In this section:
Application: The Southern Bakery
States :
La Boulangerie du Sud, located in Marseille, is promoting its new fresh fruit tarts. The sales price excluding tax (PV HT) of a tart is set at €15 and the purchase price excluding tax (PA HT) is €10. They want to analyze their unit net margin as well as other aspects of their profitability to optimize their business strategy.
Work to do :
- Calculate the unit net margin for a pie sold.
- Determine the margin rate of the pie.
- Evaluate the markup rate of the pie.
- If the bakery wants to increase the unit net margin by €2, what should be the new selling price excluding tax while maintaining the same net profit?
- What would be the impact on the margin rate if the purchase cost increased by €1 while keeping the same selling price?
Proposed correction:
The unit net margin is calculated by subtracting the net profit from the net profit. Here, this gives:
€15 – €10 = €5
The net unit margin for each pie sold is therefore €5.The margin rate is calculated using the formula:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Which gives: ((€15 – €10) ÷ €10) x 100 = 50%
The margin rate for the pie is 50%.The markup rate is determined by the formula:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Replacing: ((€15 – €10) ÷ €15) x 100 = 33,33%
The markup rate of the pie is 33,33%.
To increase the unit net margin by €2, it will have to go from €5 to €7.
So, the new PV HT is: €10 + €7 = €17
The new selling price excluding VAT must be €17.If the purchase cost increases by €1, the HT PA becomes €11.
The new margin rate will be: ((€15 – €11) ÷ €11) x 100 = 36,36%
The increase in the PA HT reduces the margin rate to 36,36%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
Application: Nova Electronics
States :
Nova Electronics, a distributor of high-tech gadgets, offers a state-of-the-art Bluetooth speaker. The acquisition cost (AP excluding VAT) is €30 while the selling price (SRP excluding VAT) is set at €50. The company seeks to understand the impact on their profitability and the competitiveness of their product.
Work to do :
- What is the unit net margin for each speaker sold?
- Calculate the margin rate for this enclosure.
- Calculate the markup rate for this enclosure.
- Suppose the company reduces its net sales tax by €5, what will the new unit net margin be?
- Analyze the impact on the markup rate if the purchase price decreases by €2 with the initial PV excluding tax.
Proposed correction:
The unit net margin is obtained by the difference between the PV HT and the PA HT:
€50 – €30 = €20
Thus, each speaker sold generates a net unit margin of €20.The margin rate is calculated as follows:
Margin rate = ((€50 – €30) ÷ €30) x 100 = 66,67%
The margin rate is therefore 66,67%.Using the markup rate formula:
Brand rate = ((€50 – €30) ÷ €50) x 100 = 40%
The markup rate is 40%.
If the PV excluding tax is reduced by €5, the new PV excluding tax is therefore €45.
New unit net margin = €45 – €30 = €15
The new net unit margin will be €15.Assuming that the PA HT decreases by €2, the new PA HT becomes €28.
The recalculated markup rate is: ((€50 – €28) ÷ €50) x 100 = 44%
The decrease in the HT PA leads to an increase in the mark rate to 44%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
Application: The Fringantes Shoes
States :
Les Fringantes Chaussures sells leather boot models. The purchase price, excluding taxes, for a particular model is €40, while the sales price excluding taxes has been determined at €70. To adjust their pricing strategy and optimize their profit, the company wants to check some important financial metrics.
Work to do :
- Determine the unit net margin for a pair of boots sold.
- Calculate the margin rate on this model of boots.
- Estimate the markup rate on these boots.
- Propose a new selling price excluding tax necessary to achieve a margin rate of 80%.
- Discuss the impact if the purchase price dropped by €5, while maintaining the same sale price.
Proposed correction:
The unit net margin is determined by the formula:
PV excluding tax – PA excluding tax = €70 – €40 = €30
Therefore, the unit net margin is €30.The margin rate is calculated using:
Margin rate = ((€70 – €40) ÷ €40) x 100 = 75%
The margin rate is 75%.For the mark rate, we use:
Brand rate = ((€70 – €40) ÷ €70) x 100 = 42,86%
The markup rate is 42,86%.
To achieve a margin rate of 80%, let's use the formula:
PV HT = PA HT x (1 + (Margin rate ÷ 100))
Here is the calculation: €40 x (1 + (80 ÷ 100)) = €72
A selling price excluding tax of €72 would make it possible to achieve this margin rate.If the purchase price drops by €5, the new HT PA is €35.
