In this section:
Application: House of Gourmet Flavors
States :
Maison Saveurs Gourmandes is a company specializing in the artisanal production of jams. It strives to combine quality and competitiveness by controlling its costs. In order to better understand its profitability, the company wants to calculate its margins on three types of jams: strawberry, apricot, and raspberry. Here is the data:
- Strawberry jam: PV excluding tax of €5 and PA excluding tax of €3,50
- Apricot jam: PV excluding tax of €4,50 and PA excluding tax of €3
- Raspberry jam: PV excluding tax of €6 and PA excluding tax of €4
Work to do :
- Calculate the margin rate for strawberry jam.
- What is the markup rate for apricot jam?
- Determine the unit margin of raspberry jam.
- If the company sells 1 jars of strawberry jam, what is the overall margin generated?
- Analyze the impact of a 10% reduction in the selling price of apricot jam on its unit margin.
Proposed correction:
-
The margin rate for strawberry jam is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((5 – 3,50) ÷ 3,50) x 100 = 42,86%.
The margin rate for strawberry jam is 42,86%. -
For the mark rate of apricot jam:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((4,50 – 3) ÷ 4,50) x 100 = 33,33%.
The markup rate of apricot jam is 33,33%. -
The unit margin of raspberry jam is calculated by:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 6 – 4 = €2.
The unit margin for raspberry jam is €2.
-
For the overall margin generated by 1 jars of strawberry jam:
Overall margin = Unit margin x quantity sold
Replacing, 1,50 x 1 = €000.
The overall margin generated is €1. -
In the event of a 10% reduction in the sale price for apricot jam:
New PV HT = 4,50 – (4,50 x 0,10) = 4,05 €
New unit margin = New PV HT – PA HT = 4,05 – 3 = 1,05 €
Before the reduction, the unit margin was €1,50.
The 10% price reduction reduces the unit margin to €1,05, a 30% decrease per unit.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x quantity sold |
| New PV HT (reduction) | PV HT – (PV HT x reduction rate) |
Application: Avant-Garde Technology
States :
Technology Avant-Garde is an innovative startup developing connected accessories for athletes. One of their flagship products, the ConnectRun watch, needs to be thoroughly analyzed for its profitability. The known data is as follows:
- Selling price excluding VAT: €120
- Purchase price excluding VAT: €80
The company also plans to sell a new product, ConnectHeart, with the following projections: - Projected PV excluding tax: €150
- Projected PA HT: €110
Work to do :
- Calculate the margin rate for the ConnectRun watch.
- Determine the markup rate for the ConnectHeart product.
- What is the current unit margin of the ConnectRun watch?
- If Avant-Garde Technology sells 500 ConnectRun watches, what is the total margin achieved?
- What decision should be made if the goal is to increase ConnectHeart's margin rate to 50%?
Proposed correction:
-
The margin rate for the ConnectRun watch is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((120 – 80) ÷ 80) x 100 = 50%.
The margin rate for the ConnectRun watch is 50%. -
The markup rate for the ConnectHeart product is determined as follows:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((150 – 110) ÷ 150) x 100 = 26,67%.
The markup rate for ConnectHeart is 26,67%. -
The current unit margin of the ConnectRun watch is:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 120 – 80 = €40.
The unit margin for ConnectRun is €40.
-
To determine the total margin if 500 ConnectRun watches are sold:
Total margin = Unit margin x quantity sold
Replacing, 40 x 500 = €20.
The total margin achieved would be €20. -
To achieve a 50% margin rate for ConnectHeart:
Desired margin rate = ((PV HT – PA HT) ÷ PA HT)
We reverse to determine the desired PV: PV HT = PA HT x (1 + desired margin rate)
PV excluding VAT = 110 x 1,50 = €165.
The decision would be to increase ConnectHeart's net sales to €165 to achieve 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 |
| Unit margin | PV HT – PA HT |
| Total margin | Unit margin x quantity sold |
| Selling price for target rate | PA HT x (1 + Desired margin rate) |
Application: Chic Paris Fashion
States :
Mode Chic Paris is a high-end clothing store that seeks to maximize its profitability by optimizing the pricing policy of its collections. The store is reviewing its range of cashmere sweaters and wool scarves. The current data is:
- Selling price excluding tax of the sweater: €200
- Purchase price excluding tax of the sweater: €120
- Scarf, PV excluding VAT: €60, PA excluding VAT: €36
Work to do :
- Calculate the margin rate for the cashmere sweater.
- What is the markup rate of wool scarves?
- What unit margin is made on a sweater?
