In this section:
- Application: GourmetFusion
- App: TechWorld Gadgets
- Application: BioBéasseur Organic
- Application: InstaTech Solutions
- Application: FashionBoutique
- Application: EcoAuto Parts
- App: ArtStudio Supplies
- Application: AquaPure Filters
- Application: SolarEnergy Innovators
- App: GreenFurniture Design
- App: UrbanCycle Equipment
Application: GourmetFusion
States :
GourmetFusion, a company specializing in the production of gourmet meal trays, is looking to optimize its pricing and margin strategy. Currently, GourmetFusion sells its trays for €25 excluding VAT per unit, with a purchase cost of €15 excluding VAT. Last year, the company sold 2 meal trays. It wants to estimate its overall margin for the year and understand its relative performance.
Work to do :
- Calculate the unit margin made for each meal tray sold by GourmetFusion.
- Determine GourmetFusion's overall margin for the past year.
- What is GourmetFusion's margin rate for the previous year?
- GourmetFusion is considering increasing its selling price excluding VAT to €30 per tray. What would the new margin rate be?
- Analyze the strategic impact of this price increase on the company's competitiveness.
Proposed correction:
The unit margin is the difference between the selling price excluding tax (PV excluding tax) and the purchasing price excluding tax (PA excluding tax).
[ \text{Unit margin} = €25 – €15 = €10 ]
The unit margin is €10 per meal tray.The overall margin is calculated by multiplying the unit margin by the quantity sold.
[ \text{Overall margin} = €10 x €2 = €000 ]
The overall margin is therefore €20 for the past year.The margin rate is given by the formula:
[ \text{Margin rate} = ((€25 – €15) ÷ €15) x 100 = 66,67% ]
The margin rate for the previous year is 66,67%.
With a new selling price of €30 per tray, the margin rate becomes:
[ \text{Margin rate (new)} = ((€30 – €15) ÷ €15) x 100 = 100% ]
The margin rate would then be 100%.By increasing the price, GourmetFusion could significantly improve its profitability, but it will have to ensure that this increase does not negatively impact demand, especially if competition remains aggressive on prices.
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 |
App: TechWorld Gadgets
States :
TechWorld Gadgets, a technology accessories company, sold 5 units of a particular headset model last year. The unit selling price excluding VAT is €000, with a purchase cost of €50 per unit. The company wants to know its overall margin performance to adjust its sales strategy.
Work to do :
- What is the unit margin made on each helmet sold?
- Calculate the overall margin earned by TechWorld Gadgets during the year.
- What is the margin rate for this helmet model?
- Let's say TechWorld wants to reduce the selling price by €5 to increase sales. What would the new margin be?
- Discuss the possible business implications of this decision on sales and the market.
Proposed correction:
The unit margin is calculated as follows:
[ \text{Unit margin} = €50 – €30 = €20 ]
The unit margin per helmet is therefore €20.The overall margin is obtained by multiplying the unit margin by the number of units sold:
[ \text{Overall margin} = €20 x €5 = €000 ]
The overall margin is €100 for the year.The margin rate is determined by the formula:
[ \text{Margin rate} = ((€50 – €30) ÷ €30) x 100 = 66,67% ]
The margin rate for this helmet is 66,67%.
With a reduced sale price of €45:
[ \text{Margin rate (reduced)} = ((€45 – €30) ÷ €30) x 100 = 50% ]
The new margin rate would be 50%.Reducing the selling price could stimulate demand by making the product more attractive, but a trade-off is necessary to balance sales volume and margin per unit.
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: BioBéasseur Organic
States :
BioBéasseur Organic, a company specializing in organic cosmetic products, offers a cream sold for €40 excluding VAT, with a purchase cost of €22 excluding VAT. Last year, 3 units were sold. The company would like to evaluate the financial efficiency of its range of creams.
Work to do :
- Calculate the unit margin on each cream sold by BioBéasseur Organic.
- What is the overall margin rate achieved by the company for the cream?
- Determine the overall margin on sales of this cream.
- If BioBéasseur Organic plans to reduce the purchase cost by €2, what impact would this have on the unit margin?
- Analyze how such a cost reduction could affect the company's competitive position.
Proposed correction:
The unit margin is calculated by:
[ \text{Unit margin} = €40 – €22 = €18 ]
Each cream provides a margin of €18.The margin rate is obtained by the formula:
[ \text{Margin rate} = ((€40 – €22) ÷ €22) x 100 = 81,82% ]
The margin rate is therefore 81,82%.The overall margin is:
[ \text{Overall margin} = €18 x €3 = €500 ]
The overall margin generated is €63.
With the reduction in the purchase cost of €2, the new unit margin would be:
[ \text{New unit margin} = €40 – €20 = €20 ]
The new margin per unit would be €20.Reducing the cost of purchase while maintaining the price could improve profits, while potentially allowing future price cuts to compete more.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x Quantity sold |
Application: InstaTech Solutions
States :
InstaTech Solutions, an IT service and maintenance company, charges €120 excluding VAT for each intervention. The average cost of the services provided is €50 excluding VAT per service. To improve its processes, InstaTech wants to analyze the margin obtained after having carried out 800 interventions during the year.
Work to do :
- Evaluate the unit margin earned on each service.
- Determine the overall margin achieved by InstaTech over the year.
- What is the margin rate for these services?
- InstaTech is considering adjusting the price charged to €100 excluding VAT to increase its customer base. What would the new margin rate be?
- Consider the implications of this pricing adjustment for profitability and customer satisfaction.
Proposed correction:
The unit margin on each service is calculated as follows:
[ \text{Unit margin} = €120 – €50 = €70 ]
InstaTech makes a margin of €70 per intervention.The overall margin is the product of the unit margin and the number of interventions:
[ \text{Total margin} = €70 x €800 = €56 ]
The overall margin for the year amounts to €56.As for the margin rate:
[ \text{Margin rate} = ((€120 – €50) ÷ €50) x 100 = 140% ]
The margin rate reaches 140%.
For a new price of €100:
[ \text{Margin rate (adjusted)} = ((€100 – €50) ÷ €50) x 100 = 100% ]
The margin rate would then be 100%.By lowering prices, InstaTech could reach a wider market, but it must ensure that the margin reduction does not compromise quality as well as the company's overall profits.
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: FashionBoutique
States :
FashionBoutique is a company specializing in women's clothing. It sells a dress for €80 excluding VAT, while the purchase cost is €45. Over the past year, FashionBoutique has sold 1 dresses. In order to maximize its profits, the company wants to better understand its overall margin and the implications of new pricing strategies.
Work to do :
- Calculate the unit margin on each dress.
- What is the overall margin associated with these sales?
- What is the margin rate achieved?
- If FashionBoutique lowered the purchase cost to €40 for each dress, what would the new margin rate be?
- Interpret how such cost reduction could support FashionBoutique's long-term growth.
Proposed correction:
To calculate the unit margin:
[ \text{Unit margin} = €80 – €45 = €35 ]
The unit margin is €35 for each dress.The overall margin is deduced by:
[ \text{Overall margin} = €35 x €1 = €500 ]
FashionBoutique achieved an overall margin of €52.The margin rate is calculated as follows:
[ \text{Margin rate} = ((€80 – €45) ÷ €45) x 100 = 77,78% ]
The margin rate is 77,78%.
With a purchase cost reduced to €40:
[ \text{Margin rate (modified)} = ((€80 – €40) ÷ €40) x 100 = 100% ]
The new margin rate would be 100%.Reducing the cost of purchase while maintaining the current selling price would allow FashionBoutique to improve its profitability, which could be reinvested in the development of its brand and collections.
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: EcoAuto Parts
States :
EcoAuto Parts specializes in the distribution of eco-friendly auto parts. A major part is sold at €150 excluding VAT, for a purchase cost of €90. During the year, 1 units were sold. The objective is to improve margins and analyze potential commercial adjustments.
