How-to-calculate-margin-percentage

How to Calculate Margin Percentage | 9 Exercises

by

Application: House of Restoration

States :

La Maison de la Restauration is a well-established caterer in the gastronomic sector. It offers prepared dishes at different prices depending on the event. For a corporate event, it must establish its prices and understand its margins. The production cost of a starter dish is €10 excluding VAT and it is sold at €25 excluding VAT. In a context of increased competition, determine the margin percentages to optimize profitability.

Work to do :

  1. Calculate the margin rate for the starter dish sold.
  2. Determine the selling price excluding tax required to obtain a markup rate of 30% if the production cost excluding tax remains at €10.
  3. Calculate the overall margin if you plan to sell 200 starters.
  4. Analyze the impact of a 10% increase in production cost on the initial margin rate.
  5. Suggest a strategic adjustment if the production cost increases to €12 excluding VAT but you want to maintain a margin rate of 50%.

Proposed correction:

  1. To calculate the margin rate, we use the formula:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    Let's substitute the values: ((25 – 10) ÷ 10) x 100 = 150%.
    The margin rate for the starter dish is 150%.

  2. To obtain a markup rate of 30%, we use the formula:
    PV HT = PA HT ÷ (1 – Mark rate).
    Substituting, 10 ÷ (1 – 0,30) = €14,29.
    The selling price excluding VAT should be around €14,29 to achieve a mark-up rate of 30%.

  3. To calculate the overall margin, use the formula: Overall margin = Unit margin x quantity sold.

The unit margin is €25 – €10 = €15.
So, Overall Margin = 15 x 200 = €3.
The overall margin for the sale of 200 dishes is €3.

  1. If the cost of production increases by 10%, it rises to €10 x 1,10 = €11.
    The new margin rate is ((25 – 11) ÷ 11) x 100 = 127,27%.
    A 10% increase in cost reduces the margin rate to 127,27%.

  2. If the production cost increases to €12 excluding VAT and you want a margin rate of 50%, use:
    PV HT = PA HT x (1 + Margin rate).
    So, 12 x (1 + 0,50) = €18.
    With a production cost of €12, a selling price of €18 would maintain a margin rate of 50%.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Sale price excl. VAT PA HT ÷ (1 – Mark rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold
Price adjustment excluding VAT PA HT x (1 + Margin rate)

Application: Tech Innov

States :

Tech Innov is a company specializing in the manufacture of cutting-edge electronic gadgets. One of its flagship products, a connected bracelet, has a production cost of €40 excluding VAT and is sold at €100 excluding VAT. The company seeks to analyze its performance to optimize its sales strategies.

Work to do :

  1. Calculate the markup rate for the connected bracelet.
  2. Determine the selling price excluding tax required to obtain a margin rate of 200% with a production cost of €40 excluding tax.
  3. If the company plans to sell 500 bracelets, what would be their total contribution to the overall margin?
  4. Evaluate the impact of a €5 reduction in production cost on the current markup rate.
  5. Suggest a strategy if the selling price is reduced by 10% while maintaining a margin rate of 150%.

Proposed correction:

  1. To calculate the markup rate, we use the formula:
    Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
    Let's substitute the values: ((100 – 40) ÷ 100) x 100 = 60%.
    The markup rate for the connected bracelet is 60%.

  2. To obtain a margin rate of 200%, we use the formula:
    PV HT = PA HT x (1 + Margin rate).
    Replacing, 40 x (1 + 2) = €120.
    The selling price excluding tax should be €120 to achieve a margin rate of 200%.

  3. To calculate the overall margin, we first find the unit margin:

Unit margin = PV HT – PA HT = 100 – 40 = 60 €.
So, Overall Margin = 60 x 500 = €30.
The contribution to the overall margin is €30 for 000 bracelets sold.

  1. If the production cost is reduced by €5, it becomes €35.
    New markup rate = ((100 – 35) ÷ 100) x 100 = 65%.
    A €5 reduction in cost improves the markup rate to 65%.

