In this section:
Application: Star of the Sea
States :
The company Étoile de la Mer, which specializes in the sale of marine care products, wants to analyze the profitability of its latest organic facial mask. For this product, the purchase price excluding tax is €8 and the sale price excluding tax is €15. The company aims to evaluate its unit gross margin to know if it is profitable to keep this product in its range.
Work to do :
-
Calculate the unit gross margin for the organic face mask.
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Determine the margin rate for this product.
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Rate the brand rate for organic face mask.
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If the company wants to offer a 10% discount on the net selling price, what would be the new unit gross margin?
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What business strategy would you propose to the company based on the results obtained to improve profitability?
Proposed correction:
-
The unit gross margin is calculated by subtracting the pre-tax purchase price from the pre-tax selling price.
Unit gross margin = PV excluding tax – PA excluding tax
Gross margin per unit = €15 – €8 = €7
The gross margin per unit for the organic face mask is €7. -
The margin rate is calculated using the following formula:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Margin rate = ((€15 – €8) ÷ €8) x 100 = 87,5%
The margin rate for this product is 87,5%. -
The markup rate is determined by the following formula:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Brand rate = ((€15 – €8) ÷ €15) x 100 = 46,67%
The markup rate for organic face mask is 46,67%.
-
If a 10% reduction is applied, the new selling price excluding VAT would be:
New PV HT = PV HT x (1 – 0,10)
New PV excluding VAT = €15 x (1 – 0,10) = €13,5
The new gross margin per unit = €13,5 – €8 = €5,5
With a 10% reduction, the unit gross margin becomes €5,5. -
To improve profitability, Étoile de la Mer could explore strategies such as increasing sales volume through promotions, or negotiating purchasing costs to preserve margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross 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 PV HT | PV HT x (1 – reduction) |
| New gross margin | New PV HT – PA HT |
Application: Camille's Delights
States :
Les Délices de Camille is an artisan baker famous for its delicious brioches. The cost price of a brioche is €1,20, and it is sold at a price of €2,50 excluding VAT. Camille wants to understand the profitability of each brioche sold and plan its future prices.
Work to do :
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Calculate the gross margin per unit for a brioche.
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Determine the margin rate for this brioche.
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Camille intends to increase the cost price by 10%. How will this impact the gross margin per unit if the selling price remains unchanged?
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Calculate the new selling price excluding VAT required to maintain the same markup rate after the increase in cost price.
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Provide an analysis of the strategic implications of these cost and price changes for the company.
Proposed correction:
-
The gross margin per unit for a brioche is calculated by subtracting the cost price from the selling price excluding tax.
Gross unit margin = PV excluding tax – Cost price
Gross margin per unit = €2,50 – €1,20 = €1,30
The gross margin per unit of each brioche is €1,30. -
The margin rate is determined by the following formula:
Margin rate = ((PV HT – Cost price) ÷ Cost price) x 100
Margin rate = ((€2,50 – €1,20) ÷ €1,20) x 100 = 108,33%
The margin rate is 108,33%. -
If the cost price increases by 10%, the new cost price is:
New cost price = Cost price x (1 + 0,10)
New cost price = €1,20 x €1,10 = €1,32
New gross margin per unit = PV excluding tax – New cost price = €2,50 – €1,32 = €1,18
The impact of the 10% increase would reduce the unit gross margin to €1,18.
-
To maintain the same markup rate, we use the formula:
PV HT = New Cost Price ÷ (1 – Markup Rate)
Calculation of the initial markup rate:
Initial markup rate = ((PV excluding VAT – Cost price) ÷ PV excluding VAT) x 100
Initial markup rate = ((€2,50 – €1,20) ÷ €2,50) x 100 = 52%
New PV excluding VAT = €1,32 ÷ (1 – 0,52) = €2,75
To maintain the markup rate, the new selling price excluding tax must be €2,75. -
Camille could assess the impact on sales volume following the price increase and at the same time check how to optimize the production process to limit cost increases.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Cost price |
| Margin rate | ((PV HT – Cost price) ÷ Cost price) x 100 |
| New cost price | Cost price x (1 + increase) |
| PV HT for Brand Rate | New Cost Price ÷ (1 – Initial Markup Rate) |
| Brand taxes | ((PV HT – Cost price) ÷ PV HT) x 100 |
Application: Tech Solutions
States :
Tech Solutions, an innovative company in the electronics sector, wants to analyze the profitability of one of its latest gadgets. Each gadget has a production cost of €25 and a sales price of €60 excluding VAT. The company wants to better understand its margins in order to make informed strategic decisions.
