How to Calculate the Margin of an Article | 9 Exercises

Application: Rainbow Soaps

States :

Les Savons de l'Arc-en-Ciel, a company specializing in the manufacture of artisanal soaps, wishes to analyze the profitability of its latest product, “Pure Nature” soap. This soap is sold at a retail price of €15 excluding VAT and has a purchase price of €8 excluding VAT. Last year, the company sold 3 units of this soap. To better adapt its business strategy, it wishes to understand various performance indicators.

Work to do :

1. Calculate the unit margin for “Pure Nature” soap.
2. Determine the overall margin made on this annual sale.
3. Calculate the margin rate for “Pure Nature” soap.
4. Find the corresponding markup rate.
5. Analyze the implications that these results could have on the pricing policy of Les Savons de l'Arc-en-Ciel.

Proposed correction:

1. The unit margin is obtained by the difference between the selling price excluding tax and the purchase price excluding tax.
   Unit margin = €15 – €8 = €7
   The unit margin for “Pure Nature” soap is therefore €7.

2. The overall margin is calculated by multiplying the unit margin by the volume sold.
   Total margin = €7 x €3 = €000
   The overall margin made on the annual sale is €21.

3. The margin rate is given by ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€15 – €8) ÷ €8) x 100 = 87,5%
The margin rate for “Pure Nature” soap is 87,5%.

4. The mark rate is obtained by ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€15 – €8) ÷ €15) x 100 = 46,67%
   The markup rate for this soap is 46,67%.

5. The results show that “Pure Nature” soap has a very profitable margin. However, given the margin rate and brand, Les Savons de l'Arc-en-Ciel could consider adjusting its selling price to improve its competitiveness without sacrificing too much profitability.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Futuristic Technology SA

States :

Technologie Futuriste SA is a technology gadget manufacturing company. The company wants to evaluate the performance of its latest drone, the SkyMaster Pro. Each unit retails for €350 excluding VAT and costs €200 excluding VAT to produce. Last year, Technologie Futuriste SA sold 1 SkyMaster Pro units. To update its marketing strategy, the company wants specific information on profitability and pricing.

Work to do :

1. Calculate the unit margin of each drone sold by Technologie Futuriste SA.
2. Evaluate the overall margin generated by the sale of SkyMaster Pro.
3. Find the margin rate for SkyMaster Pro.
4. Calculate the markup rate of SkyMaster Pro.
5. Analyze what these results mean for Technologie Futuriste SA's future business strategies.

Proposed correction:

1. To calculate the unit margin, you subtract the purchase price excluding VAT from the sale price excluding VAT.
   Unit margin = €350 – €200 = €150
   Each drone sold generates a unit margin of €150.

2. The overall margin is determined by multiplying the unit margin by the total quantity sold.
   Total margin = €150 x €1 = €500
   The total sale of SkyMaster Pro generated an overall margin of €225.

3. The margin rate is determined by ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€350 – €200) ÷ €200) x 100 = 75%
For SkyMaster Pro, the margin rate is 75%.

4. For the markup rate, use ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€350 – €200) ÷ €350) x 100 = 42,86%
   The drone's mark rate is 42,86%.

5. These results indicate that Technologie Futuriste SA benefits from a substantial profitability with SkyMaster Pro. Nevertheless, the company could evaluate whether it is advantageous to reduce the selling price to broaden the customer base while preserving enough margin to maintain its profitability.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Fashion and Style SARL

States :

Mode et Style SARL is an innovative company in the fashion industry. The recent “Urban Elegance” collection has particularly attracted attention, especially the “Urban Chic” coat. This coat retails for €120 excluding VAT and costs €75 excluding VAT to produce. With 2 units sold this season, the company is looking to assess its precise sales results.

Work to do :

1. Calculate the unit margin of the “Chic Urbain” coat.
2. Determine the overall margin made with this seasonal sale.
3. Find the margin rate associated with this item.
4. Calculate the markup rate for this coat.
5. Discuss the strategic implications for the upcoming Fashion and Style SARL collection.

Proposed correction:

1. The unit margin is obtained by subtracting the pre-tax purchase price from the pre-tax selling price.
   Unit margin = €120 – €75 = €45
   The “Chic Urbain” coat has a unit margin of €45.

2. The overall margin results from multiplying the unit margin by the number of coats sold.
   Total margin = €45 x €2 = €500
   The seasonal sale generated an overall margin of €112 for this model.

