In this section:
Application: Gourmet Sweets
States :
Les Douceurs Gourmandes, a pastry shop renowned for its artisanal cakes, wants to evaluate the performance of one of its star products, a chocolate cake. The purchase price excluding tax (PA HT) for the cake ingredients is €6 per unit, and it is sold at a sales price excluding tax (SRP HT) of €12. The manager wants to determine the unit sales margin as well as the margin rate to optimize her pricing strategy.
Work to do :
- Calculate the unit sales margin of the chocolate cake.
- Determine the profit margin for the cake.
- If the pre-tax purchase price increased by €1 per unit, what would the new unit margin be?
- If Les Douceurs Gourmandes wants to achieve a margin rate of 60%, what should the new PV excluding tax be?
- Analyze the strategic implications of an increase in the pre-tax purchase price for pastries.
Proposed correction:
-
Calculation of the unit commercial margin of the chocolate cake:
The unit commercial margin is calculated using the following formula: Unit margin = PV HT – PA HT.
Unit margin = €12 – €6 = €6.
For each cake sold, the bakery makes a commercial margin of €6. -
Determining the margin rate for the cake:
The margin rate is calculated as follows: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
Margin rate = ((€12 – €6) ÷ €6) x 100 = 100%.
The margin rate for chocolate cake is 100%. -
New unit margin with an increase in the purchase price excluding tax of €1:
New PA HT = €6 + €1 = €7.
New unit margin = PV excluding tax – New PA excluding tax = €12 – €7 = €5.
With the purchase price increasing by €1, the new unit margin is €5.
-
Calculation of the new PV HT to reach a margin rate of 60%:
Using the formula: PV HT = PA HT ÷ (1 – Margin rate).
PV excluding tax = €6 ÷ (1 – 0,60) = €15.
To achieve a margin rate of 60%, the selling price excluding tax must be adjusted to €15. -
Analysis of the strategic implications of an increase in the purchase price:
An increase in the purchase price reduces the unit margin, thereby decreasing the profitability per unit. To maintain or improve the margin, Les Douceurs Gourmandes can consider either increasing the selling price or looking for lower-cost suppliers. Analyzing the competition and customer price sensitivity is essential to decide on the appropriate strategy.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PV HT for margin rate | PA HT ÷ (1 – Margin rate) |
Application: Infitex Fashion
States :
Infitex Mode is a clothing store that wants to evaluate the profitability of its best-selling pair of denim pants. The purchase price excluding tax is €20 per unit and the sale price excluding tax is set at €50. The manager wants to analyze whether the current sale price maximizes profits and predict the impact of a promotional price reduction.
Work to do :
- Calculate the unit sales margin of the pants.
- Determine the margin rate for the pants.
- What would be the impact on the unit margin of a 10% reduction in the net selling price?
- If the company wants to achieve a unit margin of €35, what should the new PV excluding tax be?
- How would a reduction in the net selling price affect customer perception and brand strategy?
Proposed correction:
-
Calculation of the unit commercial margin of the pants:
Unit margin = PV HT – PA HT.
Unit margin = €50 – €20 = €30.
The unit margin for each pair of pants sold is €30. -
Determining the margin rate for pants:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€50 – €20) ÷ €20) x 100 = 150%.
The markup for denim pants is 150%. -
Impact of a 10% reduction in the net selling price on the unit margin:
New PV excluding tax = €50 – (10% x €50) = €45.
New unit margin = New PV excluding tax – PA excluding tax = €45 – €20 = €25.
After reduction, the unit margin is €25.
-
New PV excluding tax to reach a unit margin of €35:
PV HT = PA HT + Desired unit margin.
PV excluding tax = €20 + €35 = €55.
To obtain a unit margin of €35, the selling price excluding tax must be €55. -
Effects of a reduction in the net selling price on customer perception:
A price reduction may attract more cost-sensitive customers, increase sales volumes, but could also degrade the perception of quality or luxury of the pants. Brand positioning may need adjustments to avoid a perceived erosion of quality.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PV HT for desired margin | PA HT + Desired unit margin |
Application: Tech Innovators
States :
Tech Innovators, a technology start-up, is marketing a new version of wireless headphones. The manufacturing cost excluding taxes is €35 per unit, while these headphones are sold at a selling price excluding taxes of €80. Management is looking to adjust its pricing policy and wants to understand the potential impact of these adjustments on its margin.