Work to do :
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Calculate the unit gross margin for the gadget.
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Determine the margin rate for this gadget.
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Analyze how a 15% decrease in the net selling price would affect the unit gross margin.
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Assuming that costs increase by €5, what would be the minimum selling price to guarantee a unit gross margin of €20?
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Explain what strategic decisions can arise from these findings, taking into account the potential impact on competition and brand image.
Proposed correction:
-
The unit gross margin is the selling price excluding tax minus the production cost.
Gross margin per unit = PV excluding tax – Production cost
Gross margin per unit = €60 – €25 = €35
The gross margin per unit of the gadget is €35. -
The margin rate uses the formula:
Margin rate = ((PV HT – Production cost) ÷ Production cost) x 100
Margin rate = ((€60 – €25) ÷ €25) x 100 = 140%
The margin rate for the gadget is 140%. -
If the selling price excluding VAT falls by 15%, the new selling price excluding VAT is:
New PV HT = PV HT x (1 – 0,15) = €60 x (1 – 0,15) = €51
New gross margin per unit = €51 – €25 = €26
With a 15% drop, the unit gross margin is reduced to €26.
-
For a desired unit gross margin of €20 with a production cost increased by €5, we must solve the following equation:
New production cost = Production cost + €5 = €30
New PV HT = New gross unit margin + New production cost
New PV excluding tax = €20 + €30 = €50
The minimum selling price to guarantee a gross margin of €20 would be €50. -
Based on the results obtained, Tech Solutions should consider the impact on the perception of volume and competitiveness in the sector. Adjustments must be made on costs or marketing to maintain a strong position.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| New PV HT | PV HT x (1 – reduction) |
| New production cost | Production cost + increase |
| New PV for margin | New gross unit margin + New production cost |
Application: Urban Bike
States :
Vélo Urbain, a brand specializing in eco-friendly bicycles, currently sells its flagship model at a price of €350 excluding VAT with a production cost of €200. The company wants to explore margins for future decisions on its pricing positioning.
Work to do :
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What is the gross margin per unit made on each bike sold?
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Calculate the margin rate for this model.
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Anticipate the effect on the unit gross margin if a reduction of €50 on the excluding tax selling price is applied.
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Determine the selling price excluding tax that would need to be charged to maintain a gross unit margin of €180 after an increase in production costs of €20.
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How can these results influence Vélo Urbain’s distribution strategy?
Proposed correction:
-
The unit gross margin is calculated by subtracting the production cost from the selling price excluding tax.
Gross margin per unit = PV excluding tax – Production cost
Gross margin per unit = €350 – €200 = €150
The gross margin per unit per bike is €150. -
The margin rate uses the formula:
Margin rate = ((PV HT – Production cost) ÷ Production cost) x 100
Margin rate = ((€350 – €200) ÷ €200) x 100 = 75%
The margin rate for this bike is 75%. -
If a reduction of €50 is applied:
New PV HT = PV HT – €50 = €350 – €50 = €300
New gross unit margin = New PV excluding tax – Production cost
New gross margin per unit = €300 – €200 = €100
The €50 reduction reduces the unit gross margin to €100.
-
If the production cost increases by €20, then:
New production cost = Production cost + €20 = €220
To maintain a gross margin of €180:
New PV HT = Unit gross margin + New production cost
New PV excluding tax = €180 + €220 = €400
The selling price excluding tax to be applied should be €400 to maintain the same gross unit margin. -
Vélo Urbain could review its distribution policy, taking into account adjusted margins to ensure attractiveness, while preserving financial solidity.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| New PV HT | PV HT – reduction |
| New production cost | Production cost + increase |
| New PV for margin | Gross margin per unit + New production cost |
Application: Night Cream
States :
La Crème de Nuit, a prestigious cosmetics brand, markets an advanced moisturizing cream at a price of €60 excluding VAT, with a production cost of €20. The company wants to refine its profitability analysis by evaluating the unit gross margin.
Work to do :
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Calculate the gross margin per unit obtained on each pot of cream sold.
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What is the markup for this moisturizer?
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If La Crème de Nuit offers a promotional discount of €15 on the selling price excluding VAT, what happens to the unit gross margin?
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If the brand wants to maintain its margin rate but the production cost increases by €5, what new selling price excluding tax should it apply?
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What could be the strategic impact of these analyses on the brand's marketing positioning?
Proposed correction:
-
The unit gross margin is determined by subtracting the production cost from the net selling price.
