiency, or negotiating prices with suppliers could help reduce costs without affecting quality.
   Good optimization can lead to better management.

5. By increasing turnover by 8%, to €540, with costs of €000, the new gross margin would be:
   €540 – €000 = €350.
   An increase in turnover would improve the gross margin by €40, strengthening profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of security services
Gross margin rate	(Gross margin ÷ Net turnover) x 100
Necessary turnover	Cost ÷ (1 – Gross Margin Rate)

Application: Interim Medical Health

States :

Intérim Médical Santé, a healthcare specialist, is seeking to understand the financial impact of its nursing placements over the past year. The financial information is as follows:

• Turnover excluding tax: €400
• Cost of investments: €250

Work to do :

1. Calculate the gross margin achieved by Intérim Médical Santé.
2. Calculate gross margin rate to check financial efficiency.
3. If the company wants to increase revenue by €50, while maintaining costs, what would the new gross margin be?
4. Identify a potential method to improve gross margin on the benefit side.
5. Describe the impact of a 10% reduction in costs on gross margin, while retaining revenue.

Proposed correction:

1. Gross margin is found using: Gross margin = Net sales – Cost of investments.
   €400 – €000 = €250.
   The gross margin is €150.

2. Apply: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (150 ÷ 000) x 400 = 000%.
   The gross margin rate is 37,5%.

3. With an increase in turnover of €50, the gross margin becomes:

New Revenue = Original Revenue + Increase
€400 + €000 = €50
New gross margin = €450 – €000 = €250.
The new gross margin would be €200.

4. To improve gross margin, Intérim Médical Santé could form partnerships with hospitals to rationalize logistics costs.
   Reducing inefficiencies helps improve margin.

5. Reducing costs by 10%, to €225, with unchanged turnover, increases the gross margin to:
   €400 – €000 = €225.
   This would increase the gross margin by €25, demonstrating increased profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of investments
Gross margin rate	(Gross margin ÷ Net turnover) x 100
New turnover	Original turnover + Increase

Application: Premier Event Interim

States :

The agency Intérim Événementiel Premier provides staff for high-end events. It wishes to evaluate its recent annual financial results in order to adapt its economic strategies. The available data are:

• Turnover excluding tax: €750
• Cost of event services: €525

Work to do :

1. Calculate the gross margin obtained by Intérim Événementiel Premier for the year.
2. Evaluate the agency's gross margin rate.
3. Forecast the gross margin if service costs were increased by 12%, maintaining revenue.
4. What advantages or disadvantages might arise from increased specialization of services for this agency?
5. Highlight the potential impact of a 15% price increase while maintaining costs.

Proposed correction:

1. Calculate the gross margin with: Gross margin = Turnover excluding tax – Cost of event services.
   €750 – €000 = €525.
   The gross margin is €225.

2. For gross margin rate, use: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (225 ÷ 000) x 750 = 000%.
   The gross margin rate is 30%.

3. Increasing costs by 12%, or €588, while maintaining revenues, would result in a gross margin of:

€750 – €000 = €588.
Gross margin would decrease to €162, impacting profitability.

4. Increased specialization may lead to enhanced reputation, increased loyalty and attractiveness to clients seeking unique expertise, but could reduce the potential market by limiting the range of possible operations.
   Diversification must be balanced with specialization to avoid pitfalls.

5. If prices increase by 15%, turnover would be 30% higher, or €862.
   The new gross margin, with the same costs, would be:
   €862 – €500 = €525.
   This increase significantly strengthens the company's profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of event services
Gross margin rate	(Gross margin ÷ Net turnover) x 100
New turnover	Original revenue x (1 + Rate of increase)

Application: Interim Luxury International

States :

Intérim Luxe International offers specialized interim services in luxury boutiques. In order to adjust its future strategy, it wants to analyze its recent financial performance. Here are the details for the last financial year:

• Turnover excluding tax: €1
• Cost of services: €800

Work to do :

1. Calculate the gross margin for the last financial year of Intérim Luxe International.
2. Determine the gross margin rate generated by the agency.
3. What would the gross margin be if revenue increased by €100 with constant costs?
4. Discuss how improving the customer experience could indirectly maximize gross margin.
5. Evaluate the possible impacts of a 5% cost reduction in the overall strategy.

Proposed correction:

1. Use: Gross margin = Net turnover – Cost of services.
   €1 – €200 = €000.
   The gross margin is €400.

2. Calculation of the gross margin rate: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (400 ÷ 000) x 1 = 200%.
   The gross margin rate is 33,3%.

3. Increasing turnover from €100 to €000 with fixed costs would lead to a gross margin of:

€1 – €300 = €000.
The increase in turnover increases the gross margin by €100.

4. Improving the customer experience can increase satisfaction and loyalty, leading to increased referrals and reduced new customer acquisition costs.
   A satisfied customer base often translates into increased gross margin.

5. Reducing costs by 5% to €760, with turnover maintained, would bring the gross margin to:
   €1 – €200 = €000.
   This strategy increases gross margin by €40, thereby optimizing profitability.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of services
Gross margin rate	(Gross margin ÷ Net turnover) x 100
New CA	Original turnover + Increase

Application: Interim Commerce

States :

Intérimo Commerce, a specialist in the temporary placement of sales staff, wants to optimize its profitability. Based on recent financial years, here are the relevant figures:

• Turnover excluding tax: €320
• Cost of sales missions: €240

Work to do :

1. Calculate the gross margin for Intérimo Commerce.
2. Establish the current gross margin rate.
3. How much should the cost of missions drop to reach a gross margin of €100 with a stable income?
4. Consider a policy the company could adopt to maintain an attractive margin while increasing sales volume.
5. Discuss the repercussions if Interimo decided to reduce the number of missions, but increase their unit value.

Proposed correction:

1. Calculate: Gross margin = Net sales turnover – Cost of sales missions.
   €320 – €000 = €240.
   The gross margin is €80.

2. Calculate the gross margin rate: Gross margin rate = (Gross margin ÷ Net sales) x 100.
   (80 ÷ 000) x 320 = 000%.
   The gross margin rate is 25%.

3. To obtain a gross margin of €100, the cost of the missions should be:

Cost of missions = Turnover excluding tax – Desired gross margin
€320 – €000 = €100.
Costs are expected to be reduced to €220.

4. The company could focus on upselling and loyalty programs to boost volume while maintaining high margins.
   These initiatives drive revenue growth and profitability.

5. If Interimo reduces the number of missions while increasing their value, this could improve the margin with easier cost management and potentially see equipment or staff training increase less frequently.
   This strategy emphasizes quality over quantity, but requires careful management.

Formulas Used:

Title	Formulas
Gross margin	Turnover excluding tax – Cost of sales missions
Gross margin rate	(Gross margin ÷ Net turnover) x 100
Cost of missions	Net sales – Desired gross margin