How to Calculate Expected Margin | 9 Exercises

Application: Sweet Pastry

States :

La Pâtisserie Sucrée, renowned for its delicious pastries, is planning to launch a new chocolate tart. Calculating the expected margin is crucial to establishing the sales price. The available data are: the purchase cost excluding tax (excluding taxes) of the ingredients is €8 per tart, and the expected sales price excluding tax is €12 per unit. The forecast monthly sales quantity is 500 tarts.

Work to do :

1. Calculate the expected unit margin for a chocolate tart.
2. Determine the overall margin expected for one month.
3. Calculate the expected margin rate for chocolate tarts.
4. Calculate the expected markup rate for sales of chocolate tarts.
5. Analyze how an increase in the cost of purchasing ingredients to €9 would affect the unit margin.

Proposed correction:

1. The expected unit margin is calculated using the formula: PV HT – PA HT.
   By replacing, €12 – €8 = €4. The margin provided for a pie is €4.

2. The overall expected margin uses the formula: unit margin x quantity sold.
   By replacing, €4 x €500 = €2. The overall margin over a month is €000.

3. The margin rate is: ((PV HT – PA HT) ÷ PA HT) x 100.

Substituting, ((€12 – €8) ÷ €8) x 100 = 50%. The margin rate is 50%.

4. The markup rate is: ((PV HT – PA HT) ÷ PV HT) x 100.
   Substituting, ((€12 – €8) ÷ €12) x 100 = 33,33%. The markup rate is 33,33%.

5. With a purchase cost of €9, the new unit margin would be: €12 – €9 = €3.
   An increase in the purchase cost reduces the unit margin from €4 to €3.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: TechInnovations

States :

TechInnovations, a startup specializing in high-tech accessories, plans to launch a new model of wireless headphones. The production cost excluding VAT for each device is €25, while the selling price excluding VAT is set at €60. The company plans to sell 1 units in the next quarter.

Work to do :

1. Calculate the expected unit margin for each earpiece.
2. Estimate the overall quarterly margin expected for headphone sales.
3. Determine the margin rate for the new headphones.
4. Determine the markup rate for new headphones.
5. Discuss the financial implications if the company decides to lower the selling price to €50.

Proposed correction:

1. The expected unit margin is: €60 – €25 = €35. Each earphone generates a margin of €35.

2. The overall quarterly margin would be: €35 x €1 = €000. The total margin expected for the quarter is €35.

3. The margin rate is: ((€60 – €25) ÷ €25) x 100 = 140%. The margin rate is 140%.

4. The markup rate is: ((€60 – €25) ÷ €60) x 100 = 58,33%. The markup rate is 58,33%.

5. With a reduced selling price of €50, the new unit margin would be: €50 – €25 = €25.
   A lower selling price reduces the unit margin from €35 to €25.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: GreenStyle

States :

GreenStyle, an eco-friendly clothing company, plans to launch a new collection of organic cotton t-shirts. The manufacturing costs excluding VAT are €9 per t-shirt, with an expected selling price excluding VAT of €18. The sales forecast for the collection is 3 t-shirts for the next half-year.

Work to do :

1. Calculate the unit margin for the new organic cotton t-shirt.
2. Calculate the overall margin for the semester.
3. Find the margin rate on each organic cotton t-shirt.
4. Find the markup rate of the new collection.
5. Analyze the impact on the overall margin if sales exceed the initial forecast by 500 units.

Proposed correction:

1. The unit margin is: €18 – €9 = €9. Each t-shirt brings a margin of €9.

2. The overall margin is: €9 x €3 = €000. The margin over the half-year should be €27.

3. The margin rate is: ((€18 – €9) ÷ €9) x 100 = 100%. The margin rate is 100%.

4. The markup rate is: ((€18 – €9) ÷ €18) x 100 = 50%. The markup rate is 50%.

5. If 500 additional units are sold, the overall margin becomes: €9 x (3 + 000) = €500.
   Selling more significantly improves the overall margin to €31.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: BistroDelices

States :

BistroDélices, a restaurant-bar known for its innovative dishes, is planning to launch a new gourmet burger. The cost of purchasing the ingredients for each burger is €5, and the selling price is expected to be €15. The restaurant estimates that it will sell 800 burgers this month.

Work to do :

1. Calculate the expected unit margin for each gourmet burger.
2. Evaluate the expected monthly overall margin.
3. Determine the margin rate for gourmet burgers.
4. Determine the markup rate for burger sales.
5. Describe the implications if a promotional campaign reduces the net selling price to €12 to stimulate sales.

Proposed correction:

1. The expected unit margin is: €15 – €5 = €10. Each burger brings a margin of €10.

2. The overall monthly margin is: €10 x 800 = €8. The expected margin over one month is €000.

3. The margin rate is: ((€15 – €5) ÷ €5) x 100 = 200%. The margin rate is 200%.

4. The markup rate is: ((€15 – €5) ÷ €15) x 100 = 66,67%. The markup rate is 66,67%.

5. With a promotional price excluding tax of €12, the new unit margin would be: €12 – €5 = €7.
   A promotion will reduce the unit margin from €10 to €7, which influences profitability.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: Pedal & Co

States :

Pédale & Co, a store specializing in quality bicycles, is launching a new electric model. The production cost excluding tax of a bicycle is €450, and it will be sold at €800 excluding tax. The store plans to sell 150 units this quarter.

