In this section:
Application: Illustrated Literature
States :
Littératures Illustrées, a book and derivative products store, wants to calculate the profit margin associated with its sales of comic book box sets. Each box set has a purchase price excluding tax of €12 and is resold at a price of €20 excluding tax. The store would also like to analyze the profitability of these products on a quantity of 1500 boxes sold over a year.
Work to do :
- Determine the unit margin achieved by Littératures Illustrées on each comic book box set.
- Calculate the margin rate for a comic book box set.
- Estimate the overall margin achieved for 1500 boxes sold.
- Calculate the markup rate for a comic book box set.
- Discuss the strategic implications of the calculated margin for the Illustrated Literature business.
Proposed correction:
-
The unit margin is calculated by subtracting the purchase price excluding VAT from the sale price excluding VAT:
Unit margin = PV excluding tax – PA excluding tax = €20 – €12 = €8.
This means that Littératures Illustrées earns €8 per box set sold. -
The margin rate is obtained by applying the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((20 – 12) ÷ 12) x 100 = 66,67%.
Littératures Illustrées achieves a margin rate of 66,67% on each box set sold. -
The overall margin is obtained by multiplying the unit margin by the quantity sold:
Overall margin = Unit margin x Quantity sold = 8 x 1500 = €12.
Littératures Illustrées achieves a total margin of €12 for the 000 boxes sold.
-
The markup rate is calculated as follows:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((20 – 12) ÷ 20) x 100 = 40%.
The markup rate of the boxes sold by Littératures Illustrées is 40%. -
The calculated margins indicate excellent profitability for comic book box sets, with high unit and overall margins. Littératures Illustrées could consider maintaining or intensifying the marketing of these box sets.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: RestoVerde
States :
RestoVerde, an organic restaurant chain, is looking to assess the financial performance of its flagship dish, an exotic salad. Their cost price excluding tax for each salad is €4 and it is sold at €10 excluding tax. Management wants to understand the profitability that the sale of 2000 salads generated the previous year.
Work to do :
- Calculate how much RestoVerde earns per unit of salad sold, using the unit margin.
- Find the margin rate on the sale of a salad.
- Determine the overall margin for the 2000 salads sold.
- Evaluate the markup rate for salad.
- Analyze how the margin made per salad can influence RestoVerde's strategy.
Proposed correction:
-
The unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €10 – €4 = €6.
Each salad generates a profit of €6 for RestoVerde. -
The margin rate is expressed by the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((10 – 4) ÷ 4) x 100 = 150%.
A margin rate of 150% is achieved on each salad sold. -
For the overall margin:
Overall margin = Unit margin x Quantity sold = 6 x 2000 = €12.
The sale of the 2000 salads brings a total margin of €12 to RestoVerde.
-
The markup rate is calculated by:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((10 – 4) ÷ 10) x 100 = 60%.
The markup rate for salad is 60%. -
With such a high unit margin, RestoVerde has the opportunity to use this profitability to finance the development of new recipes or invest in improving the customer experience.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: FuturoTech Technology
States :
FuturoTech is an innovative start-up specializing in electronic gadgets. It has just launched a new smartphone with a purchase cost excluding VAT of each device of €180 and a sale price of €300 excluding VAT. The start-up wants to evaluate the financial success of this model after having sold 500 units in the last few months.
Work to do :
- Calculate the unit margin achieved on the smartphone by FuturoTech.
- Estimate the margin rate for the smartphone in question.
- Determine the overall margin for the 500 smartphones sold.
- Calculate the markup rate for FuturoTech.
- Evaluate the financial implications of these margins for the future development of FuturoTech.
Proposed correction:
-
The calculated unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €300 – €180 = €120.
Thus, FuturoTech earns €120 per smartphone sold. -
The margin rate is obtained by the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((300 – 180) ÷ 180) x 100 = 66,67%.
A margin rate of 66,67% is applied for each smartphone. -
The overall margin is obtained as follows:
Overall margin = Unit margin x Quantity sold = 120 x 500 = €60.
