In this section:
Application: The Flavors of the Vegetable Garden
States :
The company "Les Saveurs du Potager", specializing in the wholesale sale of organic fruits and vegetables, carefully monitors its margins to adapt to local competition. It wants to analyze the commercial margin made on its organic carrots to optimize its sales prices. Here is the important information:
- Unit purchase price excluding tax (PA excluding tax): €1,50
- Unit selling price excluding VAT (PV excluding VAT): €2,70
- Quantity sold: 1800 units
You need to help the company calculate and evaluate the sales margin of this product and its implications.
Work to do :
- What is the unit sales margin for organic carrots?
- Calculate the overall sales margin for the 1800 units sold.
- What is the margin rate for a unit?
- Determine the unit markup rate.
- Analyze how a 5% drop in the net selling price could impact the margin rate.
Proposed correction:
Answer 1:
The unit trade margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT.
Unit commercial margin = PV excluding tax – PA excluding tax = €2,70 – €1,50 = €1,20.
So the margin on each carrot sold is €1,20.
Answer 2:
The overall sales margin is obtained by multiplying the unit margin by the quantity sold.
Overall sales margin = Unit margin x Quantity sold = €1,20 x 1800 = €2160.
So the overall margin for the 1800 carrots is €2160.
Answer 3:
The margin rate is calculated with the following formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((2,70 € – 1,50 €) ÷ 1,50 €) x 100 = 80%.
The margin rate for a unit of organic carrot is 80%.
Answer 4:
The markup rate is the margin on the selling price excluding tax:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€2,70 – €1,50) ÷ €2,70) x 100 ? 44,44%.
The unit mark rate is therefore 44,44%.
Answer 5:
If the selling price excluding VAT decreases by 5%, the new PV excluding VAT will be:
PV excluding tax = €2,70 x (1 – 0,05) = €2,565.
The new margin rate becomes:
Margin rate = ((€2,565 – €1,50) ÷ €1,50) x 100 ? 71%.
A 5% decrease in the selling price results in a drop in the margin rate to 71%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: SteelCrafters
States :
"SteelCrafters" is a manufacturer of metal materials for the construction industry. In order to monitor its profitability, the company wants to know the sales margin on its landscape metal structures. Here is the data:
- Unit purchase price excluding tax (PA excluding tax): €500
- Unit selling price excluding VAT (PV excluding VAT): €750
- Quantity sold: 80 units
Work to do :
- Calculate the sales margin per unit sold.
- Determine the total sales margin made on the sale of the 80 units.
- What is the unit margin percentage on the pre-tax purchase price?
- Calculate the markup rate for each unit sold.
- If the quantity sold had been 100 units instead of 80, what would the total margin have been?
Proposed correction:
Answer 1:
The difference between the selling price excluding VAT and the purchase price excluding VAT gives the unit commercial margin:
Unit commercial margin = PV excluding tax – PA excluding tax = €750 – €500 = €250.
Each unit sold therefore brings in a margin of €250.
Answer 2:
To obtain the total sales margin, we multiply the unit margin by the number of units sold:
Overall commercial margin = €250 x 80 = €20.
The overall margin is therefore €20 for 000 units sold.
Answer 3:
The percentage of the unit margin on the purchase price excluding tax is the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((750 € – 500 €) ÷ 500 €) x 100 = 50%.
The margin rate on the purchase price is therefore 50%.
Answer 4:
The markup rate on a unit is:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€750 – €500) ÷ €750) x 100 ? 33,33%.
It is therefore 33,33%.
Answer 5:
If the quantity sold had been 100 units, the overall sales margin would have been:
Overall sales margin = Unit margin x Quantity sold = €250 x 100 = €25.
In this case, the total margin would have been €25.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Artis Bijou
States :
"Artis Bijou" is a small online jewelry store, and it wants to evaluate the profitability of the personalized bracelets sold recently. The sales data is as follows:
- Unit purchase price excluding tax (PA excluding tax): €14
- Unit selling price excluding VAT (PV excluding VAT): €30
- Quantity sold: 450 units
Work to do :
- Calculate the unit sales margin made on each bracelet.
- What is the total margin for selling bracelets?
- Determine the unit margin rate.
- Calculate the unit markup rate for these sales.
- If purchasing costs increased by 3%, how would this affect the unit margin rate?
Proposed correction:
Answer 1:
The unit sales margin is obtained by subtracting the unit purchase price excluding VAT from the unit sales price excluding VAT:
Unit sales margin = €30 – €14 = €16.
Each bracelet sold therefore brings in a margin of €16.
Answer 2:
The overall margin is obtained by multiplying the unit margin by the quantity sold:
Overall commercial margin = €16 x €450 = €7200.
The total commercial margin achieved is therefore €7200.
Answer 3:
The margin rate on these bracelets is given by the following formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((30 € – 14 €) ÷ 14 €) x 100 ? 114,29%.