The new margin rate with the same PV excluding tax of €70 becomes: ((€70 – €35) ÷ €35) x 100 = 100%
The lower purchase price results in a margin rate of 100%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| Pv HT for desired rate | PA HT x (1 + (Margin rate ÷ 100)) |
Application: Tech Tools Services
States :
Tech Tools Services, a professional tools company, is evaluating the cost and profitability of a new power tool. The purchase price of this tool is €60 excluding VAT, and it is sold at a price excluding VAT of €100. To better understand its growth drivers, the company wants to calculate the margin and analyze the impacts of potential modifications.
Work to do :
- What is the net unit margin achieved by Tech Tools Services on this tool?
- Calculate the power tool margin rate.
- Evaluate the current markup rate of this tool.
- To achieve a price reduction of €5 while maintaining the same net margin, what would be the new desired purchase cost?
- What happens to the margin rate if the purchase price increases by €10 while keeping the same PV excluding VAT?
Proposed correction:
The unit net margin is calculated by:
PV excluding tax – PA excluding tax = €100 – €60 = €40
The unit net margin is therefore €40.Applying the margin rate formula:
Margin rate = ((€100 – €60) ÷ €60) x 100 = 66,67%
The margin rate is 66,67%.Let's calculate the markup rate with:
Brand rate = ((€100 – €60) ÷ €100) x 100 = 40%
The current markup rate is 40%.
If the sale price decreases by €5, the PV excluding tax then becomes €95.
To keep a net margin of €40, let us hope that: €95 – PA excluding tax = €40, i.e. PA excluding tax = €95 – €40 = €55
The purchase price should drop to €55 to maintain this margin.By increasing the PA HT by €10, it then becomes €70.
The new margin rate is then: ((€100 – €70) ÷ €70) x 100 = 42,86%
The increase in the PA excluding tax to €70 reduces the margin rate to 42,86%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| New PA HT | PV HT – Unit net margin |
Application: Jewelry Shine & Brilliance
States :
Bijouterie Éclat & Brillance is selling a new gold necklace. The purchase price excluding tax (PA HT) of this necklace is €80, and its sale price excluding tax (PV HT) is €150. In such a competitive market, the company wants to do an in-depth analysis of its pricing and margins.
Work to do :
- Determine the unit net margin for the sale of a necklace.
- Calculate the margin rate associated with this product.
- Estimate the markup rate of this gold necklace.
- If the company wants to reduce the price while maintaining 60% net margin, what would be the new PV excluding tax?
- Discuss the effect if the company successfully negotiates a €15 discount on the purchase cost.
Proposed correction:
The formula for unit net margin is:
PV excluding tax – PA excluding tax = €150 – €80 = €70
Each necklace sold generates a net margin of €70.Let's calculate the margin rate:
Margin rate = ((€150 – €80) ÷ €80) x 100 = 87,5%
The margin rate for this product is 87,5%.By calculating the markup rate:
Brand rate = ((€150 – €80) ÷ €150) x 100 = 46,67%
The mark rate is then 46,67%.
With a net margin of 60%, we have:
Desired net margin = PA HT x (1 + (Net margin % ÷ 100)) = €80 x (1 + 0,6) = €128
So, to maintain a net margin of 60%, the PV excluding tax should be €128.If the purchase cost is reduced by €15, the new PA excluding tax becomes €65.
With the PV excluding tax of €150, the net margin is now: €150 – €65 = €85, and the margin rate is: ((€150 – €65) ÷ €65) x 100 = 130,77%
By reducing the purchase cost, the margin rate improves significantly to 130,77%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| PV HT with % net margin | PA HT x (1 + (Net margin % ÷ 100)) |
Application: StartSmart Education
States :
StartSmart Education sells specialized educational materials. Their activity pack is purchased for a cost, excluding taxes, of €25, and is sold at a price of €45. To monitor their competitiveness and profitability, they examine their financial metrics in depth.
Work to do :
- What is the unit net margin that each activity pack generates?
- Calculate the margin rate of this educational product.
- What is the markup rate of this pack?
- If StartSmart decides to increase its net sales tax by €3, what will the new unit net margin be?
- Analyze how a change in purchase cost of €5 would affect the markup rate if the selling price remains constant.
Proposed correction:
The unit net margin is:
PV excluding tax – PA excluding tax = €45 – €25 = €20
Each activity pack generates a unit net margin of €20.The margin rate is determined with:
Margin rate = ((€45 – €25) ÷ €25) x 100 = 80%
The margin rate is 80%.Let's calculate the markup rate as follows:
Brand rate = ((€45 – €25) ÷ €45) x 100 = 44,44%
The markup rate is 44,44%.
With an increase of €3 in the PV excluding tax, this becomes €48.
