How to Calculate Margin in Value | 9 Exercises

Application: Restoration of the Shooting Star

States :

The restaurant "L'Étoile Filante" is a small fast food establishment located in the city center. It offers complete meals at a unit sales price of €12,50 excluding tax. The purchase cost per meal is €7,50 excluding tax. To boost its sales, the restaurant plans to sell 250 meals each week. Let's help the manager calculate the value margin as well as some key financial indicators to optimize its profitability.

Work to do :

1. Calculate the unit margin per meal.
2. What are the margin rate and brand rate for each meal?
3. Determine the restaurant's overall weekly margin.
4. If the restaurant reduces the unit selling price to €11,00 excluding VAT to attract more customers, what would the new unit margin be?
5. Provide an analysis of the financial implications if the number of meals sold increased to 300 per week at the new price.

Proposed correction:

1. The unit margin is calculated by subtracting the purchase price (PA) from the sale price (SVP).

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €12,50 – €7,50 = €5,00.

   The unit margin per meal is therefore €5,00.

2. • Margin rate: ((PV HT – PA HT) ÷ PA HT) x 100.
     Calculation: ((€12,50 – €7,50) ÷ €7,50) x 100 = 66,67%.

   • Mark rate: ((PV HT – PA HT) ÷ PV HT) x 100.
     Calculation: ((€12,50 – €7,50) ÷ €12,50) x 100 = 40,00%.

   The margin rate is 66,67% and the markup rate is 40,00%.

3. The overall margin is calculated by multiplying the unit margin by the number of meals sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €5,00 x 250 = €1.

The restaurant's overall weekly margin is €1.

4. By lowering the selling price to €11,00 excluding VAT, the new unit margin would be:

   Calculation: €11,00 – €7,50 = €3,50.

   The new unit margin would be €3,50.

5. By selling 300 meals at €11,00 excluding VAT, the overall margin would be:

   Calculation: €3,50 x 300 = €1.

   Although the unit margin is decreasing, the increase in sales volume could compensate, but it depends on whether the operating cost remains stable.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: Tech Innovative Solution

States :

Tech Solution Innovante is a young start-up specializing in the sale of technological gadgets. Its flagship product, a connected bracelet, is sold for €99,99 excluding VAT at a purchase cost of €65,00 excluding VAT. The company hopes to sell 600 units per month to maximize its profits. Based on this data, help the team analyze its performance.

Work to do :

1. Calculate the unit margin of the connected bracelet.
2. Evaluate the product's margin rate.
3. Determine the expected monthly overall margin.
4. Calculate the markup rate for this product.
5. How could the sales strategy be affected if the purchase cost increased to €70,00 excluding VAT?

Proposed correction:

1. The unit margin is calculated by the difference between the selling price excluding tax and the purchase cost excluding tax.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €99,99 – €65,00 = €34,99.

   The unit margin of the connected bracelet is €34,99.

2. The margin rate is calculated by dividing the unit margin by the pre-tax purchase cost, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€99,99 – €65,00) ÷ €65,00) x 100 = 53,83%.

   The product margin rate is 53,83%.

3. The monthly overall margin results from multiplying the unit margin by the number of units sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €34,99 x 600 = €20.

The expected monthly overall margin is €20.

4. The markup rate is obtained by dividing the unit margin by the selling price excluding tax, multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€99,99 – €65,00) ÷ €99,99) x 100 = 35,00%.

   The markup rate is 35,00%.

5. With an increase in the purchase cost to €70,00 excluding VAT, the new unit margin would be:

   Calculation: €99,99 – €70,00 = €29,99.

   The company will have to assess whether this reduced margin is acceptable or whether it would be necessary to review the selling price to maintain its profitability.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: Chic and Shock Fashion

States :

Mode Chic et Choc is a clothing store that wants to optimize its sales. The owner, Antoine, offers a pretty summer dress at a price of €85,00 excluding VAT. The purchase cost of each dress is €50,00 excluding VAT. He thinks he can sell 120 dresses over the next month. Let's study the impact of these sales on the company's margins.

Work to do :

1. Determine the unit margin for each dress.
2. What is the markup for this dress?
3. Calculate the overall margin for 120 dresses.
4. Evaluate the markup rate for dresses.
5. Discuss the implications for the store if the selling price increased by 10%.

Proposed correction:

1. The unit margin is the difference between the selling price excluding VAT and the purchase cost excluding VAT.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €85,00 – €50,00 = €35,00.

   The unit margin for each dress is €35,00.

2. The margin rate is obtained by dividing the unit margin by the purchase cost, all multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€85,00 – €50,00) ÷ €50,00) x 100 = 70,00%.

   The markup for this dress is 70,00%.

3. The overall margin is calculated by multiplying the unit margin by the number of dresses sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €35,00 x 120 = €4.

The overall margin for 120 dresses is €4.

4. The markup rate is found by dividing the unit margin by the selling price excluding tax, then multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€85,00 – €50,00) ÷ €85,00) x 100 = 41,18%.

   The markup rate is 41,18%.

5. With a 10% increase in the sale price, the new price would be €93,50 excluding VAT.

   The new unit margin would be: €93,50 – €50,00 = €43,50.

   This would imply better profitability, but it would also be necessary to check whether demand remains stable with this new price.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: Health & Vital Well-Being

States :

The “Health & Vital Well-Being” center offers health cures to its members at a rate of €150,00 excluding VAT per cure. The cost of purchasing resources for each cure is €90,00 excluding VAT. The center plans to sell 200 cures during the summer season. Let’s provide a detailed analysis for the manager.

Work to do :

1. Calculate the unit margin for each cure.
2. What is the margin rate of the proposed treatments?
3. Determine the overall margin expected for the summer season.
4. Evaluate the mark rate per treatment.
5. Consider the impact of a 15% drop in selling price on margins.

Proposed correction:

1. The unit margin is obtained by subtracting the pre-tax purchase cost from the pre-tax selling price.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €150,00 – €90,00 = €60,00.

   The unit margin for each treatment is €60,00.

2. The margin rate is determined by dividing the unit margin by the pre-tax purchase cost, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€150,00 – €90,00) ÷ €90,00) x 100 = 66,67%.

   The treatment margin rate is 66,67%.

3. The overall margin is calculated by multiplying the unit margin by the number of planned treatments.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €60,00 x 200 = €12.

The overall margin expected for the summer season is €12.

4. The markup rate is obtained by dividing the unit margin by the selling price excluding tax, multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€150,00 – €90,00) ÷ €150,00) x 100 = 40,00%.

   The mark rate per treatment is 40,00%.

5. If the sale price decreases by 15%, the new price would be €127,50 excluding VAT.

   The new unit margin would be: €127,50 – €90,00 = €37,50.

   This would significantly reduce the profitability of each treatment, so it is crucial to compensate by increasing the volume sold.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: Noveltoys Education

States :

Noveltoys, an educational toy and game store, sells a science experiment kit for children. This flagship product is priced at €55,00 excluding VAT, with a purchase cost of €30,00 excluding VAT. The store plans to sell 400 units this quarter. Let's review the margins associated with this product.

Work to do :

1. Calculate the unit margin of the experience kit.
2. Determine the margin rate for this product.
3. Estimate the overall quarterly margin.
4. What is the markup rate of the kit?
5. Consider the financial consequences if the company decided to reduce the purchasing cost by negotiating with the supplier.

Proposed correction:

1. The unit margin is calculated by subtracting the pre-tax purchase cost from the pre-tax selling price.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €55,00 – €30,00 = €25,00.

   The unit margin of the experience kit is €25,00.

2. The margin rate is the ratio of the unit margin to the purchase cost, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€55,00 – €30,00) ÷ €30,00) x 100 = 83,33%.

   The margin rate for this product is 83,33%.

3. The overall quarterly margin is obtained by multiplying the unit margin by the number of kits sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €25,00 x 400 = €10.

The overall quarterly margin is €10.

4. The markup rate is calculated by dividing the unit margin by the selling price excluding tax, multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€55,00 – €30,00) ÷ €55,00) x 100 = 45,45%.

   The markup rate of the kit is 45,45%.

5. By negotiating a reduction in the purchase cost, say to €25,00 excluding VAT, the new unit margin would become:

   Calculation: €55,00 – €25,00 = €30,00.

   This would increase the margin, which would strengthen the company's position vis-à-vis its competitors.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: SmartHome Technology

States :

SmartHome, a home automation company, is launching a new home security system for €299,00 excluding VAT. This system is purchased for €180,00 excluding VAT. The company aims to sell 700 systems this year. Let's take a look at the profitability of this operation.

Work to do :

1. Calculate the unit margin for each safety system.
2. What is the margin rate for this product?
3. What is the expected annual overall margin?
4. Evaluate the markup rate.
5. Discuss the strategic choices to consider if SmartHome wishes to reduce the manufacturing cost to €170,00 excluding VAT.

Proposed correction:

1. The unit margin is calculated by subtracting the pre-tax purchase cost from the pre-tax selling price.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €299,00 – €180,00 = €119,00.

   The unit margin for each security system is then €119,00.

2. The margin rate is calculated by dividing the unit margin by the purchase cost, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€299,00 – €180,00) ÷ €180,00) x 100 = 66,11%.

   The product margin rate is 66,11%.

3. The annual overall margin is calculated by multiplying the unit margin by the number of systems sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €119,00 x 700 = €83.

The expected annual overall margin is €83.

4. The markup rate is the division of the unit margin by the selling price, multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€299,00 – €180,00) ÷ €299,00) x 100 = 39,80%.

   The markup rate is 39,80%.

5. By reducing the purchase cost to €170,00 excluding VAT, the new unit margin would become:

   Calculation: €299,00 – €170,00 = €129,00.

   This would allow for improved margins, giving SmartHome greater flexibility for promotions or improving its services.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: AgriNature Bio

States :

The company AgriNature Bio offers a range of ecological fertilizers. Its flagship product is sold for €40,00 excluding VAT with a production cost of €25,00 excluding VAT. The manager plans to sell 1 units this semester to ensure the financing of future projects. Let's analyze the margins to better understand the financial issues.

Work to do :

1. What is the unit margin of each unit of fertilizer?
2. Calculate the margin rate of the latter.
3. What overall margin can we expect over half a year?
4. Evaluate the brand rate of the fertilizer.
5. Explore the implications of an increase in production cost to €30,00 excluding VAT on profitability.

Proposed correction:

1. The unit margin is the subtraction of the production cost excluding tax from the selling price excluding tax.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €40,00 – €25,00 = €15,00.

   The unit margin per fertilizer is €15,00.

2. The margin rate is calculated by dividing the unit margin by the production cost excluding tax, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€40,00 – €25,00) ÷ €25,00) x 100 = 60,00%.

   The margin rate is 60,00%.

3. The overall margin for the half-year can be determined by multiplying the unit margin by the number of units sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €15,00 x 1 = €000.

The overall margin expected over half a year is €15.

4. To calculate the markup rate: divide the unit margin by the selling price excluding tax and multiply by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€40,00 – €25,00) ÷ €40,00) x 100 = 37,50%.

   The brand rate of the fertilizer is 37,50%.

5. If the production cost increases to €30,00 excluding VAT, the unit margin would become:

   Calculation: €40,00 – €30,00 = €10,00.

   Profitability is declining, posing a challenge for maintaining margins without adjusting pricing policy.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: Automotive CarPro

States :

CarPro is a car dealership selling a flagship electric model for €32 excluding VAT. The cost price is €500,00 excluding VAT. The company hopes to sell 27 units this year to consolidate its position in the sustainable vehicle market. Let's analyze its sales margins.

Work to do :

1. Calculate the unit margin for each vehicle sold.
2. What is the applicable margin rate for the electric model?
3. Estimate the overall annual margin from the planned units.
4. Calculate the markup rate.
5. Analyze the effect of increasing the selling price to €34 excluding VAT.

Proposed correction:

1. The unit margin is found by subtracting the cost price excluding VAT from the selling price excluding VAT.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €32 – €500,00 = €27.

   The unit margin per vehicle is therefore €5.

2. The margin rate is determined by dividing the unit margin by the cost price excluding tax, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€32 – €500,00) ÷ €27) x 000,00 = 27%.

   The applicable margin rate is 20,37%.

3. The annual overall margin is obtained by multiplying the unit margin by the number of vehicles sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €5 x 500,00 = €150.

The expected overall annual margin is €825.

4. The markup rate is calculated by taking the unit margin, divided by the selling price excluding tax, multiplied by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€32 – €500,00) ÷ €27) x 000,00 = 32%.

   The markup rate is 16,92%.

5. If the selling price increases to €34 excluding VAT, the new unit margin becomes:

   Calculation: €34 – €000,00 = €27.

   This price increase strategy could improve margins while attracting consumers interested in innovations.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold

Application: NaturalGreens Cosmetics

States :

NaturalGreens, an organic cosmetics brand, is launching a new essential oil at €18,00 excluding VAT, with a cost price of €10,00 excluding VAT per bottle. It is aiming to sell 5000 units over the year to strengthen its range of natural products. Let's explore the financial implications.

Work to do :

1. What is the unit margin made on each bottle?
2. Calculate the margin rate of this new essential oil.
3. Determine the total margin expected over the year.
4. Rate the markup rate on this product.
5. Consider the consequences of a premium positioning by increasing the selling price to €20,00 excluding VAT.

Proposed correction:

1. The unit margin is calculated by subtracting the cost price excluding tax from the selling price excluding tax.

   Formula: Unit margin = PV HT – PA HT.

   Calculation: €18,00 – €10,00 = €8,00.

   The unit margin per bottle is €8,00.

2. The margin rate is the unit margin divided by the cost price excluding tax, multiplied by 100.

   Formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.

   Calculation: ((€18,00 – €10,00) ÷ €10,00) x 100 = 80,00%.

   The margin rate of essential oil is 80,00%.

3. The total annual margin is obtained by multiplying the unit margin by the units sold.

Formula: Overall margin = Unit margin x Quantity sold.

Calculation: €8,00 x 5000 = €40.

The total margin expected for the year is €40.

4. To determine the markup rate, divide the unit margin by the selling price excluding VAT and multiply by 100.

   Formula: Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.

   Calculation: ((€18,00 – €10,00) ÷ €18,00) x 100 = 44,44%.

   The markup rate is 44,44%.

5. If the selling price increases to €20,00 excluding VAT, the new unit margin would become:

   Calculation: €20,00 – €10,00 = €10,00.

   NaturalGreens would strengthen its profitability while positioning its product with a more premium clientele.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Overall margin	Unit margin x Quantity sold