Thus, the unit margin rate amounts to 114,29%.
Answer 4:
The unit markup rate is the percentage of the margin compared to the selling price:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€30 – €14) ÷ €30) x 100 ? 53,33%.
This mark rate is therefore 53,33%.
Answer 5:
If the purchase price increased by 3%, this would give a new net PA of:
PA excluding VAT = €14 x (1 + 0,03) = €14,42.
The new margin rate would be:
Margin rate = ((€30 – €14,42) ÷ €14,42) x 100 ? 108%.
The margin rate would therefore decrease to around 108% in the event of a 3% increase in costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: GreenTech Innovations
States :
GreenTech Innovations, a developer of renewable energy solutions, is looking to understand the profitability of its recently released domestic solar panels. Here are the key figures:
- Unit price excluding VAT: €350
- PV excluding VAT per unit: €480
- Quantity sold: 150 units
Work to do :
- What is the unit sales margin of solar panels?
- Determine the overall sales margin for all units sold.
- Calculate the unit margin rate for a panel.
- What is the markup rate on each panel sold?
- Estimate how a 10% discount on the PV excluding VAT would affect the overall margin amount.
Proposed correction:
Answer 1:
Unit margin = PV excluding tax – PA excluding tax = €480 – €350 = €130.
Each panel thus generates a margin of €130.
Answer 2:
The overall commercial margin is obtained by multiplying the unit margin and the quantities sold:
Overall commercial margin = €130 x 150 = €19.
The 150 units generated a commercial margin of €19.
Answer 3:
The margin rate is calculated on the purchase price excluding tax:
Margin rate = ((€480 – €350) ÷ €350) x 100 ? 37,14%.
The unit margin rate is therefore 37,14%.
Answer 4:
The markup rate is the ratio between the commercial margin and the selling price excluding tax:
Markup rate = ((€480 – €350) ÷ €480) x 100 ? 27,08%.
This results in a unit markup rate of 27,08%.
Answer 5:
A 10% discount on the excluding VAT sale price would give a new excluding VAT PV:
PV excluding tax = €480 x (1 – 0,10) = €432.
So the new unit margin would be:
Unit margin = €432 – €350 = €82.
Overall commercial margin = €82 x 150 = €12.
A 10% discount on the PV excluding tax would lead to an overall margin loss of €7.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Textile Avenue
States :
“Textile Avenue”, a men’s clothing brand, wants to analyze the sales margin on its cotton shirts sold during its latest promotional campaign. The details are provided below:
- Unit price excluding VAT: €20
- PV excluding VAT per unit: €45
- Number of shirts sold: 1200 units
Work to do :
- What is the unit sales margin obtained for each shirt sold?
- Calculate the total sales margin made on 1200 shirts.
- Determine the unit margin rate for shirts.
- Calculate the markup rate per shirt.
- If the purchase price increased by €1, how would this affect the unit sales margin?
Proposed correction:
Answer 1:
Unit margin = PV excluding tax – PA excluding tax = €45 – €20 = €25.
Each shirt sold generates a margin of €25.
Answer 2:
To get the total margin:
Overall sales margin = Unit margin x Quantity sold = €25 x 1200 = €30.
The total sale of the shirts generated a commercial margin of €30.
Answer 3:
The margin rate is calculated as follows:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((45 € – 20 €) ÷ 20 €) x 100 = 125%.
The margin rate is therefore 125%.
Answer 4:
The markup rate is expressed by:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€45 – €20) ÷ €45) x 100 ? 55,56%.
The markup rate per shirt is 55,56%.
Answer 5:
If the purchase cost increased by €1, the new purchase costs would be:
PA excluding tax = €20 + €1 = €21.
The new unit margin would then be:
Unit margin = PV excluding tax – PA excluding tax = €45 – €21 = €24.
The unit margin would therefore fall from €25 to €24.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: CycloPro
States :
CycloPro, a bicycle and accessories store, wants to analyze the sales margin of a series of lightweight bicycle helmets that it has just sold. Here is the information:
- Unit price excluding VAT: €60
- PV excluding VAT per unit: €95
- Quantity sold: 500 units
Work to do :
- What is the unit sales margin on a helmet sold?
- Determine the overall sales margin for these sales.
- What is the unit margin rate for a helmet?
- Calculate the markup rate for a helmet.
- Analyze the impact on margin if the number of helmets sold increases by 20%.
Proposed correction:
Answer 1:
Unit commercial margin = PV excluding tax – PA excluding tax = €95 – €60 = €35.
Each helmet sold therefore generates a profit of €35.
Answer 2:
Overall sales margin = Unit margin x Quantity sold = €35 x 500 = €17.
The total margin obtained from the sale of the 500 helmets is €17.
Answer 3:
The unit margin rate is obtained by:
Margin rate = ((€95 – €60) ÷ €60) x 100 ? 58,33%.
This means that the margin rate is 58,33%.