3. The margin rate is calculated as follows: ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€120 – €75) ÷ €75) x 100 = 60%
The margin rate for the coat is 60%.

4. For the markup rate, we use: ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€120 – €75) ÷ €120) x 100 = 37,5%
   The coat's mark rate is 37,5%.

5. The results indicate a solid commercial performance. However, Mode et Style SARL must analyze the market for the next collection, in order to maintain the balance between cost and selling price, while captivating potential customers with innovative designs.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Health Plus Pharmaceuticals

States :

Santé Plus Pharmaceuticals specializes in the development of dietary supplements. Their product, "VitaBoost," sells for €25 excluding VAT, while the production cost is €15 excluding VAT. The company wants to understand its performance on the 5 units sold during the last quarter to better plan its upcoming sales campaigns.

Work to do :

1. Calculate the unit margin for each unit of “VitaBoost”.
2. Evaluate the overall margin generated by the sale of “VitaBoost”.
3. Find the margin rate for this product.
4. Determine the brand rate of “VitaBoost”.
5. Analyze the impact of these results on Santé Plus Pharmaceutiques' future marketing strategy.

Proposed correction:

1. For any unit, the unit margin is the selling price excluding tax minus the production cost excluding tax.
   Unit margin = €25 – €15 = €10
   Each “VitaBoost” unit generates a unit margin of €10.

2. The overall margin is the multiplication of the unit margin by the sales volume.
   Total margin = €10 x €5 = €000
   The overall margin generated by the sale of “VitaBoost” is €50.

3. The margin rate is given by ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€25 – €15) ÷ €15) x 100 = 66,67%
The margin rate for “VitaBoost” is 66,67%.

4. As for the mark rate, it is equal to ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€25 – €15) ÷ €25) x 100 = 40%
   The markup rate for this product is 40%.

5. Financial performance indicates that VitaBoost is delivering substantial returns. These results should encourage Santé Plus Pharmaceuticals to continue its market expansion strategy while considering targeted promotions to attract a broader customer base.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Modern Education SARL

States :

Éducation Moderne SARL has just launched an interactive digital textbook titled “Apprentissage 4.0,” selling for €60 excluding VAT, with a production cost of €35 excluding VAT per unit. The company has sold 1 copies in six months and is looking to gain insight into its current profitability to inform its future digital educational content.

Work to do :

1. Calculate the unit margin of the digital manual “Learning 4.0”.
2. Determine the overall margin from sales of this manual.
3. Find the margin rate associated with the product.
4. Calculate the mark rate of “Learning 4.0”.
5. Consider how these calculations may influence future product line expansion.

Proposed correction:

1. The unit margin is the result of the difference between PV HT and PA HT.
   Unit margin = €60 – €35 = €25
   The “Learning 4.0” manual offers a unit margin of €25.

2. The overall margin can be calculated by multiplying the unit margin by the number of sales.
   Total margin = €25 x €1 = €200
   The sale of this manual generated an overall margin of €30.

3. The margin rate is calculated from ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€60 – €35) ÷ €35) x 100 = 71,43%
The margin rate is 71,43% for this manual.

4. The markup rate is ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€60 – €35) ÷ €60) x 100 = 41,67%
   For the manual, the mark rate is 41,67%.

5. These performance data highlight a satisfactory performance for this educational product. Éducation Moderne SARL could consider expanding digital distribution and exploring new content options to satisfy a growing customer base.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Culinary Arts of the Earth

States :

Art Culinaires de la Terre offers a range of organic kitchen products, including the “Organic Gourmet Package.” This package retails for €50 (excluding VAT) and costs €30 (excluding VAT) to produce. With 600 units recently sold, the company is looking to adjust its understanding of profitability to explore new markets.

Work to do :

1. Calculate the unit margin for “Organic Gourmet Package”.
2. Determine the overall margin generated by the last sale.
3. What is the margin rate for “Package Gourmet Bio”?
4. Determine the markup rate for this product.
5. Propose market strategies based on these findings for Culinary Arts of the Earth.

Proposed correction:

1. The unit margin is obtained by subtracting the HT PA from the HT PV.
   Unit margin = €50 – €30 = €20
   The unit margin for each “Organic Gourmet Package” is €20.

2. The overall margin is achieved by the product of the unit margin and the total sold.
   Overall margin = €20 x 600 = €12
   Sales of this package generated an overall margin of €12.

3. The margin rate is determined by ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€50 – €30) ÷ €30) x 100 = 66,67%
The margin rate for this product is 66,67%.