  2. If the sale price is reduced by 10%, it becomes €90.
    To maintain a margin rate of 150%, it is necessary to have PV HT = PA HT x (1 + Margin rate).
    90 = PA HT x 2,5, then PA HT = 90 ÷ 2,5 = €36.
    With this strategy, the production threshold is €36 for a PV excluding tax of €90.

Formulas Used:

Title Formulas
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
PV HT adjustment PA HT x (1 + Margin rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Green Fashion

States :

Green Fashion is an innovative start-up in the textile industry, specializing in ecological clothing. Currently, an organic cotton dress costs €30 excluding VAT to produce and is sold at €75 excluding VAT. The company wants to analyze its position in relation to the competition while maintaining an attractive margin.

Work to do :

  1. Calculate the markup rate for the current dress.
  2. What new selling price excluding tax would be necessary to achieve a markup rate of 50% if the production cost excluding tax remains €30?
  3. If Green Fashion sells 300 dresses, what is the total margin obtained?
  4. Analyze the effects of a 20% increase in production cost on the current margin rate.
  5. If the selling price must be reduced by 20% for competitive reasons, determine the remaining margin rate.

Proposed correction:

  1. To find the margin rate, we apply:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    Substituting, ((75 – 30) ÷ 30) x 100 = 150%.
    The markup on the dress is 150%.

  2. To obtain a markup rate of 50%, the formula is:
    PV HT = PA HT ÷ (1 – Mark rate).
    Let's replace, 30 ÷ (1 – 0,50) = €60.
    A sale price of €60 is required for a markup rate of 50%.

  3. The unit margin is €75 – €30 = €45.

So, Overall Margin = 45 x 300 = €13.
The total margin on the sale of 300 dresses is €13.

  1. A 20% increase puts the cost at 30 x 1,20 = €36.
    New margin rate = ((75 – 36) ÷ 36) x 100 = 108,33%.
    The margin rate falls to 108,33% after this increase.

  2. With a 20% discount, the new price is 75 x 0,80 = €60.
    New margin rate = ((60 – 30) ÷ 30) x 100 = 100%.
    The margin rate becomes 100% with the adjusted selling price.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Sale price excl. VAT PA HT ÷ (1 – Mark rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Auto Elite

States :

Auto Elite is a company specializing in the sale of luxury cars. Each model sold costs €70 excluding VAT to acquire for the company and is resold for €000 excluding VAT. Faced with a rapidly expanding market but also with increasing competition, Auto Elite wishes to determine its different margins in order to adjust its sales prices strategically.

Work to do :

  1. Calculate the margin rate on the sale of a vehicle.
  2. What would be the required selling price excluding tax to achieve a margin rate of 100% with the same acquisition cost?
  3. If the company manages to sell 80 vehicles, what will be the total margin achieved?
  4. Discuss the financial implications if the acquisition cost increases by 10% over the initial margin rate.
  5. If Auto Elite reduces its prices by 15% in order to increase its market share, calculate the new margin rate.

Proposed correction:

  1. The formula for the margin rate is:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    Let's replace, ((120 – 000) ÷ 70) x 000 = 70%.
    The margin rate on each vehicle is 71,43%.

  2. For a margin rate of 100%, we have
    PV HT = PA HT x (1 + Margin rate).
    Replacing, 70 x 000 = €2.
    A price of €140 would be required for a 000% margin.

  3. Unit margin: 120 – 000 = €70.

Total margin = 50 x 000 = €80.
The total margin on the sale of 80 vehicles is €4.

  1. A 10% increase in cost comes to 70 x 000 = €1,10.
    New margin rate: ((120 – 000) ÷ 77) x 000 = 77%.
    This reduces the margin rate to 55,84%.

  2. With a 15% decrease, the price is 120 x 000 = €0,85.
    New margin rate: ((102 – 000) ÷ 70) x 000 = 70%.
    The margin rate with reduced prices is 45,71%.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Price adjustment PA HT x (1 + Margin rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Bio Beauty

States :

Bio Beauté produces artisanal natural cosmetics. A specific moisturizing cream costs €5 excluding VAT to manufacture and sells for €15 excluding VAT. With an increasingly strong demand for natural products, the company is looking to optimize its profitability and study its margins to plan for future expansion.

