Application: Fashion flagships
States :
Fleurons de la Mode is a company specializing in the sale of high-end clothing in Bordeaux. To better understand its commercial performance, it wants to analyze the margin made on its latest collection of coats. The purchase price excluding tax of a coat is €150 and the sale price excluding tax is set at €250. They sold 300 coats during the fall-winter season.
Work to do :
- Calculate the unit margin excluding tax made on each coat sold.
- Determine the overall HT margin achieved on the collection.
- What is the margin rate applied to this collection?
- If Fleurons de la Mode wants to increase its margin rate to 50%, what should be the new selling price excluding tax for the coats?
- Analyze the strategic impact for the company of improving the margin rate on its future operations.
Proposed correction:
-
Calculate the unit margin excluding tax made on each coat sold.
The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT.
Unit margin = PV excluding tax – PA excluding tax
= €250 – €150
= 100 €
Each coat sold generates a unit margin of €100. -
Determine the overall HT margin achieved on the collection.
The overall margin is calculated by multiplying the unit margin by the quantity sold.
Overall margin = Unit margin x Quantity sold
= €100 x 300
£30
The coat collection generated an overall margin of €30. -
What is the margin rate applied to this collection?
To obtain the margin rate, use the formula:
((PV HT – PA HT) ÷ PA HT) x 100
Substituting into the equation:
((250 – 150) ÷ 150) x 100 = (100 ÷ 150) x 100 = 66,67%
The margin rate for this collection is 66,67%.
-
If Fleurons de la Mode wants to increase its margin rate to 50%, what should be the new selling price excluding tax for the coats?
To find the new selling price, the margin rate formula is rearranged to:
PV HT = PA HT x (1 + Desired margin rate)
= 150 x (1 + 0,50)
= 150x1,50
= 225 €
The new selling price excluding VAT must be €225 to reach the 50% margin rate. -
Analyze the strategic impact for the company of improving the margin rate on its future operations.
Improving the margin rate allows Fleurons de la Mode to increase its profits per unit sold, which strengthens its financial solidity. It also allows it to better absorb fixed costs, invest in product quality or customer service and have greater room for maneuver during commercial negotiations.
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 |
| Selling price for margin | PA HT x (1 + Desired margin rate) |
Application: TechnoGadget
States :
TechnoGadget is a tech accessories startup based in Paris. The company is planning to launch a new smart bracelet. The purchase price per unit is €20 excluding VAT, and they are selling it for €60 excluding VAT. As part of their in-store launch plan, they plan to sell 500 units in the first month.
Work to do :
- Determine the unit margin excluding tax for a bracelet sold.
- Calculate the overall margin excluding tax for the month's sales.
- What is the markup rate applied?
- For better competitiveness, TechnoGadget is considering reducing its selling price to €55 excluding VAT. What will the new markup rate be?
- Discuss the possible impacts on TechnoGadget's revenue after this price reduction.
Proposed correction:
-
Determine the unit margin excluding tax for a bracelet sold.
Unit margin = PV excluding tax – PA excluding tax
= €60 – €20
= 40 €
Each bracelet sold brings in a unit margin of €40. -
Calculate the overall margin excluding tax for the month's sales.
Overall margin = Unit margin x Quantity sold
= €40 x 500
£20
The month's sales generate an overall margin of €20. -
What is the markup rate applied?
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
= ((60 – 20) ÷ 60) x 100
= (40 ÷ 60) x 100
= 66,67%
The applied markup rate is 66,67%.
-
For better competitiveness, TechnoGadget is considering reducing its selling price to €55 excluding VAT. What will the new markup rate be?
New mark rate = ((PV HT – PA HT) ÷ PV HT) x 100
= ((55 – 20) ÷ 55) x 100
= (35 ÷ 55) x 100
= 63,64%
The new mark rate will be 63,64%. -
Discuss the possible impacts on TechnoGadget's revenue after this price reduction.
Reducing the selling price can stimulate demand and increase sales volume, which could offset the decline in unit margin. This strategy can improve market share and increase product awareness. However, it is essential to ensure that the decline in margin does not affect overall profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Artisan Pastry
States :
La Pâtisserie Artisanale is a local business that wants to evaluate the profitability of its brand new artisanal chocolate cake. The purchase cost excluding VAT of each cake is €5, and the selling price excluding VAT in store is €15. During the launch month, 800 cakes were sold.
Work to do :
- What is the unit margin excluding tax achieved for a cake sold?