Work to do :

1. Calculate the expected unit margin for each electric bike.
2. Determine the overall margin expected for the quarter.
3. Calculate the margin rate for these electric bikes.
4. Calculate the markup rate for selling these bikes.
5. Consider the strategic implications if sales ultimately reach 180 units.

Proposed correction:

1. The expected unit margin is: €800 – €450 = €350. Each bike generates a margin of €350.

2. The overall margin is: €350 x 150 = €52. The total margin for the quarter would be €500.

3. The margin rate is: ((€800 – €450) ÷ €450) x 100 = 77,78%. The margin rate is 77,78%.

4. The markup rate is: ((€800 – €450) ÷ €800) x 100 = 43,75%. The markup rate is 43,75%.

5. For 180 units, the overall margin becomes: €350 x 180 = €63.
   An increase in sales significantly improves the overall margin to €63.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: Elecom

States :

Elecom, an innovative electronic gadget company, plans to market a new portable charger. The manufacturing cost excluding VAT per unit is €7, and the expected selling price excluding VAT is €20. The company estimates sales of 2 units for the next month.

Work to do :

1. Calculate the unit margin for the portable charger.
2. Evaluate the expected monthly overall margin.
3. Determine the margin rate for this product.
4. Determine the markup rate.
5. Explain the consequences of reducing production costs to €6 on the unit margin.

Proposed correction:

1. The unit margin is: €20 – €7 = €13. Each charger brings a margin of €13.

2. The overall monthly margin is: €13 x €2 = €500. The total margin is €32.

3. The margin rate is: ((€20 – €7) ÷ €7) x 100 = 185,71%. The margin rate is 185,71%.

4. The markup rate is: ((€20 – €7) ÷ €20) x 100 = 65%. The markup rate is 65%.

5. If the cost of a unit falls to €6, the unit margin becomes: €20 – €6 = €14.
   Cost reduction increases unit margin from €13 to €14.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: BioBeverages

States :

BioBoissons, a natural beverage company, is preparing to launch a new organic fruit juice. The production cost excluding tax per bottle is €1,50, and the selling price excluding tax is expected to be €4. The company anticipates monthly sales of 10 bottles.

Work to do :

1. Determine the unit margin for each bottle of fruit juice.
2. Estimate the overall margin expected for a month.
3. Calculate the margin rate for this juice.
4. Calculate the markup rate for sales.
5. Analyze the impact of a €0,30 increase in the selling price on the unit margin.

Proposed correction:

1. The unit margin is: €4 – €1,50 = €2,50. Each bottle brings a margin of €2,50.

2. The overall monthly margin is: €2,50 x 10 = €000. The overall margin for the month is €25.

3. The margin rate is: ((€4 – €1,50) ÷ €1,50) x 100 = 166,67%. The margin rate is 166,67%.

4. The markup rate is: ((€4 – €1,50) ÷ €4) x 100 = 62,5%. The markup rate is 62,5%.

5. With a selling price of €4,30, the new margin becomes: €4,30 – €1,50 = €2,80.
   Increasing the selling price improves the unit margin from €2,50 to €2,80.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: HomeChef

States :

HomeChef, a company offering ready-to-cook meal kits, is launching a new weekly menu. The cost of ingredients excluding VAT for each kit is €12, and it will be sold at €30 excluding VAT. Sales are expected to reach 700 kits per month.

Work to do :

1. Calculate the unit margin for each meal kit.
2. Establish the overall margin expected for a month.
3. Calculate the margin rate on these kits.
4. Calculate the markup rate for the sale.
5. Consider the impact on business management if demand doubles.

Proposed correction:

1. The unit margin is: €30 – €12 = €18. Each kit generates a margin of €18.

2. The overall monthly margin is: €18 x 700 = €12. The total margin for the month is €600.

3. The margin rate is: ((€30 – €12) ÷ €12) x 100 = 150%. The margin rate is 150%.

4. The markup rate is: ((€30 – €12) ÷ €30) x 100 = 60%. The markup rate is 60%.

5. If demand doubles, the overall margin would be: €18 x (2 x 700) = €25.
   Management should adapt to double increased sales to maintain performance.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100

Application: TechSavvy

States :

TechSavvy, a store selling computer accessories, is preparing to release a new mechanical keyboard. The cost of a keyboard is €30 excluding VAT, and it is expected to sell for €70 excluding VAT. Sales forecast is 400 units per month.

Work to do :

1. Calculate the unit margin for each keyboard.
2. Evaluate the overall monthly expected margin.
3. Calculate the margin rate on each keyboard.
4. Calculate the markup rate for these sales.
5. Discuss the effects of a 10% discount on the net selling price to boost sales.

Proposed correction:

1. The unit margin is: €70 – €30 = €40. Each keyboard generates a margin of €40.

2. The overall monthly margin is: €40 x €400 = €16. The total monthly margin is €000.

3. The margin rate is: ((€70 – €30) ÷ €30) x 100 = 133,33%. The margin rate is 133,33%.

4. The markup rate is: ((€70 – €30) ÷ €70) x 100 = 57,14%. The markup rate is 57,14%.

5. With a 10% discount on the sale price, the new price is €70 x (1 – 0,10) = €63.
   The new unit margin becomes: €63 – €30 = €33.
   The discount reduces the unit margin, which could influence the pricing strategy.

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
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100