Work to do :
- Calculate the unit sales margin of the headphones.
- Determine the margin rate for the headphones.
- What would be the impact of a €5 reduction in manufacturing cost on the unit margin?
- Tech Innovators wants a 70% margin, what should the selling price be excluding VAT?
- Discuss the implications of a change in manufacturing cost on long-term sales strategy.
Proposed correction:
-
Calculation of the unit sales margin of headphones:
Unit margin = PV HT – PA HT.
Unit margin = €80 – €35 = €45.
Per unit sold, the unit margin is €45. -
Determining the margin rate for headphones:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€80 – €35) ÷ €35) x 100 = 128,57%.
The margin rate is 128,57%. -
Effect of a €5 reduction in manufacturing cost on unit margin:
New PA HT = €35 – €5 = €30.
New unit margin = PV excluding tax – New PA excluding tax = €80 – €30 = €50.
Reducing the manufacturing cost increases the margin to €50 per unit.
-
PV HT required for a margin rate of 70%:
Using the formula: PV HT = PA HT ÷ (1 – Margin rate).
PV excluding tax = €35 ÷ (1 – 0,70) = €116,67.
To achieve a margin rate of 70%, the PV excluding tax must be adjusted to €116,67. -
Analysis of the implications of a variation in manufacturing cost:
Reducing the cost of production can increase margins, however, it is crucial not to compromise on quality, as this could harm Tech Innovators’ reputation. In the long run, cost optimization can strengthen competitiveness and support aggressive pricing campaigns.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT for desired margin rate | PA HT ÷ (1 – Margin rate) |
Application: Bio Health
States :
Bio Santé, a company specializing in food supplements, has launched a new product: organic vitamin C. The purchase price excluding tax per box is €10, and the product is sold at €25 excluding tax. The company wants to determine the margins to optimize its profits and decide on possible price readjustments.
Work to do :
- Calculate the unit sales margin of the box of vitamin C.
- Determine the margin rate for this product.
- If Bio Santé wishes to reduce the selling price excluding tax to €20, what will the new unit margin be?
- What purchase price would allow a unit margin of €15 to be maintained if the sale price remains at €25?
- What would be the strategic impact of a reduction in the selling price on customer loyalty?
Proposed correction:
-
Calculation of the unit commercial margin of vitamin C:
Unit margin = PV HT – PA HT.
Unit margin = €25 – €10 = €15.
The unit margin per product is €15. -
Determination of the margin rate for vitamin C:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€25 – €10) ÷ €10) x 100 = 150%.
The margin rate is 150%. -
New unit margin with a selling price excluding tax of €20:
New unit margin = New PV excluding tax – PA excluding tax = €20 – €10 = €10.
By lowering the selling price to €20, the unit margin decreases to €10.
-
Purchase price for a unit margin of €15 with PV excluding tax at €25:
PA HT = PV HT – Desired unit margin.
PA excluding tax = €25 – €15 = €10.
To maintain a margin of €15, the purchase price must be €10. -
Strategic impact of a price reduction on loyalty:
A price reduction can improve accessibility and attract new customers. However, the risk is to reduce the perception of quality or luxury. Bio Santé could compensate for this reduction with improved customer service or loyalty programs to strengthen customer retention.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PA HT for desired margin | PV HT – Desired unit margin |
Application: Zen Electronics
States :
Zen Electronics, a retailer specializing in high-tech gadgets, sells smart clocks. The acquisition cost excluding tax for a clock is €40, and it is sold at €85 excluding tax. The company plans to review its margins to determine the potential impact on its profits and sales.
Work to do :
- Calculate the unit sales margin of a smart clock.
- Determine the margin rate for this product.
- If Zen Electronics increases its selling price excluding tax to €90, what would the new unit margin be?
- What would be the ideal purchase cost to maintain a margin rate of 120% if the sale price remains at €85?