Work to do :

  1. Calculate the gross margin percentage on moisturizer.
  2. What selling price excluding tax should be aimed for to guarantee a margin rate of 300% with the same manufacturing cost?
  3. Suppose the expected sale is 1 units, what overall margin can be expected?
  4. Estimate the effect of a €1 increase in cost on the initial gross margin percentage.
  5. If Bio Beauté decides to apply a reduction of €2 on the sale price, calculate the new margin rate.

Proposed correction:

  1. The gross margin percentage is calculated by:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    Substituting, ((15 – 5) ÷ 5) x 100 = 200%.
    The cream generates a gross margin rate of 200%.

  2. For a margin rate of 300%, use:
    PV HT = PA HT x (1 + Margin rate).
    Replacing, 5 x (1 + 3) = €20.
    A selling price of €20 is required for this margin rate.

  3. Unit margin = 15 – 5 = €10.

Overall margin = 10 x 1 = €000.
For 1 units, the total margin reaches €000.

  1. An increase of €1 brings the cost to €6.
    New margin rate: ((15 – 6) ÷ 6) x 100 = 150%.
    This increase reduces the margin to 150%.

  2. €2 reduction, price €13.
    New margin rate: ((13 – 5) ÷ 5) x 100 = 160%.
    The margin narrows to 160%.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
PV HT adjustment PA HT x (1 + Margin rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Gourmet Delice

States :

Gourmet Delice is a company renowned for its high-end pastries. An assortment of macarons costs €8 excluding VAT to produce and is sold for €25 excluding VAT to satisfy connoisseurs. To develop new sales strategies, the company wants to analyze its margins.

Work to do :

  1. Calculate the margin percentage based on the cost of production.
  2. What selling price excluding VAT is necessary to guarantee a mark-up rate of 40% at constant cost?
  3. Based on a projected sale of 600 assortments, what total Piano dage mark-up is possible?
  4. If the cost of production increased by 20%, what would be the effect on the initial margin percentage?
  5. By reducing the price by 10% to increase sales volume, what new margin percentage would be achieved?

Proposed correction:

  1. The cost-based margin is expressed as:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    ((25 – 8) ÷ 8) x 100 = 212,5%.
    The margin percentage stands at 212,5%.

  2. For a markup rate of 40%, the calculation is:
    PV HT = PA HT ÷ (1 – Mark rate).
    8 ÷ (1 – 0,40) = €13,33.
    The price should be €13,33.

  3. Unit margin is 25 – 8 = €17.

Overall margin to be expected: 17 x 600 = €10.
The total expected margin is €10.

  1. With a 20% increase, the cost rises to €9,60.
    The margin is then ((25 – 9,60) ÷ 9,60) x 100 = 160,42%.
    This increase changes the margin to 160,42%.

  2. With a 10% discount, the price drops to €22,50.
    The new margin is ((22,50 – 8) ÷ 8) x 100 = 181,25%.
    A price reduction reduces the margin to 181,25%.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Sale price excl. VAT PA HT ÷ (1 – Mark rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Health Protech

States :

Santé Protech designs innovative medical equipment. Each device sold to a clinic costs €200 excluding VAT and sells for €500 excluding VAT. As the company seeks to diversify its sales channels, it must understand the impact of its margins on its competitiveness.

Work to do :

  1. Calculate the margin rate for the medical device.
  2. What selling price excluding VAT would be required to guarantee a mark-up rate of 60%, cost unchanged?
  3. If the expected annual sale is 1 devices, what overall margin will be achieved?
  4. Consider the impact on initial margin if costs increase by 5%.
  5. If the selling price is reduced by €50, what is the new margin percentage?

Proposed correction:

  1. Margin rate is determined by:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    ((500 – 200) ÷ 200) x 100 = 150%.
    The device provides a margin rate of 150%.