4. As for the markup rate, the formula is ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€50 – €30) ÷ €50) x 100 = 40%
   The markup rate is 40% for the package.

5. The information gained indicates that Art Culinaires de la Terre has a good price point and profitability. To strengthen their expansion, they could consider group sales or collaborations with other organic brands in order to attract new buyers.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Artists' Jewelry

States :

Bijoux d'Artistes creates unique jewelry pieces. Their “Éclat Solide” bracelet retails for €300 excluding VAT, while the cost of materials and production comes to €180 excluding VAT per unit. Total sales this year amounted to 400 units. The company aims to leverage its margins to reinvest.

Work to do :

1. Calculate the unit margin achieved by the “Solid Shine” bracelet.
2. Determine the overall margin on annual sales of the bracelet.
3. Calculate the margin rate associated with “Solid Shine”.
4. Find the markdown rate for this bracelet.
5. Discuss the implications these results may have for reinvestment strategy.

Proposed correction:

1. For unit margin, subtract cost from the selling price.
   Unit margin = €300 – €180 = €120
   The unit margin for “Éclat Solide” is €120.

2. Let's calculate the overall margin by multiplying the unit margin by the number of units sold.
   Overall margin = €120 x 400 = €48
   The overall margin for the year for this bracelet is €48.

3. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€300 – €180) ÷ €180) x 100 = 66,67%
The margin rate is 66,67% for the bracelet.

4. The mark rate is evaluated by ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€300 – €180) ÷ €300) x 100 = 40%
   The markup rate for “Solid Shine” is 40%.

5. The results show an attractive margin, allowing Bijoux d'Artistes to consider strategic reinvestments to expand their product range or deepen their target market using these funds.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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: Technoclean Solutions

States :

Technoclean Solutions offers innovative cleaning services for offices. Their latest service, “Special Cleanliness+,” costs €200 excluding VAT per service, while the direct cost is €120 excluding VAT. With 800 services completed this quarter, the company is looking to gain a clear view of its current performance and optimize it.

Work to do :

1. Calculate the unit margin of “Special Cleanliness+”.
2. Determine the overall margin for this quarter.
3. Evaluate the service margin rate.
4. Calculate the markup rate for this service.
5. Propose recommendations to improve financial performance based on these results.

Proposed correction:

1. Unit margin is the difference between the selling price and the direct cost.
   Unit margin = €200 – €120 = €80
   The “Special Cleanliness+” service generates a unit margin of €80.

2. The overall margin is found by multiplying the unit margin by the number of services.
   Overall margin = €80 x 800 = €64
   The overall margin for the quarter is €64.

3. The margin rate uses ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€200 – €120) ÷ €120) x 100 = 66,67%
The reported margin rate is 66,67%.

4. The markup rate uses the formula ((PV HT – PA HT) ÷ PV HT) x 100.
   Brand rate = ((€200 – €120) ÷ €200) x 100 = 40%
   The markup rate for this service is 40%.

5. Building on this financial performance, Solutions Technoclean could explore bundled offers to strengthen its competitiveness, while optimizing costs to maximize margins.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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 Solar

States :

GreenTech Solaire develops and sells solar kits for individuals. The “SunPower” kit retails for €1 excluding VAT, with a production cost of €000 excluding VAT. This year, 650 kits were sold. The company aims to optimize its margins for future expansion.

Work to do :

1. Calculate the unit margin of a “SunPower” kit.
2. Evaluate the overall margin over the year.
3. Find the kit's margin rate.
4. Find the brand rate of “SunPower”.
5. Discuss strategic development areas to improve future margins based on results.

Proposed correction:

1. The unit margin results from the difference between PV HT and PA HT.
   Unit margin = €1 – €000 = €650
   Each “SunPower” kit generates a unit margin of €350.

2. The overall margin for the year is obtained by multiplying the unit margin with total sales.
   Overall margin = €350 x 300 = €105
   The overall margin achieved is €105 for the year.

3. The margin rate is ((PV HT – PA HT) ÷ PA HT) x 100.

Margin rate = ((€1 – €000) ÷ €650) x 650 = 100%
The margin rate is 53,85%.

4. The markup rate is calculated as follows: ((PV HT – PA HT) ÷ PV HT) x 100.
   Markup rate = ((€1 – €000) ÷ €650) x 1 = 000%
   The markup rate is 35% for the kit.

5. GreenTech Solaire could use these results to strengthen strategic partnerships and optimize production and distribution, while continuing to develop their solar innovations to attract more customers.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Overall 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