How-to-calculate-the-margin-of-an-item

How to Calculate the Margin of an Article | 9 Exercises

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Application: Rainbow Soaps

States :

The company Les Savons de l'Arc-en-Ciel, which specializes in the manufacture of artisanal soaps, wants to analyze the profitability of its latest product, the soap "Pure Nature". This soap is sold at a sales price excluding tax of €15 and has a purchase price excluding tax of €8. Last year, the company sold 3 units of this soap. To better adapt its commercial strategy, it wants to know different performance indices.

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%.

  1. 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%.

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

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 company that produces technological gadgets. The company wants to evaluate the performance of its latest drone "SkyMaster Pro". Each unit is sold at a price of €350 excluding VAT and costs €200 excluding VAT to produce. Last year, Technologie Futuriste SA sold 1 units of SkyMaster Pro. In order to update its marketing strategy, the company wants precise indications on profitability and pricing strategy.

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%.

  1. 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%.

  2. 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 sector. The recent collection "Élégance Urbaine" has attracted particular attention, especially the coat "Chic Urbain". This coat is sold at a price of €120 excluding VAT and costs €75 excluding VAT to produce. With 2 units sold this season, the company wants to evaluate its precise commercial 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%.

  1. 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%.

  2. 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 Pharmaceutiques specializes in the development of food supplements. Their product “VitaBoost” is sold at €25 excluding VAT, while the production cost is €15 excluding VAT. The company wants to understand its performance on the 5 units sold in the last quarter in order to better plan its next sales campaigns.

Work to do :

  1. Calculate the unit margin for each unit of “VitaBoost”.
  2. Estimate 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%.

  1. 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%.

  2. Financial performance indicates that “VitaBoost” has a substantial return. These results should encourage Santé Plus Pharmaceutiques to continue their market expansion strategy while considering targeted promotions to capture a wider 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 manual entitled “Apprentissage 4.0” sold at €60 excluding VAT, with a production cost of €35 excluding VAT per unit. The company has sold 1 copies in six months and wants to have an overview of the 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.

  1. 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%.

  2. 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 set of organic kitchen products, including the “Organic Gourmet Package”. This package is sold at €50 excluding VAT and costs €30 excluding VAT to produce. With a recent sale of 600 units, the company wants 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 linked to “Organic Gourmet Package”?
  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%.

  1. 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.

  2. 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 pieces of jewelry. Their "Éclat Solide" bracelet is sold at €300 excluding VAT, while the cost of materials and production comes to €180 excluding VAT per unit. Total sales amount to 400 units this year. The company wants to take advantage of 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.

  1. 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%.

  2. 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 :

Solutions Technoclean offers innovative cleaning services for offices. Their latest service “Special Cleanliness+” sells for €200 excluding VAT per service, while the direct cost is €120 excluding VAT. With 800 services carried out this quarter, the company wants to get 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%.

  1. 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%.

  2. 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 is marketed at €1 excluding VAT with a production cost of €000 excluding VAT. This year, 650 kits were sold. The company wants 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%.

  1. 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.

  2. 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

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