Work to do :
- Determine the unit margin for each piece sold.
- Calculate the overall margin obtained by EcoAuto Parts.
- What is the current margin rate?
- Suppose EcoAuto Parts increases its selling price to €170 excluding VAT. Find the new margin rate.
- Consider the effects of such a price increase on brand perception and sales volume.
Proposed correction:
The unit margin is calculated by:
[ \text{Unit margin} = €150 – €90 = €60 ]
Each piece generates a margin of €60.The overall margin is the product of the unit margin and the number of units sold:
[ \text{Overall margin} = €60 x €1 = €200 ]
The overall margin for the year is €72.The margin rate is given by:
[ \text{Margin rate} = ((€150 – €90) ÷ €90) x 100 = 66,67% ]
The current margin rate is 66,67%.
With the new sale price:
[ \text{Margin rate (new)} = ((€170 – €90) ÷ €90) x 100 = 88,89% ]
The margin rate would now stand at 88,89%.By increasing the selling price, EcoAuto Parts can give the impression of higher quality, but it risks lowering sales volume if competitors charge lower prices.
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 |
App: ArtStudio Supplies
States :
ArtStudio Supplies offers paint kits for amateur artists, sold at €55 excluding VAT each, costing €25 excluding VAT to produce. In one year, the company sold 2 kits. The aim is to improve the understanding of margins to define new opportunities.
Work to do :
- What is the unit margin for each kit sold?
- Calculate the overall margin made by ArtStudio Supplies.
- What is the meaning of the margin rate in this context?
- Analyze the impact on margin if the purchase cost was reduced by 10%.
- How could such cost reduction be used for the company's future pricing strategy?
Proposed correction:
The unit margin can be calculated by:
[ \text{Unit margin} = €55 – €25 = €30 ]
A kit brings a margin of €30.The overall margin is:
[ \text{Overall margin} = €30 x €2 = €600 ]
ArtStudio Supplies generated an overall margin of €78.The margin rate, an indicator of relative profitability by product, is:
[ \text{Margin rate} = ((€55 – €25) ÷ €25) x 100 = 120% ]
This means that every euro spent on production generates €1,20 of margin.
With a 10% reduction in the purchase cost (from €25 to €22,50):
[ \text{New unit margin} = €55 – €22,50 = €32,50 ]
The unit margin would increase to €32,50.This reduction could allow the company to reduce its prices while preserving the margin, in order to reach more customers or to reinvest in quality and advertising.
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: AquaPure Filters
States :
AquaPure is a company known for its water filtration systems. It sells its systems for €200 excluding VAT each, for a production cost of €120. During the year, AquaPure managed to sell 1 units. The objective is to review the company's financial strategy to maximize its profits.
Work to do :
- Determine the unit margin made on each system sold.
- What is the overall margin achieved for the year?
- What is the margin rate granted to AquaPure?
- Consider a scenario where the selling price increases by 10%. What will the new margin rate be?
- Discuss the potential effects of such a price increase on customer perception and market position.
Proposed correction:
For the unit margin:
[ \text{Unit margin} = €200 – €120 = €80 ]
Each system sold brings in a margin of €80.The overall margin for the year amounts to:
[ \text{Overall margin} = €80 x €1 = €800 ]
AquaPure generated an overall margin of €144.The margin rate is calculated by:
[ \text{Margin rate} = ((€200 – €120) ÷ €120) x 100 = 66,67% ]
AquaPure enjoys a margin rate of 66,67%.
With a 10% increase in the sale price (from €200 to €220):
[ \text{Margin rate (new)} = ((€220 – €120) ÷ €120) x 100 = 83,33% ]
The margin rate would increase to 83,33%.Raising prices could mean higher perceived quality and increased margins, but AquaPure could lose price-sensitive customers if its competitors remain cheaper.
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: SolarEnergy Innovators
States :
SolarEnergy Innovators is dedicated to manufacturing solar panels, sold at a price of €600 excluding VAT each, with a manufacturing cost of €350. During the year, the company delivered 950 panels. It wants to deepen the understanding of its margins to adjust its pricing policies.