The new unit net margin is: €48 – €25 = €23
This change leads to a net margin of €23.If the purchase cost changes to €30, the new markup rate with the net sales tax of €45 is: ((€45 – €30) ÷ €45) x 100 = 33,33%
This change would reduce the markup rate to 33,33%, negatively impacting its profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
Application: Horizon Travel
States :
Voyages Horizon designs personalized tourist circuits. They offer a one-week circuit sold (PA HT) at €600 and resold (PV HT) for €1. By adjusting their pricing model to remain competitive, they analyze the financial return on each sale.
Work to do :
- Calculate the unit net margin per tourist circuit.
- Set the margin rate for this circuit.
- Calculate the markup rate for these sales.
- Decide on the reduction in the purchase price necessary to set a PV excluding tax of €900 while keeping a margin of €400.
- Evaluate the impact of the markup rate if the PV excluding tax was set at €950 with the same purchase price.
Proposed correction:
The unit net margin is obtained by:
PV excluding tax – PA excluding tax = €1 – €000 = €600
The unit net margin is €400 per circuit.The margin rate is:
Margin rate = ((€1 – €000) ÷ €600) x 600 = 100%
The margin rate for this circuit is 66,67%.Using:
Markup rate = ((€1 – €000) ÷ €600) x 1 = 000%
The mark rate of the circuits is 40%.
To maintain a net margin of €400 with a net PV of €900, we have:
900 € – PA HT = 400 € therefore PA HT = 900 € – 400 € = 500 €
The purchase price should drop to €500.With a PV excluding tax of €950 and a PA excluding tax of €600, we have a net margin of €350.
Brand rate = ((€950 – €600) ÷ €950) x 100 = 36,84%
By setting the PV excluding tax at €950, the markup rate decreases to 36,84%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| PA HT with margin target | PV HT – Unit net margin |
Application: Natural Garden
States :
Jardin Naturel, a specialist in garden equipment, has invested in a new garden shed. The cost excluding tax of this shed is €180, and they are reselling it for €300. To adjust their pricing policy and maximise their profits, they are looking at the economic performance of the product.
Work to do :
- Calculate the unit net margin generated by the sale of each shelter.
- What is the margin rate achieved on the garden shed?
- Calculate the markup rate associated with this shelter.
- Recommend a new desired selling price excluding VAT if the company wants a margin rate of 100%.
- Analyze the potential consequences if the PV HT remains at €300 but the purchase cost increases to €200.
Proposed correction:
The unit net margin is calculated as follows:
PV excluding tax – PA excluding tax = €300 – €180 = €120
Therefore, the net unit margin per shelter sold is €120.For the margin rate we have:
Margin rate = ((€300 – €180) ÷ €180) x 100 = 66,67%
So the margin rate is 66,67%.Calculating the markup rate:
Brand rate = ((€300 – €180) ÷ €300) x 100 = 40%
The markup rate for this shelter is 40%.
For a margin rate of 100%, we require that:
PV excluding tax = PA excluding tax x (1 + (100 ÷ 100)) = €180 x 2 = €360
So the new selling price should be €360.In the event of an increase in the PA excluding tax to €200, the new margin rate is:
((€300 – €200) ÷ €200) x 100 = 50%
This reduces the margin rate to 50%, decreasing profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| PV HT for desired rate | PA HT x (1 + (Margin rate ÷ 100)) |
Application: Green Pharmacy
States :
La Pharmacie Verte distributes a new range of vitamins. The purchase price of each box is €10, and the selling price excluding tax is set at €22. With increasing competition, the company wants to optimize its margins and evaluate its strategic options.
Work to do :
- What is the net unit margin made on each box of vitamins?
- Determine the margin rate for this box.
- Calculate the markup rate applied to this product.
- If the objective is to reduce the net selling price by €2 while maintaining a net margin of €12, what should the new purchase price be?
- Discuss the impact if the purchase cost increased to €12 but the selling price remained constant.
Proposed correction:
The unit net margin is:
PV excluding tax – PA excluding tax = €22 – €10 = €12
Each box of vitamins generates a net unit margin of €12.Let's calculate the margin rate:
Margin rate = ((€22 – €10) ÷ €10) x 100 = 120%
The margin rate applied is 120%.For the mark rate:
Brand rate = ((€22 – €10) ÷ €22) x 100 = 54,55%
The markup rate is therefore 54,55%.
With a reduction of €2 in the PV excluding tax, this becomes €20.
For a net margin of €12, let's hope: €20 – PA excluding tax = €12, so PA excluding tax = €8
The new purchase price should drop to €8.If the net profit increases to €12, the new net margin is: €22 – €12 = €10
The new margin rate is: ((€22 – €12) ÷ €12) x 100 = 83,33%
This would reduce the profitability of the margin rate to 83,33%.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit net 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 |
| PA HT for requested margin | PV HT – Unit net margin |