  2. The price for a 60% markup rate asks:
    PV HT = PA HT ÷ (1 – Mark rate).
    200 ÷ (1 – 0,60) = €500.
    This rate justifies a price of €500.

  3. Unit margin is 500 – 200 = €300.

Total margin = 300 x 1 = €200.
The margin on 1 units reaches €200.

  1. A 5% increase makes the cost €210.
    The margin becomes ((500 – 210) ÷ 210) x 100 = 138,10%.
    The increase reduces the margin to 138,10%.

  2. Price reduction of €50 lowers the price to €450.
    The new margin is ((450 – 200) ÷ 200) x 100 = 125%.
    The new margin percentage is 125%.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Sale price excl. VAT PA HT ÷ (1 – Mark rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Urban Style

States :

Style Urbain designs original and eco-responsible sneakers. Each pair manufactured has a cost of €30 excluding VAT and sells at an average price of €75 excluding VAT. To retain more customers, the company explores margins to adjust its prices competitively.

Work to do :

  1. Calculate the markup rate for a pair of sneakers.
  2. What should the selling price be excluding tax to obtain a margin rate of 150%, with the current cost?
  3. If Style Urbain plans to sell 5 pairs per month, how much does it expect to generate in total margin?
  4. If the cost of production increases by 15%, how is the current markup rate affected?
  5. As a promotion, if a 5% discount is applied, what will be the new margin rate?

Proposed correction:

  1. Brand rate used:
    Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
    ((75 – 30) ÷ 75) x 100 = 60%.
    The mark rate reached 60%.

  2. Calculation for margin rate:
    PV HT = PA HT x (1 + Margin rate).
    30 x (1 + 1,50) = €75.
    The required price is €75.

  3. Unit margin: 75 – 30 = €45.

The overall margin is 45 x 5 = €000.
Expected margin generated: €225.

  1. 15% increase, cost €34,50.
    New markup rate: ((75 – 34,50) ÷ 75) x 100 = 54%.
    It drops to 54% with this adjustment.

  2. 5% discount, price becomes €71,25.
    New margin rate: ((71,25 – 30) ÷ 30) x 100 = 137,5%.
    After reduction, the margin rate is 137,5%.

Formulas Used:

Title Formulas
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Price adjustment PA HT x (1 + Margin rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Application: Inclusive Education

States :

Inclusive Education produces and sells digital educational materials. Each educational kit costs €15 excluding VAT and is sold for €35 excluding VAT. The company is committed to making digital accessible and wants to assess margins to ensure the economic viability of its projects.

Work to do :

  1. Calculate the margin percentage of the educational kit.
  2. What would be the selling price excluding tax to ensure a markup rate of 45%, while keeping the production cost constant?
  3. Planning to sell 7 kits, what total contribution to margin can be expected?
  4. If unit costs increase by €3 per kit, how is the margin rate influenced?
  5. With a loyalty strategy generating a 10% discount on the sale price, evaluate the new margin percentage.

Proposed correction:

  1. Margin rate:
    Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
    ((35 – 15) ÷ 15) x 100 = 133,33%.
    The kit generates a margin of 133,33%.

  2. For 45% markup rate:
    PV HT = PA HT ÷ (1 – Mark rate).
    15 ÷ (1 – 0,45) = €27,27.
    A price of €27,27 is required.

  3. Unit margin: 35 – 15 = €20.

Total margin = 20 x 7 = €000.
Expected margin for 7 kits: €000.

  1. Cost increased to €18.
    New margin: ((35 – 18) ÷ 18) x 100 = 94,44%.
    The increase brings it down to 94,44%.

  2. 10% discount, new price €31,50.
    New margin: ((31,50 – 15) ÷ 15) x 100 = 110%.
    The margin increases to 110% with the discount.

Formulas Used:

Title Formulas
Margin rate ((PV HT – PA HT) ÷ PA HT) x 100
Brand taxes ((PV HT – PA HT) ÷ PV HT) x 100
Price for Mark Rate PA HT ÷ (1 – Mark rate)
Unit margin PV HT – PA HT
Overall margin Unit margin x quantity sold

Leave comments