FuturoTech achieved a total margin of €60 on these sales.
-
The markup rate is calculated by:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((300 – 180) ÷ 300) x 100 = 40%.
The markup rate is 40%. -
With substantial margins, FuturoTech has an excellent base to support the research and development of future gadgets, which is crucial for its growth and competitiveness.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Single Mode
States :
Mode Unique, an online boutique specializing in designer clothing, has decided to launch a new collection of eco-friendly t-shirts. Each t-shirt costs €15 to produce (excluding VAT) and sells for €35 excluding VAT. The management wants to assess the profitability of this collection after selling 1200 pieces.
Work to do :
- Determine the unit margin made on each t-shirt sold by Mode Unique.
- Calculate the margin rate applicable to a t-shirt from this collection.
- Estimate the overall margin of the 1200 t-shirts sold.
- Calculate the markup rate for a t-shirt.
- Discuss the impact of these financial results on Mode Unique’s sustainability strategy.
Proposed correction:
-
The unit margin for each t-shirt is:
Unit margin = PV excluding tax – PA excluding tax = €35 – €15 = €20.
Mode Unique makes a profit of €20 per t-shirt sold. -
The margin rate is determined by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((35 – 15) ÷ 15) x 100 = 133,33%.
Thus, the proactive margin is 133,33%. -
The overall sales margin is:
Overall margin = Unit margin x Quantity sold = 20 x 1200 = €24.
The collection generated a total agricultural margin of €24.
-
The markup rate is calculated as follows:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((35 – 15) ÷ 35) x 100 = 57,14%.
The markdown rate for this t-shirt is 57,14%. -
These results show good profitability, allowing Mode Unique to reinvest in other environmental initiatives and strengthen its role in the ecological market.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Pharmacy Health+
States :
Santé+, a pharmacy chain, wants to calculate the profitability of new food supplements. The purchase cost excluding tax of a bottle is €7 and it is resold at €12 excluding tax. This year, it sold 2500 units and wants to know the performance of this segment.
Work to do :
- Calculate the unit margin achieved by Santé+ on a bottle.
- Determine the margin rate for each bottle sold.
- Estimate the total margin for these 2500 bottles.
- Calculate the markup rate for the dietary supplement.
- Analyze how these financial results can influence the brand's strategic decisions.
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV excluding tax – PA excluding tax = €12 – €7 = €5.
Each bottle sold brings in a margin of €5. -
The margin rate is determined by the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((12 – 7) ÷ 7) x 100 = 71,43%.
The margin rate for bottles is 71,43%. -
The overall margin generated is:
Overall margin = Unit margin x Quantity sold = 5 x 2500 = €12.
Santé+ generated a total margin of €12.
-
The mark rate is obtained by:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((12 – 7) ÷ 12) x 100 = 41,67%.
The brand rate of food supplements reaches 41,67%. -
Santé+ can use these comfortable margins to diversify its offering or increase its market share, while focusing on product innovation and strengthening its visibility.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Advanced Computer Education
States :
Advanced Computer Education, a dynamic company specializing in online training, wants to calculate the margins on its new data analysis course. The development cost excluding tax is €5000, and each course license is sold at €200. They have sold 60 licenses this year.
Work to do :
- Calculate the unit margin made per course license.
- Determine the margin rate for each license sale.
- Calculate the overall margin for all licenses sold.
- Calculate the mark rate for the data analysis course.
- Discuss the implications of these findings for the company's future strategy.
Proposed correction:
-
The unit margin is:
Unit margin = PV HT – PA HT = €200 – (5000 ÷ 60) = €116,67.
Each license sold generates a margin of €116,67. -
The margin rate is determined by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((200 – 83,33) ÷ 83,33) x 100 = 139,99%.
The margin rate on each license is 139,99%. -
The overall margin is:
Overall margin = Unit margin x Quantity sold = 116,67 x 60 = €7.
The total margin for the licenses sold amounts to €7.