- How could Zen Electronics modify its business strategy to maximize its margins while remaining competitive?
Proposed correction:
-
Calculation of the unit commercial margin of the connected clock:
Unit margin = PV HT – PA HT.
Unit margin = €85 – €40 = €45.
The unit margin for each clock sold is €45. -
Determining the margin rate for the connected clock:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€85 – €40) ÷ €40) x 100 = 112,5%.
The margin rate is 112,5%. -
New unit margin with a selling price excluding tax of €90:
New unit margin = New PV excluding tax – PA excluding tax = €90 – €40 = €50.
By increasing the selling price to €90, the unit margin increases to €50.
-
Purchase cost for a margin rate of 120% with a PV excluding tax of €85:
Using the formula: PA HT = PV HT ÷ (1 + Margin rate).
PA excluding VAT = €85 ÷ (1 + 1,20) = €38,64.
To maintain a margin rate of 120%, the purchase cost must be €38,64. -
Strategies to maximize margins without losing competitiveness:
Zen Electronics could reposition its brand towards a premium product perception, thereby justifying high prices while improving margins. Another approach would be to expand the range with complementary accessories to increase the value per transaction.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PA HT for desired margin rate | PV HT ÷ (1 + Margin rate) |
Application: Green & Luxury
States :
Vert & Luxe is a high-end organic cosmetics brand, selling an innovative facial mask. The cost price excluding VAT is €15 per mask, and it is sold at €45 excluding VAT. The management wants to evaluate the pricing strategy and is looking for optimization to increase profitability.
Work to do :
- Find the unit trade margin for the face mask.
- Calculate the margin rate on this product.
- If Vert & Luxe decides to lower the selling price to €40 excluding VAT, what will be the impact on the unit margin?
- What would be the selling price excluding tax required to achieve a unit margin of €35?
- What would be the implications of a drop in the selling price on brand image and the perception of luxury?
Proposed correction:
-
Face mask unit margin:
Unit margin = PV HT – PA HT.
Unit margin = €45 – €15 = €30.
Each mask sold generates a unit margin of €30. -
Calculation of the margin rate for the mask:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€45 – €15) ÷ €15) x 100 = 200%.
The markup on the face mask is 200%. -
Impact of the drop in the net selling price to €40 on the unit margin:
New unit margin = New PV excluding tax – PA excluding tax = €40 – €15 = €25.
Reducing the selling price to €40 reduces the unit margin to €25.
-
PV excluding tax for a desired unit margin of €35:
PV HT = PA HT + Desired unit margin.
PV excluding tax = €15 + €35 = €50.
To obtain a unit margin of €35, the PV excluding tax must be €50. -
Consequences of a drop in the selling price on luxury positioning:
Reducing the price may expand the customer base and increase sales volume, but risks diluting Vert & Luxe's premium position. The company must ensure that it maintains elements of distinction such as exclusive ingredients or premium packaging TO maintain the perception of luxury.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT for desired unit margin | PA HT + Desired unit margin |
Application: Speedy Cycle
States :
Speedy Cycle, an electric bike rental company, is considering selling some of its second-hand bikes to renew its fleet. The net cost of a bike is estimated at €450, and it plans to sell them at €650 excluding VAT. Management wants to understand its current margin to decide on possible pricing strategies.
Work to do :
- Calculate the unit sales margin for each bicycle sold.
- Determine the margin rate on the sale of bicycles.
- How would the unit margin be affected by an increase in the net selling price to €700?
- What would be the maximum purchase cost to achieve a margin rate of 60% at a sale price of €650?
- What strategy should Speedy Cycle adopt to balance unit margin and sales volume?
Proposed correction:
-
Unit sales margin for bicycles:
Unit margin = PV HT – PA HT.
Unit margin = €650 – €450 = €200.
The unit margin per bike sold is €200. -
Calculation of the margin rate on bicycles:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€650 – €450) ÷ €450) x 100 = 44,44%.
The margin rate is 44,44%. -
Effect of the increase in the selling price excluding tax to €700 on the unit margin:
New unit margin = New PV excluding tax – PA excluding tax = €700 – €450 = €250.