- Determine the overall margin excluding tax for the sale of cakes during the launch month.
- Calculate the margin rate for the sale of these cakes.
- If costs increase by €2 per cake, what should the new selling price excluding tax be to maintain the same margin rate as that initially calculated?
- Analyze the impact of this price increase on the competitive positioning of Artisan Pastry.
Proposed correction:
-
What is the unit margin excluding tax achieved for a cake sold?
Unit margin = PV excluding tax – PA excluding tax
= €15 – €5
= 10 €
Each cake sold generates a unit margin of €10. -
Determine the overall margin excluding tax for the sale of cakes during the launch month.
Overall margin = Unit margin x Quantity sold
= €10 x 800
£8
The launch month generated an overall margin of €8. -
Calculate the margin rate for the sale of these cakes.
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((15 – 5) ÷ 5) x 100
= (10 ÷ 5) x 100
= 200%
The margin rate on the sale of these cakes is 200%.
-
If costs increase by €2 per cake, what should the new selling price excluding tax be to maintain the same margin rate as that initially calculated?
To maintain the margin rate, we readjust the selling price with the formula:
PV HT = (PA HT + Increase) x (1 + Margin rate)
= (5 + 2) x (1 + 2)
= 7x3
= 21 €
The new selling price excluding tax should be €21 to maintain the margin rate. -
Analyze the impact of this price increase on the competitive positioning of Artisan Pastry.
A price increase could position the product as a premium product, which can appeal to customers looking for quality. However, it is crucial to confirm that the local market will support this increase, and that customers will not turn to cheaper alternatives, which could impact market share.
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 |
| Selling price for margin | (PA HT + Increase) x (1 + Margin rate) |
Application: LuxeBijou Paris
States :
LuxeBijou Paris, a luxury jewelry workshop, wants to evaluate the financial performance of their gold bracelets. Each unit costs €500 to produce (excluding VAT) and sells for €1. They sold 200 units at their last fashion show.
Work to do :
- Calculate the unit margin excluding tax for a bracelet.
- What is the overall margin excluding tax for the bracelets sold during the fashion show?
- Determine the margin rate applied.
- If LuxeBijou wants to make an additional margin of €200 per unit, what should the new selling price excluding tax be?
- Assess the financial risks for LuxeBijou in increasing the selling price in the current market context.
Proposed correction:
-
Calculate the unit margin excluding tax for a bracelet.
Unit margin = PV excluding tax – PA excluding tax
= €1 – €200
= 700 €
Each bracelet sold generates a unit margin of €700. -
What is the overall margin excluding tax for the bracelets sold during the fashion show?
Overall margin = Unit margin x Quantity sold
= €700 x 50
£35
The parade generated an overall margin of €35. -
Determine the margin rate applied.
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((1 – 200) ÷ 500) x 500
= (700 ÷ 500) x 100
= 140%
The margin rate applied is 140%.
-
If LuxeBijou wants to make an additional margin of €200 per unit, what should the new selling price excluding tax be?
For an additional margin, we increase the selling price by the desired amount:
PV HT = (Current Margin + Additional) + PA HT
= (700 + 200) + 500
£1
The new selling price excluding VAT should be €1 to achieve the additional margin of €400. -
Assess the financial risks for LuxeBijou in increasing the selling price in the current market context.
Raising the price could reduce competitiveness if customers decide to switch to cheaper alternatives. However, if the increase is justified by better quality or a limited edition, it could improve brand perception. The main risk is losing market share if customers do not perceive the additional value equivalent to the price increase.
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 |
| Sale price for supplement | (Current margin + Additional) + PA HT |
Application: SantéPlus Innovations
States :
SantéPlus Innovations, a major player in the field of medical diagnostic devices, wants to introduce a new range of electronic thermometers. The production cost excluding tax of a thermometer is €10, with a sale price set at €25 excluding tax. They anticipate selling 1 units during the first year.
Work to do :
- Calculate the HT unit margin per thermometer.
- Calculate the overall margin excluding tax for the first year.
- What is the initial markup rate on this product?
- In order to increase profits, SantéPlus plans to increase the selling price to €30 excluding VAT. What will the new markup rate be?
- Discuss the possible implications of the increased selling price for SantéPlus's market strategy.
Proposed correction:
-
Calculate the HT unit margin per thermometer.
Unit margin = PV excluding tax – PA excluding tax
= €25 – €10
= 15 €
Each thermometer sold generates a unit margin of €15. -
Calculate the overall margin excluding tax for the first year.
Overall margin = Unit margin x Quantity sold
= €15 x 1
£15
The first year should generate an overall margin of €15. -
What is the initial markup rate on this product?
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
= ((25 – 10) ÷ 25) x 100
= (15 ÷ 25) x 100
= 60%
The initial markup rate is 60%.
-
In order to increase profits, SantéPlus plans to increase the selling price to €30 excluding VAT. What will the new markup rate be?
New mark rate = ((PV HT – PA HT) ÷ PV HT) x 100
= ((30 – 10) ÷ 30) x 100
= (20 ÷ 30) x 100
= 66,67%
The new mark rate will be 66,67%. -
Discuss the possible implications of the increased selling price for SantéPlus's market strategy.
Raising the price can signal an improvement in perceived value, which can attract customers looking for more reliable products. However, there is a risk that customers will reject the increase if they do not perceive any clear additional value. The company must ensure that the communication around the products is transparent and justifies the increase.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Ecolibri Luminaires
States :
Écolibri Luminaires is a company specializing in ecological and sustainable lighting. They want to analyze the profitability of their solar lamps. Currently, the purchase price excluding tax is €15 per lamp and they are sold for €40 excluding tax. During their last promotion campaign, 2 lamps were sold.
Work to do :
- Find the unit margin excluding VAT of each lamp sold.
- Determine the overall HT margin generated by the campaign.
- Estimate the margin rate applied for this campaign.
- To improve their profitability, they are considering reducing the purchase price by €2 per lamp. What would then be the new margin rate without changing the selling price?
- Describe the potential benefits and challenges of reducing production costs for Écolibri Luminaires.
Proposed correction:
-
Find the unit margin excluding VAT of each lamp sold.
Unit margin = PV excluding tax – PA excluding tax
= €40 – €15
= 25 €
Each lamp sold generates a unit margin of €25. -
Determine the overall HT margin generated by the campaign.
Overall margin = Unit margin x Quantity sold
= €25 x 2
£50
The campaign generated an overall margin of €50. -
Estimate the margin rate applied for this campaign.
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((40 – 15) ÷ 15) x 100
= (25 ÷ 15) x 100
= 166,67%
The margin rate applied is 166,67%.
-
To improve their profitability, they are considering reducing the purchase price by €2 per lamp. What would then be the new margin rate without changing the selling price?
New margin rate = ((PV HT – (PA HT – Reduction)) ÷ (PA HT – Reduction)) x 100
= ((40 – (15 – 2)) ÷ (15 – 2)) x 100
= ((40 – 13) ÷ 13) x 100
= (27 ÷ 13) x 100
= 207,69%
The new margin rate would be 207,69%. -
Describe the potential benefits and challenges of reducing production costs for Écolibri Luminaires.
Reducing production costs could improve the profit margin, allowing for increased investments in R&D or marketing. However, the challenge lies in maintaining quality, in order to preserve the company's reputation. A rigorous approach to supplier management is essential to avoid compromises although the purchase price decreases.
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 |
Application: BioBonanza
States :
BioBonanza is a company specializing in organic food products, famous for its organic almond butter. The purchase price excluding VAT per unit is €8, and it is sold for €14 excluding VAT. During an organic fair, they managed to sell 3 units.
Work to do :
- Calculate the unit margin excluding tax per jar of almond butter sold.
- Calculate the overall margin excluding tax resulting from the sale during the show.
- Calculate the current markup rate of this product.
- If BioBonanza wants to apply a margin rate of 100%, what should be the selling price excluding tax of the jar of almond butter?
- Describe what the potential impacts would be for BioBonanza by moving to a higher margin model.
Proposed correction:
-
Calculate the unit margin excluding tax per jar of almond butter sold.
Unit margin = PV excluding tax – PA excluding tax
= €14 – €8
= 6 €
Each jar of almond butter sold brings in a unit margin of €6. -
Calculate the overall margin excluding tax resulting from the sale during the show.
Overall margin = Unit margin x Quantity sold
= €6 x 3
£21
The sale during the show generated an overall margin of €21. -
Calculate the current markup rate of this product.
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
= ((14 – 8) ÷ 14) x 100
= (6 ÷ 14) x 100
= 42,86%
The current markup rate is 42,86%.
-
If BioBonanza wants to apply a margin rate of 100%, what should be the selling price excluding tax of the jar of almond butter?
PV HT = PA HT x (1 + Desired margin rate)
= 8 x (1 + 1)
= 8x2
= 16 €
The selling price excluding tax should be €16 to apply a margin rate of 100%. -
Describe what the potential impacts would be for BioBonanza by moving to a higher margin model.
Increasing the price may be difficult to accept for consumers who are used to the current prices. However, it could strengthen the perception of the product as a premium product, attracting new customers. However, it is crucial to manage the communication well to justify this increase with product improvements or alternative benefits.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Selling price for margin | PA HT x (1 + Desired margin rate) |
Application: Studio Numérik
States :
Studio Numérik, a key player in the creation of educational software, wants to understand the margin on their latest educational software. This software costs them €100 to develop per unit and is sold at €300 excluding VAT. During the last quarter, they sold 200 units.
Work to do :
- Calculate the unit margin excluding tax for each software sold.
- What is the overall software sales margin excluding VAT for the last quarter?
- What is the markup rate on these sales?
- If Studio Numérik increases the selling price of the software by 20%, what will the new markup rate be?
- Analyze how the price increase could impact the relationship with client educational institutions.
Proposed correction:
-
Calculate the unit margin excluding tax for each software sold.
Unit margin = PV excluding tax – PA excluding tax
= €300 – €100
= 200 €
Each software sold generates a unit margin of €200. -
What is the overall software sales margin excluding VAT for the last quarter?
Overall margin = Unit margin x Quantity sold
= €200 x 200
£40
The last quarter generated an overall margin of €40. -
What is the markup rate on these sales?
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
= ((300 – 100) ÷ 300) x 100
= (200 ÷ 300) x 100
= 66,67%
The markup rate on these sales is 66,67%.
-
If Studio Numérik increases the selling price of the software by 20%, what will the new markup rate be?
New HT PV = initial HT PV x (1 + Increase)
= 300x1,20
= 360 €
New mark rate = ((New PV HT – PA HT) ÷ New PV HT) x 100
= ((360 – 100) ÷ 360) x 100
= (260 ÷ 360) x 100
= 72,22%
The new mark rate will be 72,22%. -
Analyze how the price increase could impact the relationship with client educational institutions.
A price increase could make the software less accessible for some institutions with limited budgets. However, if the increase is accompanied by a better perceived quality or justifiable additional features, it could strengthen the confidence of existing customers and attract new customers looking for efficient solutions. Communicating the added value is key in this context.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT | Initial HT HP x (1 + Increase) |
Application: CycloVogue
States :
CycloVogue, a specialist in designer urban bikes, wants to analyze the profitability of its electric bikes. The purchase cost excluding tax for each bike is €600, while the sale price is €1. During the previous year, CycloVogue sold 500 bikes.
Work to do :
- Calculate the unit margin excluding tax for each bicycle sold.
- What overall margin excluding tax was generated by the sale of bicycles during the year?
- What is the margin rate applied to the sale of bicycles?
- CycloVogue is considering lowering its selling price to €1 to boost sales. What will the new margin rate be?
- Develop a strategy for CycloVogue if the market becomes more competitive after the price drop.
Proposed correction:
-
Calculate the unit margin excluding tax for each bicycle sold.
Unit margin = PV excluding tax – PA excluding tax
= €1 – €500
= 900 €
Each bike sold generates a unit margin of €900. -
What overall margin excluding tax was generated by the sale of bicycles during the year?
Overall margin = Unit margin x Quantity sold
= €900 x 120
£108
The sale of the bicycles generated an overall margin of €108 over the year. -
What is the margin rate applied to the sale of bicycles?
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
= ((1 – 500) ÷ 600) x 600
= (900 ÷ 600) x 100
= 150%
The margin rate applied is 150%.
-
CycloVogue is considering lowering its selling price to €1 to boost sales. What will the new margin rate be?
New margin rate = ((New PV HT – PA HT) ÷ PA HT) x 100
= ((1 – 350) ÷ 600) x 600
= (750 ÷ 600) x 100
= 125%
The new margin rate will be 125%. -
Develop a strategy for CycloVogue if the market becomes more competitive after the price drop.
Faced with increased competition, CycloVogue could focus on improving the customer experience, such as extended warranties or superior after-sales service. They could diversify their range with exclusive models or collaborate with designers to create limited editions. These measures can add value to the brand and differentiate it, even with a price drop.
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 |