-
To calculate the markup rate, we have:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((200 – 83,33) ÷ 200) x 100 = 58,33%.
The mark rate stands at 58,33%. -
These margins suggest substantial potential for expanding training offerings, helping to solidify its competitive position.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – (Cost dev. HT ÷ Quantity) |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Tradition Gelato Italiano
States :
Tradition Gelato Italiano, a renowned ice cream parlor chain, is considering expanding its range with a new variety of sorbet. Each pot costs €3 to produce (excluding VAT) and sells for €7 excluding VAT. The chain wants to analyse the profits from the 5000 units sold this season.
Work to do :
- Calculate the unit margin made on each pot of sorbet.
- Evaluate the margin rate of this new sorbet.
- Calculate the total margin generated by the 5000 pots sold.
- Calculate the markup rate for a pot of sorbet.
- Analyze how these margins influence the strategy for launching new flavors.
Proposed correction:
-
The unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €7 – €3 = €4.
Each pot sold generates a margin of €4. -
The margin rate is obtained as follows:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((7 – 3) ÷ 3) x 100 = 133,33%.
The margin rate for sorbet is 133,33%. -
The overall margin is calculated by:
Overall margin = Unit margin x Quantity sold = 4 x 5000 = €20.
The overall margin for these sales totals €20.
-
For the mark rate, we use:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((7 – 3) ÷ 7) x 100 = 57,14%.
A brand rate of 57,14% characterizes this product. -
With lucrative margins, the chain can confidently continue to develop and test new flavors, thereby attracting more customers and maximizing its revenues.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Future Technologies
States :
Technologies du Futur, a company that markets smart widgets, wants to analyze the profitability of its latest model sold at a price excluding tax of €150 after a purchase excluding tax of €75. It sold 800 units this year and wants to understand the financial efficiency of this product line.
Work to do :
- Calculate the unit margin made on each widget.
- Evaluate the margin rate achieved for each widget sold.
- Calculate the overall margin made on all widgets sold.
- Find the markup rate of these widgets.
- Consider the potential business implications of the calculated margins for the company.
Proposed correction:
-
The unit margin is determined by:
Unit margin = PV excluding tax – PA excluding tax = €150 – €75 = €75.
Each widget makes a margin of €75. -
The margin rate is obtained by the formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((150 – 75) ÷ 75) x 100 = 100%.
A margin rate of 100% is achieved per widget. -
The overall margin for all widgets sold:
Overall margin = Unit margin x Quantity sold = 75 x 800 = €60.
The overall sale of this product generated good margins totaling €60.
-
The markup rate is:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((150 – 75) ÷ 150) x 100 = 50%.
The markup rate of each widget is 50%. -
These high margins give the company the opportunity to explore product innovation, intensified marketing, or even strategic price reductions to capture a larger market share.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Luxury Services
States :
Services de Luxe, a company offering high-end services, recently launched a special wellness package billed at €500 excluding VAT for the purchase excluding VAT of €200 per service. This year, the company has sold 150 services and wants to verify its economic performance.
Work to do :
- Calculate the unit margin achieved for each wellness package.
- Determine the margin rate for these packages.
- Evaluate the overall margin made on the services sold.
- Calculate the markup rate of the services.
- Discuss the strategic implications for improving the Luxury Services offering in the face of these results.
Proposed correction:
-
The unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €500 – €200 = €300.
Each wellness service generates a margin of €300. -
The margin rate is calculated as follows:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((500 – 200) ÷ 200) x 100 = 150%.
The margin rate is 150% per package. -
The overall margin corresponds to:
Overall margin = Unit margin x Quantity sold = 300 x 150 = €45.
The company has a total margin of €45 for the packages sold.
-
The markup rate is determined by:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((500 – 200) ÷ 500) x 100 = 60%.
The mark rate of the services is 60%. -
Services de Luxe could consider integrating new components into these packages, taking advantage of its substantial margins to attract an even wider clientele and accentuate its high-end reputation.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |