In this section:
Application: Flavors of the World
States :
The company "Les Saveurs du Monde" is a restaurant located in the city center, specializing in fusion cuisine. The owner wants to evaluate the success of his flagship dish, the "Tandoori Burger". This burger is sold at €15 excluding VAT. The cost of purchasing the ingredients for each burger is €6 excluding VAT. The restaurant sells approximately 300 "Tandoori Burgers" per month.
Work to do :
- Calculate the unit margin made on the sale of a “Tandoori Burger”.
- Determine the overall monthly margin generated by the sale of “Tandoori Burgers”.
- What is the unit margin rate on this product?
- If the owner wants to increase his unit margin by 20%, what should be the new selling price excluding tax of the burger?
- Analyze the impact of a 10% increase in ingredient costs on unit margin.
Proposed correction:
-
The unit margin is calculated as follows: PV HT – PA HT = €15 – €6 = €9.
This means that each “Tandoori Burger” generates a margin of €9. -
For the overall monthly margin, we use the formula: Unit margin x Quantity sold = €9 x 300 = €2.
The restaurant therefore generates a total margin of €2 per month for this burger. -
The unit margin rate is calculated using the formula: ((PV HT – PA HT) ÷ PA HT) x 100 = ((15 – 6) ÷ 6) x 100 = 150%.
Thus, the margin achieved in relation to the cost of purchasing the ingredients is 150%.
-
To increase the unit margin by 20%, the calculation is as follows:
New Margin = €9 x 1,20 = €10,80.
New PV HT = PA HT + New Margin = €6 + €10,80 = €16,80.
The selling price excluding VAT should be adjusted to €16,80. -
If the cost of ingredients increases by 10%, the new purchase cost is:
New PA HT = €6 x 1,10 = €6,60.
New Margin = €15 – €6,60 = €8,40.
The new unit margin is €8,40, which represents a decrease compared to the initial margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Monthly overall margin | Unit margin x Quantity sold |
| Unit margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New Margin | Unit Margin x Increase |
| New PV HT | PA HT + New Margin |
Application: Bistro du Coin
States :
"Bistro du Coin" is a small family establishment specializing in traditional takeaway dishes. Currently, the best-selling dish is the "Cassoulet Maison" offered at €20 excluding VAT. The cost of purchasing the raw material for each dish is €12 excluding VAT. The restaurant sells an average of 200 dishes per month.
Work to do :
- Calculate the unit margin obtained on each “Cassoulet Maison”.
- What is the total margin made at the end of the month for this dish?
- Determine the unit markup rate for the “Cassoulet Maison” dish.
- If the selling price excluding VAT were to be reduced to €18, calculate the new unit margin.
- Discuss the implications for the business if the unit margin becomes insufficient.
Proposed correction:
-
Unit margin: PV HT – PA HT = €20 – €12 = €8 per “Homemade Cassoulet”.
The “Bistro du Coin” therefore makes a margin of €8 per dish. -
Monthly overall margin: Unit margin x Quantity sold = €8 x 200 = €1.
So the total margin is €1 per month. -
The unit markup rate is calculated as follows: ((PV HT – PA HT) ÷ PV HT) x 100 = ((20 – 12) ÷ 20) x 100 = 40%.
The markup rate is 40% for each dish sold.
-
With a reduction in the selling price to €18, the new unit margin is: €18 – €12 = €6.
The unit margin then decreases to €6. -
If the unit margin is insufficient, the company may have difficulty covering its fixed costs and operating profitably. It may be necessary to optimize the cost of ingredients or re-evaluate the pricing structure.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Monthly overall margin | Unit margin x Quantity sold |
| Unit markup rate | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New Unit Margin | New PV HT – PA HT |
Application: Pizza Paradiso
States :
"Pizza Paradiso" is a growing chain of pizzerias. The star product is the "Pizza Paradisiaque", offered at a price of €10 excluding VAT. The cost price for each pizza is €4,50 excluding VAT. The pizzeria sells around 800 pizzas per week.
Work to do :
- What is the margin per pizza made by “Pizza Paradiso”?
- Calculate the total weekly margin obtained thanks to the “Paradise Pizza”.
- Evaluate the margin rate for this product.
- If the cost price increased by 15%, what would be the impact on the unit margin?
- Propose a strategy to maintain margin in the event of increased production costs.
Proposed correction:
-
Unit margin: PV HT – PA HT = €10 – €4,50 = €5,50 per pizza.
So each pizza produces a margin of €5,50. -
Weekly margin: Unit margin x Quantity sold = €5,50 x 800 = €4.
The total weekly margin is therefore €4. -
The margin rate is calculated as follows: ((PV HT – PA HT) ÷ PA HT) x 100 = ((10 – 4,50) ÷ 4,50) x 100 = 122,22%.
The margin is 122,22% over cost.
-
With a 15% increase in costs, the new cost would be: €4,50 x 1,15 = €5,175.
New Margin = €10 – €5,175 = €4,825.
The unit margin would then be reduced to €4,825. -
Maintaining margin might require adjusting selling price, negotiating with suppliers for lower rates, or improving operational efficiency to offset increased costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total weekly margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New Unit Margin | PV HT – New PA HT |
Application: Gourmet Veggie
States :
“Gourmet Veggie” is an innovative restaurant that offers the best vegetarian dishes in town. Their brand new “Grilled Vegetable Wrap” is priced at €9 excluding VAT, while the cost of ingredients comes to €4 excluding VAT per wrap. The restaurant plans to sell 500 wraps per month.
Work to do :
- Determine the margin that “Gourmet Veggie” makes on each “Grilled Veggie Wrap”.
- Calculate the total monthly margin the restaurant can expect to generate.
- What is the markup rate for the “Grilled Vegetable Wrap”?
- What quantity should be sold to reach a total monthly margin of €3?
- Present an analysis of the financial risks of the product in the event of a drop in demand.
Proposed correction:
-
The unit margin is calculated as follows: PV HT – PA HT = €9 – €4 = €5.
This means that “Gourmet Veggie” earns €5 per wrap sold. -
The overall margin is: Unit margin x Quantity sold = €5 x 500 = €2.
This translates to a total margin of €2 per month. -
The markup rate is obtained by: ((PV HT – PA HT) ÷ PV HT) x 100 = ((9 – 4) ÷ 9) x 100 = 55,56%.
Thus, the mark rate is 55,56%.
-
To have a total margin of €3, you need to sell: €000 ÷ €3 = 000 wraps.
It will therefore be necessary to sell 600 wraps to reach this objective. -
A drop in demand can reduce total margins and affect profitability. It is essential to diversify the offer or use advertising to maintain sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total monthly margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Quantity for target margin | Total Target Margin ÷ Unit Margin |
Application: Indigo Coffee
States :
“Café Indigo” is a boutique coffee shop known for its “Homemade Chocolate Cookies”. Each cookie is sold at €3 excluding VAT and the cost price per cookie is €1,20 excluding VAT. The cafe sells approximately 1 cookies per month.
Work to do :
- What is the margin made per cookie at “Café Indigo”?
- Evaluate the overall monthly margin for cookies.
- What is the unit margin rate on cookies sold?
- If the selling price increases by €0,50, how will this affect the unit margin?
- Discuss the strategic implications of increasing the selling price for customer loyalty.
Proposed correction:
-
The margin per cookie is: PV HT – PA HT = €3 – €1,20 = €1,80.
Each cookie therefore generates a margin of €1,80. -
The total monthly margin is: Unit margin x Quantity sold = €1,80 x 1 = €000.
This is the margin generated per month from the sale of cookies. -
The margin rate is: ((PV HT – PA HT) ÷ PA HT) x 100 = ((3 – 1,20) ÷ 1,20) x 100 = 150%.
The margin rate is 150% for each cookie.
-
With an increase in the selling price of €0,50, the new PV excluding tax is €3,50.
New Margin = €3,50 – €1,20 = €2,30.
This increases the unit margin to €2,30. -
A price increase can reinforce the perception of quality but could also lead some customers to turn to the competition, especially if the market is price sensitive. A market study can guide the best decision.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total monthly margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New Margin after increase | New PV HT – PA HT |
Application: Palace Sushi
States :
"Palace Sushi" is known for its famous "Dragon Roll", sold at €12 excluding VAT. The production cost of each roll is €5 excluding VAT. The company manages to sell 600 rolls per week.
Work to do :
- Calculate the unit margin on each “Dragon Roll”.
- What is the weekly margin generated by the “Dragon Roll”?
- What is the markup rate for this product?
- If sales increase by 20%, what will the new weekly margin be?
- Consider the strategic effect of increased sales on the expansion of “Palace Sushi”.
Proposed correction:
-
Unit margin: PV HT – PA HT = €12 – €5 = €7.
Each “Dragon Roll” therefore brings in €7 in margin. -
Weekly margin: Unit margin x Quantity sold = €7 x 600 = €4.
Each week, the total margin is €4. -
The markup rate is: ((PV HT – PA HT) ÷ PV HT) x 100 = ((12 – 5) ÷ 12) x 100 = 58,33%.
Thus, the mark rate is 58,33%.
-
For a 20% increase in sales, the quantity becomes 600 x 1,20 = 720.
New Total Margin = €7 x 720 = €5.
The weekly margin would therefore increase to €5. -
An increase in sales shows that the product is popular, which can be used as leverage to promote other products and thus increase the presence of "Palace Sushi" on the market.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Weekly margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New Quantity | Initial Quantity x Increase |
| New Total Margin | Unit Margin x New Quantity |
Application: Bella Pasta
States :
"Bella Pasta" is a trattoria famous for its homemade lasagna. The price excluding VAT of a portion of lasagna is €14, with a purchase cost of €6 per portion. On average, 150 portions are sold each week.
Work to do :
- Calculate the unit margin for each portion of lasagna.
- What is the total weekly margin generated by lasagna?
- What is the margin rate for each portion?
- If a temporary promotion reduces the price by €2, what will the new unit margin be?
- Evaluate the potential impact of this promotion on overall revenue.
Proposed correction:
-
Unit margin: PV HT – PA HT = €14 – €6 = €8.
Each portion of lasagna therefore generates a margin of €8. -
Total weekly margin: Unit margin x Quantity sold = €8 x 150 = €1.
Every week, “Bella Pasta” makes a total margin of €1 from lasagna. -
The margin rate is given by: ((PV HT – PA HT) ÷ PA HT) x 100 = ((14 – 6) ÷ 6) x 100 = 133,33%.
Thus, each portion has a margin rate of 133,33%.
-
When the price is reduced to €12, the new unit margin is: €12 – €6 = €6.
This reduces the margin to €6 per portion. -
A temporary promotion can attract more customers, potentially increasing sales volume. However, the effect on turnover depends on the balance between the price reduction and the increase in sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total weekly margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New Promotional Margin | New PV HT – PA HT |
Application: Sweet Tooth
States :
"Sweet Tooth" is an artisanal confectionery that sells its famous "Chocolate Baguettes" at a price excluding VAT of €5. The production cost per baguette is €2. The company plans to sell 400 baguettes each month.
Work to do :
- Deduct the unit margin from the sale of a “Chocolate Baguette”.
- Calculate the total monthly margin of “Sweet Tooth”.
- What is the markup rate achieved for each baguette?
- Forecast the margin amount if monthly sales increase by 50%.
- develop a reflection on the importance of the margin for the survival of “Sweet Tooth”.
Proposed correction:
-
The unit margin is: PV HT – PA HT = €5 – €2 = €3.
So each chocolate baguette brings in €3. -
The total monthly margin is: Unit margin x Quantity sold = €3 x 400 = €1.
The confectionery therefore generates a total margin of €1 each month. -
The markup rate is: ((PV HT – PA HT) ÷ PV HT) x 100 = ((5 – 2) ÷ 5) x 100 = 60%.
So each baguette has a 60% markup rate.
-
If sales increased by 50%, the new quantity sold would be: 400 x 1,50 = 600.
New Margin = €3 x 600 = €1.
The amount of the new monthly margin would then be €1. -
Margin is crucial for Sweet Tooth because it allows it to cover fixed costs and ensure long-term profitability. A good margin is also essential to finance expansion or innovation projects.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total monthly margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New Quantity Sold | Initial Quantity x Increase |
| New Total Margin | Unit Margin x New Quantity |
Application: Green Bowl
States :
"Green Bowl" is a new brand specializing in organic salads. Their "Energy Salad" is sold at €8 excluding VAT, for an ingredient purchase cost of €3,50. The brand aims to sell 1 salads monthly.
Work to do :
- Calculate the unit margin of each “Energy Salad”.
- Specify the total monthly margin that “Green Bowl” can expect.
- Calculate the margin rate obtained per salad sold.
- Green Bowl is considering a promotional offer reducing the selling price by 10%. What will the new unit margin be?
- Suggest a strategy to improve margin, even with a promotion running.
Proposed correction:
-
The unit margin is calculated as: PV HT – PA HT = €8 – €3,50 = €4,50.
Each salad generates a margin of €4,50. -
The total monthly margin is: Unit margin x Quantity sold = €4,50 x 1 = €200.
"Green Bowl" can expect an overall margin of €5 per month. -
The margin rate is: ((PV HT – PA HT) ÷ PA HT) x 100 = ((8 – 3,50) ÷ 3,50) x 100 = 128,57%.
The unit margin rate is therefore 128,57%.
-
With a 10% price reduction, the new PV excluding VAT is: €8 – (0,10 x €8) = €7,20.
New Unit Margin = €7,20 – €3,50 = €3,70.
The new unit margin is therefore €3,70. -
To improve margin even with a promotion, Green Bowl could optimize its supply sources to reduce costs or encourage the purchase of other high-margin products through cross-selling during the duration of the offer.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Total monthly margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| New PV HT promotion | Original PV HT – (Promo rate x Original PV HT) |
| New Promotion Margin | New PV HT – PA HT |