Gross margin per unit = PV excluding tax – Production cost
Gross margin per unit = €60 – €20 = €40
Each pot of cream generates a gross margin of €40. -
The calculation of the margin rate is done as follows:
Margin rate = ((PV HT – Production cost) ÷ Production cost) x 100
Margin rate = ((€60 – €20) ÷ €20) x 100 = 200%
The cream has a margin rate of 200%. -
With a discount of €15:
New PV HT = PV HT – €15 = €60 – €15 = €45
New gross unit margin = New PV excluding tax – Production cost
New gross margin per unit = €45 – €20 = €25
Post-discount, the unit gross margin drops to €25.
-
To maintain the current margin rate with a production cost increased by €5:
New production cost = €20 + €5 = €25
PV HT required = New production cost ÷ (1 – Margin rate)
Calculation of the markup rate:
Brand rate = ((€60 – €20) ÷ €60) x 100 = 66,67%
New PV excluding VAT = €25 ÷ (1 – 0,6667) = €75
The new selling price to maintain the margin must be €75. -
The results encourage La Crème de Nuit to review its positioning, either by aligning prices or by increasing differentiation.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| New PV HT | PV HT – discount |
| New production cost | Production cost + increase |
| PV HT for Margin Rate | New production cost ÷ (1 – Markup rate) |
Application: Village Bistro
States :
Le Bistro du Village recently launched a gourmet meal basket sold at €25 excluding VAT, with a preparation cost of €10. In full development, the restaurant seeks to optimize its offers by better understanding its unit gross margin.
Work to do :
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What is the gross margin per unit per meal basket sold?
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Determine the margin rate for this gourmet meal basket.
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Discuss the impact on unit gross margin if a promotion leads to a €5 reduction on the net selling price.
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What should the selling price excluding tax be to guarantee a gross margin per unit of €18, in case the cost increases by €2?
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Analyze how these margins could influence the Bistro's customer loyalty strategies.
Proposed correction:
-
The unit gross margin is obtained by subtracting the preparation cost from the selling price excluding tax.
Gross unit margin = PV excluding tax – Preparation cost
Gross margin per unit = €25 – €10 = €15
The meal basket generates a gross unit margin of €15. -
The calculation of the margin rate is as follows:
Margin rate = ((PV HT – Preparation cost) ÷ Preparation cost) x 100
Margin rate = ((€25 – €10) ÷ €10) x 100 = 150%
The margin rate reaches 150%. -
For a reduction of €5:
New PV HT = PV HT – €5 = €25 – €5 = €20
New gross unit margin = New PV excluding tax – Preparation cost
New gross margin per unit = €20 – €10 = €10
After reduction, the gross margin per unit is €10.
-
If the cost increases to €12, to obtain a unit gross margin of €18:
New PV excluding tax = Gross unit margin + New preparation cost
New PV excluding tax = €18 + €12 = €30
The selling price excluding VAT must be €30. -
These data encourage Bistro du Village to strengthen its loyalty offers by boosting perceived value to stabilize its margins.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Preparation cost |
| Margin rate | ((PV HT – Preparation cost) ÷ Preparation cost) x 100 |
| New PV HT | PV HT – reduction |
| New gross margin | New PV HT – Preparation cost |
| New PV HT for margin | Gross margin per unit + New preparation cost |
Application: Gardener's Delight
States :
Gardener's Delight, a gardening company, offers a planting kit sold for €40 excluding VAT, with a production cost of €15. To explore the sustainability of its business model, the company wants to understand its margins.
Work to do :
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Calculate the gross margin per unit of the planting kit.
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What is the margin rate corresponding to this product?
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If a special offer reduces the net selling price by €7, how will the unit gross margin be affected?
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When a 20% cost increase is expected, what excluding tax selling price should be adjusted to maintain a unit gross margin of €25?
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Discuss strategic decisions that Gardener's Delight might consider based on these results to improve its profitability.
Proposed correction:
-
The unit gross margin is calculated by subtracting the production cost from the selling price excluding tax.
Gross margin per unit = PV excluding tax – Production cost
Gross margin per unit = €40 – €15 = €25
The gross margin per unit is €25 per planting kit. -
The margin rate is calculated as follows:
Margin rate = ((PV HT – Production cost) ÷ Production cost) x 100
Margin rate = ((€40 – €15) ÷ €15) x 100 = 166,67%
The margin rate is 166,67%. -
If the price is reduced by €7:
New PV HT = PV HT – €7 = €40 – €7 = €33
New gross unit margin = New PV excluding tax – Production cost
New gross margin per unit = €33 – €15 = €18
The reduction results in a gross unit margin of €18.