Answer 4:
The markup rate is calculated using the formula:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€95 – €60) ÷ €95) x 100 ? 36,84%.
The markup rate is 36,84%.
Answer 5:
The impact of a 20% increase in sales is equivalent to selling 600 units instead of 500. The new overall margin would be:
Overall commercial margin = €35 x 600 = €21.
Thus, a 20% increase in sales would lead to an increase in the total margin to €21.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: SmartPhonePro
States :
SmartPhonePro is a smartphone distributor. Recently, they made an offer on a particular model, and they want to evaluate their sales margin. The data is as follows:
- Unit price excluding VAT: €360
- PV excluding VAT per unit: €500
- Units sold: 100 units
Work to do :
- What is the commercial margin made on each smartphone sold?
- What is the total margin obtained from the sale of 100 smartphones?
- Calculate the margin rate on each smartphone sold.
- Determine the markup rate.
- If sales increased by 15 units, how much additional profit would be generated?
Proposed correction:
Answer 1:
Unit margin = PV excluding tax – PA excluding tax = €500 – €360 = €140.
Each smartphone sold generates a margin of €140.
Answer 2:
Total margin = Unit margin x Quantity sold = €140 x 100 = €14.
The total margin for 100 smartphones is €14.
Answer 3:
Margin rate = ((€500 – €360) ÷ €360) x 100 ? 38,89%.
The unit margin rate is therefore 38,89%.
Answer 4:
Markup rate = ((€500 – €360) ÷ €500) x 100 = 28%.
The markup rate is therefore 28%.
Answer 5:
If sales increase by 15 units, the additional margin would be:
Additional margin = Unit margin x Additional number = €140 x 15 = €2100.
So, 15 additional units would generate €2100 of additional margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Oenotech
States :
"Oenotech" is a producer of high-end wine bottles. It wants to understand the commercial margin made on a specific vintage sold massively for export. Here are the sales details:
- Unit price excluding VAT: €15
- PV excluding VAT per unit: €40
- Quantity sold: 500 units
Work to do :
- What is the unit sales margin for each bottle of wine?
- What is the overall commercial margin for the 500 bottles sold?
- What is the unit margin rate on each bottle?
- Determine the markup rate.
- If fixed costs increased by 20%, how would this affect unit margin?
Proposed correction:
Answer 1:
Unit commercial margin = PV excluding tax – PA excluding tax = €40 – €15 = €25.
Each bottle sale generates a commercial margin of €25.
Answer 2:
Overall sales margin = Unit margin x Quantity sold = €25 x 500 = €12.
The 500 sales bring a total commercial margin of €12.
Answer 3:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((40 € – 15 €) ÷ 15 €) x 100 ? 166,67%.
The margin rate is therefore 166,67%.
Answer 4:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€40 – €15) ÷ €40) x 100 ? 62,5%.
The mark rate for this vintage is therefore 62,5%.
Answer 5:
If fixed costs increased by 20%, this would not directly affect the unit sales margin in the short term, because it does not affect the pre-tax purchase cost or the pre-tax selling price, but would penalize overall profitability over a longer period.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Creamix
States :
Créamix is a company that makes artisanal ice creams. They want to analyze their commercial margins on a new ice cream flavor. The following information is available:
- Unit price excluding VAT: €2
- PV excluding VAT per unit: €5
- Quantity sold: 1500 units
Work to do :
- Calculate the unit sales margin made per unit of this ice cream.
- Determine the overall sales margin for the 1500 units sold.
- What is the margin rate for one unit of this ice cream?
- Calculate the markup rate for this same unit.
- If the purchase price increased by 10%, how would this impact the unit margin?
Proposed correction:
Answer 1:
The unit commercial margin is the result of the difference between the selling price and the purchase price excluding tax:
Unit margin = PV excluding tax – PA excluding tax = €5 – €2 = €3.
Each ice cream therefore brings in €3 of unit margin.
Answer 2:
The overall sales margin is obtained by multiplying the unit margin by the quantity sold:
Total sales margin = Unit margin x Quantity sold = €3 x 1500 = €4500.
The overall commercial margin is therefore €4500.
Answer 3:
The margin rate is expressed by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((5 € – 2 €) ÷ 2 €) x 100 = 150%.
This means that the margin rate is 150%.
Answer 4:
The markup rate represents the commercial margin as a percentage of the selling price:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((5 € – 2 €) ÷ 5 €) x 100 = 60%.
The markup rate for this ice cream is therefore 60%.
Answer 5:
If the purchase price excluding VAT increases by 10%, the new PA excluding VAT will be:
PA excluding VAT = €2 x 1,10 = €2,20.
So the new unit margin would be:
Unit margin = PV excluding tax – PA excluding tax = €5 – €2,20 = €2,80.
The 10% increase in costs therefore reduces the unit margin to €2,80.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit sales margin | PV HT – PA HT |
| Overall trade margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |