In this section:
Application: Pleasure Cafes
States :
The company "Les Cafés Plaisir", which specializes in roasting high-end coffees, wants to analyze its financial performance. For one of its flagship products, intense Arabica coffee, it has noted the following data for the last month: the purchase price (PA HT) per 250g pack is €3,50, the selling price (PV HT) is €5,60, and it has sold 2 packs. The objective is to calculate the overall margin made on this specific product and analyze its implications.
Work to do :
- Calculate the unit margin on intense Arabica coffee.
- Determine the overall margin made on the sale of this coffee.
- What should the selling price be to achieve a unit margin of €3,00?
- Compare the overall margin obtained this month with that of the previous month which was €3 and explain the change.
- Analyze the potential impact of increasing the purchase price by €0,50 on the overall margin.
Proposed correction:
-
The unit margin is obtained by subtracting the HT PA from the HT PV.
Unit margin = €5,60 – €3,50 = €2,10.
So the unit margin for each pack sold is €2,10. -
The overall margin is calculated by multiplying the unit margin by the quantity sold.
Total margin = €2,10 x €2 = €000.
The overall margin made this month on the sale of this coffee is €4. -
To achieve a unit margin of €3,00, we use the formula: Unit margin = PV excluding VAT – PA excluding VAT.
€3,00 = PV excluding VAT – €3,50.
PV excluding tax = €3,00 + €3,50 = €6,50.
The selling price should be €6,50 to achieve a unit margin of €3,00.
-
Comparison of the current overall margin with that of the previous month:
Difference = €4 – €200 = €3.
Therefore, the overall margin increased by €700, indicating an improvement in sales performance this month. -
Analysis of the impact of an increase in the PA HT of €0,50:
New PA HT = €3,50 + €0,50 = €4,00.
New unit margin = €5,60 – €4,00 = €1,60.
New overall margin = €1,60 x €2 = €000.
The increased cost reduces the overall margin to €3, which could negatively affect profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Selling price (excluding VAT) | Unit margin + PA HT |
Application: Tech Mobiles
States :
Tech Mobiles, a company specializing in the sale of smartphones, wants to evaluate its results for a particular model, the TechPhone Pro. The unit purchase cost excluding tax of each phone is €300, and it is sold at a price excluding tax of €450. During the last quarter, Tech Mobiles sold 1 units. The company wants to calculate the overall margin and think of strategies to maximize its profits.
Work to do :
- Calculate the unit margin for each TechPhone Pro sold.
- What is the overall margin made on these sales?
- Determine how many additional units you need to sell to achieve an overall margin of €250.
- If the PA HT increases by 10%, what would be the new impact on the unit margin?
- Propose a strategy to improve the overall margin knowing that the market is becoming more and more competitive.
Proposed correction:
-
Calculation of unit margin by telephone:
Unit margin = €450 – €300 = €150.
Each TechPhone Pro sold generates a unit margin of €150. -
Calculation of the overall margin achieved:
Total margin = €150 x €1 = €500.
The overall margin generated by the sale of 1 units is €500. -
Determining the number of additional units to sell:
Margin target = €250.
Additional margin requirement = €250 – €000 = €225.
Additional units = €25 ÷ €000 = €150.
Approximately 167 additional units must be sold to achieve the targeted overall margin.
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Impact on the unit margin of a 10% increase in the HT PA:
Increase in PA HT = €300 x 10% = €30.
New PA HT = €300 + €30 = €330.
New unit margin = €450 – €330 = €120.
The cost increase reduces the unit margin to €120. -
Strategy to improve overall margin:
To maximize overall margin in a competitive environment, Tech Mobiles could consider negotiating with suppliers to reduce the purchasing cost or investing in better market segmentation to increase the sales volume of models with higher margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Additional units | (Target – Current Margin) ÷ Unit Margin |
Application: Gourmet Pastry
States :
Gourmandise Pâtisserie, a shop renowned for its homemade macarons, wants to assess the profitability of a new lemon macaron. The production cost (PA HT) of each macaron is €0,80, and the selling price (PV HT) is €1,60. At a trade fair, they sold 8 macarons. Let's calculate the overall margin and identify opportunities for improvement.
Work to do :
- Calculate the unit margin per macaron sold.
- What is the overall margin generated by sales at the show?
- If Gourmandise wants to increase the overall margin by 20%, what should the new selling price excluding tax be?
- How important is cost management in calculating overall margin?
- If demand drops, how could Gourmandise maintain its overall margin?
Proposed correction:
-
Calculation of unit margin:
Unit margin = €1,60 – €0,80 = €0,80.
Each macaron sold individually generates a margin of €0,80. -
Calculation of the overall margin achieved:
Total margin = €0,80 x €8 = €000.
The total margin made on these sales is €6. -
Calculation of the new selling price to increase the overall margin by 20%:
New target overall margin = €6 x 400 = €1,20.
Increase required = €7 – €680 = €6.
To obtain a surplus margin of €1, and while keeping the initial constraints fixed, it is necessary to increase the PV excluding tax. Calculation:
(€0,80 + x) x 8 = €000.
x = (€7 ÷ 680) – €8 = €000.
A PV excluding tax of €1,76 will make it possible to achieve the overall margin objective.
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Importance of cost management:
Good cost management helps maximize unit margin and therefore overall margin. By reducing production or purchasing costs, the company can improve its margins, even without increasing the selling price. -
Strategies to maintain margin:
Gourmandise could explore new avenues such as diversifying points of sale, using substitute ingredients to reduce costs or improving marketing to stimulate demand. Adapting supply to current demand is essential.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| New PV HT | (Global margin target ÷ Quantity) + HT PA |
Application: Flora Bijoux
States :
Flora Bijoux, a craft company specializing in the manufacture of pearl jewelry, wants to evaluate the profitability of a new high-end bracelet. Each bracelet has a manufacturing cost (PA HT) of €15, and it is sold at a price of €25 HT. In the last quarter, they sold 500 of them. The company is considering adjusting its pricing strategy.
Work to do :
- Calculate the unit margin generated by a bracelet.
- Determine the overall margin on the sale of the bracelets.
- What would be the effect on overall margin if the selling price increased by 10% and sales fell by 10%?
- Identify current or future factors that could influence Flora Bijoux's unit margin.
- Propose a strategy to increase the unit margin without changing the selling price or quantity sold.
Proposed correction:
-
Calculation of unit margin:
Unit margin = €25 – €15 = €10.
Each bracelet sold contributes to a unit margin of €10. -
Calculation of the overall margin achieved:
Overall margin = €10 x 500 = €5.
Sales of bracelets generated an overall margin of €5. -
Impact of a 10% increase in PV HT and a 10% drop in sales:
New PV excluding VAT = €25 x 1,10 = €27,50.
New quantity sold = 500 x 0,90 = 450.
New unit margin = €27,50 – €15 = €12,50.
New overall margin = €12,50 x 450 = €5.
Despite the drop in sales, the overall margin increased to €5.
-
Factors influencing unit margin:
Raw material costs, fluctuations in labor prices, as well as innovations in the manufacturing process can impact unit margin either positively or negatively. -
Strategy to increase unit margin without changing price or quantity:
Flora Bijoux could optimize its production processes, explore group purchasing options to reduce the cost of raw materials, or invest in equipment that reduces manufacturing costs.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| New PV HT | Initial PV HT x (1 + increase %) |
Application: Artisan Chocolate
States :
Artisan Chocolat, a company specializing in the manufacture of luxury chocolates, wants to audit its new range of chocolate truffles. Each box of truffles costs €10 to produce (PA excluding VAT) and is sold at €20 excluding VAT. During a Valentine's Day campaign, they sold 800 units. The objective is to check the overall margin and to think about other commercial strategies.
Work to do :
- Calculate the unit margin per box of truffles.
- What total margin did Artisan Chocolat make during Valentine’s Day?
- Imagine that the manufacturing cost decreases by €1, what would be the impact on the overall margin?
- Considering that demand is price elastic, what do you suggest to maximize the overall margin?
- What could Artisan Chocolat do to reduce unit costs while maintaining quality?
Proposed correction:
-
Calculation of unit margin:
Unit margin = €20 – €10 = €10.
Each sale of a box of truffles allows a margin of €10. -
Calculation of the overall margin:
Overall margin = €10 x 800 = €8.
Sales generated a margin of €8. -
Impact of a €1 reduction in manufacturing cost:
New PA HT = €10 – €1 = €9.
New unit margin = €20 – €9 = €11.
New overall margin = €11 x 800 = €8.
Decreasing the cost by €1 per box increases the total margin to €8.
-
Strategy in case of price elastic demand:
If demand is elastic, a decrease in the selling price could increase the sales volume. Artisan Chocolat could articulate a price reduction during key periods to maximize the influx of customers and therefore increase its total overall margin. -
Reducing costs while preserving quality:
Artisan Chocolat could source more locally to reduce transportation costs and potentially obtain more economical raw materials, seek less expensive alternatives without deteriorating the quality of the finished product or streamline its manufacturing process to gain efficiency.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| New unit cost | Initial PA HT – cost reduction |
Application: Zen Apparels
States :
Zen Apparels, a brand specializing in eco-friendly ready-to-wear, wants to analyze the profitability of its winter collection. The jackets are purchased (AP excluding VAT) at €70 and resold (PV excluding VAT) at €120. During the last month, 300 jackets were sold. The objective is to calculate the overall margin and evaluate different pricing policies.
Work to do :
- Calculate the unit margin made per jacket sold.
- What is the overall margin obtained from jacket sales during the month?
- If the selling price increased by 5%, what would be the effect on the new unit margin?
- Analyze the impact of ecology on the overall margin in the current context.
- Consider ways to maintain margin while respecting the brand's ecological and ethical principles.
Proposed correction:
-
Calculation of unit margin:
Unit margin = €120 – €70 = €50.
Each jacket sold allows a margin of €50. -
Calculation of the overall margin:
Overall margin = €50 x 300 = €15.
The sales of jackets generated an overall margin of €15. -
Effect of a 5% increase in the selling price:
New PV excluding VAT = €120 x 1,05 = €126.
New unit margin = €126 – €70 = €56.
The increase in the selling price increases the unit margin to €56.
-
Impact of ecology on the overall margin:
Going green can lead to lower margins due to higher costs associated with environmentally friendly materials. However, it can also strengthen brand image, positive consumer attitudes, new sales and loyalty that could be beneficial in the long run. -
Strategies for maintaining margin while respecting ecological principles:
Zen Apparels can optimize its green supply chains to lower costs, explore partnerships with other sustainable businesses to improve efficiency, or invest in green innovations to reduce consumption of non-renewable raw materials.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| New PV HT with increase | Initial PV HT x (1 + percentage increase) |
Application: Digital Learn
States :
Digital Learn, a startup offering online courses, is looking to measure the profitability of its latest educational program. The development cost (AP excluding VAT) per access is €40, and each access is sold (PV excluding VAT) at €100. During the last quarter, 1 accesses were sold. The company is wondering about the evolution of its overall margin.
Work to do :
- Calculate the unit margin obtained by accessing the course.
- Determine the overall margin achieved during the quarter.
- If Digital Learn offers a 15% discount for a special event, what would the new unit margin be if the cost remains unchanged?
- What are the benefits and risks of reducing the price for a limited campaign?
- Consider the strategic implications of investing in continuous course improvement for future profitability.
Proposed correction:
-
Calculation of unit margin:
Unit margin = €100 – €40 = €60.
Digital Learn makes a margin of €60 per access sold to the program. -
Calculation of the overall margin:
Total margin = €60 x €1 = €200.
The total margin achieved last quarter is €72. -
Effect of a 15% reduction on the PV HT:
New PV excluding tax = €100 – (€100 x 0,15) = €85.
New unit margin = €85 – €40 = €45.
The 15% reduction reduces the margin to €45 per access.
-
Benefits and risks of reducing the price:
Reducing price can temporarily increase demand and capture market share. However, a lower price can erode the perception of quality and weaken profitability. -
Strategic implications of continuous improvement:
Continuously improving courses can attract more learners, retain current students, and justify higher prices. Good value for money can also be a major competitive advantage.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| New PV HT after reduction | Initial PV – (Initial PV x % reduction) |
Application: Nature's Delights
States :
Nature's Delights, a wellness company, wants to evaluate the performance of its cold-pressed juice line. Each bottle (AP excluding VAT) costs €2,50 to produce and is sold at €5 excluding VAT. For the last half year, they sold 10 bottles. The company is considering how to optimize their margins.
Work to do :
- Calculate the unit margin per bottle sold.
- What overall margin did the company generate on these sales?
- Determine how many more bottles would need to be sold to reach an overall margin of €30.
- What are the challenges that Nature's Delights might face in seeking to reduce its production costs?
- Assess the sustainability of current margins and discuss initiatives to be launched to ensure their maintenance.
Proposed correction:
-
Calculation of unit margin:
Unit margin = €5 – €2,50 = €2,50.
Each bottle sold allows for a margin of €2,50. -
Calculation of the overall margin:
Total margin = €2,50 x €10 = €000.
The total margin achieved is €25. -
Calculating the number of additional units required:
Margin target = €30.
Additional margin required = €30 – €000 = €25.
Additional units needed = €5 ÷ €000 = 2,50.
Nature's Delights needs to sell an additional 2 bottles to reach an overall margin of €000.
-
Possible challenges when reducing production costs:
Cutting costs can compromise perceived quality, complicate the supply chain, or limit margins for innovation and new product development. -
Assessment of the sustainability of the margins and initiatives envisaged :
The company may consider improving productivity, optimizing supply chains by favoring green alternatives or exploring new distribution channels to attract more customers while keeping margins stable.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Additional units required | (Target – Current Margin) ÷ Unit Margin |
Application: Urban Sneakers
States :
Urban Sneakers, an emerging brand in the field of urban sports shoes, is looking to analyze the profitability of its latest model, the “RunFast”. The production cost (PA HT) of a pair is €50, while the selling price (PV HT) is set at €110. They were hoping to sell 4 pairs last month. Let’s evaluate the margins and possible strategies.
Work to do :
- Calculate the unit margin per pair sold.
- Estimate the overall margin initially expected if the sales target were achieved.
- Last month, only 3 pairs were sold. Did this impact the overall margin initially planned?
- Suggest tools or methods Urban Sneakers could use to more accurately predict future sales.
- Discuss the importance of production flexibility to ensure continued profitability in the face of unforeseen variations in demand.
Proposed correction:
-
Calculation of unit margin:
Unit margin = €110 – €50 = €60.
Each pair sold therefore allows a unit margin of €60 to be achieved. -
Calculation of the expected overall margin:
Expected overall margin = €60 x €4 = €000.
Urban Sneakers was aiming for an overall margin of €240 for the RunFast model. -
Actual sales and impact on overall margin:
Actual margin = €60 x €3 = €200.
The overall margin achieved is €192, representing a difference of €000 compared to the overall margin planned.
-
Sales forecasting tools:
Urban Sneakers could turn to artificial intelligence solutions for predictive analysis, collect and interpret data on consumer trends, or use targeted surveys and market research. -
Importance of production flexibility:
Production flexibility allows for rapid adjustment of production quantities according to actual demand, reducing unnecessary inventory and associated costs while taking advantage of unplanned sales opportunities.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin initially planned | Unit Margin x Sales Target |
| Actual margin obtained | Unit Margin x Actual Sales |