With an increase in the selling price to €700, the unit margin increases to €250.
-
Purchase cost to achieve a margin rate of 60% at €650:
Using the formula: PA HT = PV HT ÷ (1 + Margin rate).
PA excluding VAT = €650 ÷ (1 + 0,60) = €406,25.
For a margin rate of 60%, the purchase cost must not exceed €406,25. -
Strategy to balance unit margin and sales volume:
Speedy Cycle could adopt a segmentation strategy, offering bikes at different price points to capture different market segments. Combining certain benefits, such as accessories or maintenance services, could justify a higher price, bolstering the margin while running a targeted marketing campaign to maintain a high volume of sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Purchase cost for margin rate | PV HT ÷ (1 + Margin rate) |
Application: Nature Side
States :
Côté Nature, an eco-responsible garden center, sells locally made terracotta pots. The cost price excluding tax per pot is €8, while their sale price is €18 excluding tax. The company wants to analyze and adjust its margins to encourage a more marked ecological transition.
Work to do :
- Calculate the unit sales margin for each pot sold.
- Determine the margin rate for sales of the pots.
- What would be the impact on the unit margin if the PV excluding tax is reduced to €16?
- What is the selling price needed to obtain a unit margin of €12?
- Discuss the strategy that Côté Nature could adopt to increase margins while promoting an eco-responsible image.
Proposed correction:
-
Unit sales margin for each pot:
Unit margin = PV HT – PA HT.
Unit margin = €18 – €8 = €10.
Each pot sold brings a margin of €10. -
Calculation of the margin rate of the pots:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€18 – €8) ÷ €8) x 100 = 125%.
The margin rate reaches 125%. -
Impact on the unit margin with a reduced PV excluding tax of €16:
New unit margin = New PV excluding tax – PA excluding tax = €16 – €8 = €8.
By lowering the selling price to €16, the unit margin increases to €8.
-
Selling price to reach a unit margin of €12:
PV HT = PA HT + Desired unit margin.
PV excluding tax = €8 + €12 = €20.
To obtain a unit margin of €12, the PV excluding tax must be €20. -
Strategy to increase margins and promote eco-responsibility:
Côté Nature can benefit from a perceived value strategy by emphasizing the positive ecological impact and contribution to the local economy. By developing environmental communication and education actions, the company could justify a price increase. Encouraging customers to opt for these products, thanks to a committed and responsible image, could compensate for a price difference.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Selling price for desired margin | PA HT + Desired unit margin |
Application: Travel & Adventures
States :
Voyage & Aventures, a travel agency specializing in tours in Asia, offers a package for a stay in Thailand. The purchase cost excluding tax of the package is €800, and it is sold to the customer at €1 excluding tax. The director wants to evaluate the margins to adjust her services.
Work to do :
- Determine the unit trade margin on the Thailand package.
- Calculate the margin rate for this product.
- If the package is sold with a discount of €100, what would the new margin be?
- What would be the ideal selling price to achieve a unit margin of €500?
- Propose a strategy to increase margin while enriching the offer for customers.
Proposed correction:
-
Unit trade margin on Thailand package:
Unit margin = PV HT – PA HT.
Unit margin = €1 – €200 = €800.
The unit margin for each package sold is €400. -
Calculation of the margin rate on the package:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€1 – €200) ÷ €800) x 800 = 100%.
The margin rate is 50%. -
Impact of the €100 reduction on the margin:
New PV excluding tax = €1 – €200 = €100.
New unit margin = New PV excluding tax – PA excluding tax = €1 – €100 = €800.
With a discount, the margin falls to €300.
-
Selling price to obtain a unit margin of €500:
PV HT = PA HT + Desired unit margin.
PV excluding tax = €800 + €500 = €1.
To reach a margin of €500, the PV excluding tax must be €1. -
Strategy to strengthen margins and quality of the offer:
Voyage & Aventures could enrich its offerings by adding exclusive activities, experienced guides or charming accommodations while justifying higher prices. Creating partnerships with local businesses to offer unique experiences could increase the perceived value of stays, justifying an upward revision of prices while retaining customers.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Selling price for desired margin | PA HT + Desired unit margin |