-
After a 20% cost increase, the cost becomes:
New production cost = Cost production x (1 + 0,20) = €15 x 1,20 = €18
New PV HT = Unit gross margin + New production cost
New PV excluding tax = €25 + €18 = €43
The selling price excluding tax must be €43 to maintain a margin of €25. -
Gardener's Delight could optimize its internal costs or improve customer perception to justify the price/value ratio.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| New PV HT | PV HT – reduction |
| New production cost | Cost of production x (1 + increase) |
| New PV HT for margin | Gross margin per unit + New production cost |
Application: Ceramic Art
States :
Art Céramique, a manufacturer of artisanal pottery items, sets the sale price of its vases at €80 excluding VAT, with a production cost of €50. To improve its business model, the company wants to evaluate its current margins.
Work to do :
-
What is the gross margin per unit of a vase?
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Estimate the margin rate generated by the sale of a vase.
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Calculate the new gross margin per unit if a discount of €12 excluding VAT is granted on the selling price.
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If the cost of production increases by 10%, what new selling price would allow a unit gross margin of €35 to be maintained?
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Propose strategic actions based on these margins to increase Art Céramique's profits.
Proposed correction:
-
The unit gross margin is calculated as follows:
Gross margin per unit = PV excluding tax – Production cost
Gross margin per unit = €80 – €50 = €30
Each vase provides a gross unit margin of €30. -
To obtain the margin rate, we use the formula:
Margin rate = ((PV HT – Production cost) ÷ Production cost) x 100
Margin rate = ((€80 – €50) ÷ €50) x 100 = 60%
The margin rate is 60%. -
With a discount of €12 on the sale price:
New PV HT = PV HT – €12 = €80 – €12 = €68
New gross unit margin = New PV excluding tax – Production cost
New gross margin per unit = €68 – €50 = €18
The gross margin per unit falls to €18 after the discount.
-
In the event of a 10% cost increase:
New production cost = Production cost x (1 + 0,10) = €50 x 1,10 = €55
To keep a gross unit margin of €35:
New PV HT = Unit gross margin + New production cost
New PV excluding tax = €35 + €55 = €90
The selling price excluding VAT should be adjusted to €90. -
Art Céramique could diversify its products or highlight the added value of craftsmanship to justify price increases.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Production cost |
| Margin rate | ((PV HT – Production cost) ÷ Production cost) x 100 |
| New PV HT | PV HT – discount |
| New production cost | Cost of production x (1 + increase) |
| New PV HT for margin | Gross margin per unit + New production cost |
Application: Ethical Clothing
States :
Vêtements Éthiques produces organic t-shirts sold at a price of €30 excluding VAT, with a manufacturing cost of €12. The company wants to assess its profitability in order to develop its pricing strategies.
Work to do :
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Determine the gross margin per unit made on each t-shirt.
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What is the margin rate of this organic t-shirt?
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Imagine that a promotion requires a reduction in the net selling price of €4. Calculate the new unit gross margin.
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Assuming a cost increase of €2, what selling price excluding tax is required to obtain a unit gross margin of €15?
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Suggest strategic improvement avenues so that Vêtements Éthiques can optimize its profitability.
Proposed correction:
-
The unit gross margin is calculated using the difference between the net selling price and the manufacturing cost:
Gross margin per unit = PV excluding tax – Manufacturing cost
Gross margin per unit = €30 – €12 = €18
Each t-shirt generates a gross margin of €18. -
The margin rate is calculated as follows:
Margin rate = ((PV HT – Manufacturing cost) ÷ Manufacturing cost) x 100
Margin rate = ((€30 – €12) ÷ €12) x 100 = 150%
The margin rate reaches 150%. -
In case of promotion:
New PV HT = PV HT – €4 = €30 – €4 = €26
New gross unit margin = New PV excluding tax – Manufacturing cost
New gross margin per unit = €26 – €12 = €14
The gross margin per unit becomes €14 with the promotion.
-
Following a cost increase of €2:
New manufacturing cost = Manufacturing cost + €2 = €14
To obtain a desired gross margin of €15:
New PV HT = Unit gross margin + New manufacturing cost
New PV excluding tax = €15 + €14 = €29
39The selling price excluding tax must fall to €29. -
Ethical Clothing can turn to product innovations or expand its services to justify its margins and maintain its profits.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit gross margin | PV HT – Manufacturing cost |
| Margin rate | ((PV HT – Manufacturing cost) ÷ Manufacturing cost) x 100 |
| New PV HT | PV HT – reduction |
| New manufacturing cost | Manufacturing cost + increase |
| New PV HT for margin | Gross margin per unit + New manufacturing cost |