Work to do :
- Calculate the unit margin for each solar panel.
- What overall margin was achieved by SolarEnergy Innovators during this period?
- What is the company's current margin rate?
- The company is considering lowering the selling price to €550 to increase its customer base. What would be the new margin rate?
- Analyze the effect of this price drop on SolarEnergy Innovators' competitive strategy.
Proposed correction:
The unit margin is obtained by:
[ \text{Unit margin} = €600 – €350 = €250 ]
This means that each panel brings in €250 in margin.The overall margin is calculated as follows:
[ \text{Total margin} = €250 x €950 = €237 ]
During the year, SolarEnergy Innovators achieved an overall margin of €237.The margin rate is determined by:
[ \text{Margin rate} = ((€600 – €350) ÷ €350) x 100 = 71,43% ]
The company benefits from a margin rate of 71,43%.
After reduction of the sale price to €550:
[ \text{Margin rate (reduced)} = ((€550 – €350) ÷ €350) x 100 = 57,14% ]
The margin rate will drop to 57,14%.Lowering the price could increase sales volume and improve market competitiveness, but it is crucial to ensure that margins remain profitable enough to support operational costs.
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 |
App: GreenFurniture Design
States :
GreenFurniture Design, an eco-friendly furniture company, produces and sells a bamboo table for €300 excluding VAT, with a production cost of €180. Last year, 1 tables were sold. The company wants to understand its performance in terms of margin to adapt its offer to the global market.
Work to do :
- Determine the unit margin that GreenFurniture Design makes on each table.
- Calculate the overall margin achieved by the company.
- What is the margin rate obtained by the company?
- If the cost of production drops by 15%, what would be the impact on the unit margin?
- Describe how reducing production costs could positively influence business strategy in the international market.
Proposed correction:
The unit margin is obtained by:
[ \text{Unit margin} = €300 – €180 = €120 ]
Each table provides the company with a margin of €120.The overall margin is:
[ \text{Overall margin} = €120 x €1 = €000 ]
GreenFurniture Design therefore achieved an overall margin of €120.The margin rate is calculated by:
[ \text{Margin rate} = ((€300 – €180) ÷ €180) x 100 = 66,67% ]
The margin rate for this product is 66,67%.
If the production cost is reduced by 15% (from €180 to €153):
[ \text{New unit margin} = €300 – €153 = €147 ]
The unit margin would thus increase to €147.A reduction in production costs offers the possibility of lowering prices for new markets without affecting the margin, increasing the attractiveness of GreenFurniture Design products internationally.
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 |
App: UrbanCycle Equipment
States :
UrbanCycle Equipment manufactures and sells popular urban bikes, priced at €450 each excluding VAT with a production cost of €275. Over the course of a year, 750 bikes were sold. The company is looking to analyse its margins to consider price reductions or business expansion.
Work to do :
- Calculate the unit margin for each bike.
- What is the total amount of the overall margin for the past year?
- What margin rate does the company currently have?
- Suppose the selling price is adjusted to €420, what would be the impact on the margin rate?
- Discuss the strategic value of a price reduction for UrbanCycle and its possible effects on sales expansion.
Proposed correction:
To calculate the unit margin on each bike:
[ \text{Unit margin} = €450 – €275 = €175 ]
UrbanCycle generates a margin of €175 per bike.The overall margin is calculated as follows:
[ \text{Total margin} = €175 x €750 = €131 ]
UrbanCycle Equipment achieved an overall margin of €131.The margin rate is determined by:
[ \text{Margin rate} = ((€450 – €275) ÷ €275) x 100 = 63,64% ]
The current margin rate is 63,64%.
Adjusting the sale price to €420:
[ \text{Margin rate (adjusted)} = ((€420 – €275) ÷ €275) x 100 = 52,73% ]
The margin rate would increase to 52,73%.A price drop could improve access to new market segments, driving sales growth while increasing the overall volume of bikes sold, which can potentially offset the decline in unit margin.
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 |