- If Mode Chic Paris sells 200 sweaters, what is the total margin obtained?
- Discuss the strategic implications of offering a 15% discount on scarves and justify your response.
Proposed correction:
-
The margin rate for cashmere sweater is:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((200 – 120) ÷ 120) x 100 = 66,67%.
The margin rate for this sweater is 66,67%. -
For the mark rate of scarves:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((60 – 36) ÷ 60) x 100 = 40%.
The markup rate of wool scarves is 40%. -
The unit margin made on a sweater is:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 200 – 120 = €80.
The unit margin on a sweater is €80.
-
To calculate the total margin for selling 200 sweaters:
Total margin = Unit margin x quantity sold
Replacing, 80 x 200 = €16.
The total margin obtained is €16. -
A 15% discount on scarves would result in a new sale price:
New PV HT = 60 – (60 x 0,15) = 51 €
New unit margin = 51 – 36 = €15
This reduction would significantly reduce the unit margin. Strategically, offering a reduction can stimulate volume sales, but it is essential to analyze whether the increase in volume compensates for the loss of unit margin. Propagating an image of price reduction could also influence the perception of the luxury brand of Mode Chic Paris.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Unit margin | PV HT – PA HT |
| Total margin | Unit margin x quantity sold |
| New PV HT (reduction) | PV HT – (PV HT x reduction rate) |
Application: FitLife Equipment
States :
FitLife Equipements, an innovative company in the world of fitness, offers eco-friendly yoga mats. Eager to optimize its operations, the company analyzes the financial performance of its products. The following data is available for cork yoga mats:
- Sale price excluding tax (PV HT): €70
- Purchase price excluding tax (PA HT): €45
In addition, it is evaluating a possible 5% readjustment of the sale price to increase its competitiveness.
Work to do :
- Calculate the margin rate for FitLife yoga mats.
- Determine the current markup rate.
- After a 5% reduction in the selling price, what is the new unit margin?
- What total margin is obtained if 1 rugs are sold at the new price?
- Consider the impact on FitLife's brand image if the company consistently adopts a price-cutting strategy.
Proposed correction:
-
The margin rate for yoga mats is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((70 – 45) ÷ 45) x 100 = 55,56%.
The margin rate for carpets is 55,56%. -
The current markup rate is:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((70 – 45) ÷ 70) x 100 = 35,71%.
The current markup rate is 35,71%. -
By adjusting the sale price by 5%:
New PV HT = 70 – (70 x 0,05) = 66,50 €
New unit margin = 66,50 – 45 = €21,50
With the reduction, the new unit margin is €21,50.
-
When 1 rugs are sold at the new price:
Total Margin = New Unit Margin x Quantity Sold
Replacing, 21,50 x 1 = €000.
The total margin would be €21. -
Applying regular price reductions could in the long term affect the perception of FitLife as a premium and sustainable brand. Consumers may perceive this strategy as a drop in quality or a concern for excess inventory. It is crucial that FitLife balances competitiveness and brand image, while maintaining its promise of quality.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT (reduction) | PV HT – (PV HT x reduction rate) |
| New unit margin | New PV HT – PA HT |
| Total margin | New unit margin x quantity sold |
Application: Lux&Co Crafts
States :
Artisanat Lux&Co, a stylish company that handcrafts quality leather bags, has decided to expand its range following a resounding success. For an accurate assessment of profitability, the company studies its accessory models. The data currently available are:
- Bag A: PV excluding tax of €250, production cost excluding tax of €150
- Wallet, PV excluding tax of €80, PA excluding tax of €50
Work to do :
- Calculate the margin rate for bag A.
- What is the markup rate for the wallet?
- If Artisanat Lux&Co wants to increase the margin rate of bag A to 70%, what should the new selling price be?
- What is the unit margin on the wallet, and what happens if the PA increases by 10%?
- Propose a global strategy to Artisanat Lux&Co aimed at maintaining high margins while meeting market demand.
Proposed correction:
-
The margin rate for bag A is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((250 – 150) ÷ 150) x 100 = 66,67%.
The margin rate for bag A is 66,67%. -
The markup rate for the wallet is:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((80 – 50) ÷ 80) x 100 = 37,5%.
The markup rate for the wallet is 37,5%. -
To achieve a 70% margin rate for an A bag:
PV HT = PA HT x (1 + desired margin rate)
PV excluding VAT = 150 x 1,70 = €255.
The new required sale price would be €255.
-
The unit margin on a wallet is calculated by:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 80 – 50 = €30.
With a 10% increase in PA, the new PA excluding tax = 50 + (50 x 0,10) = €55
New margin = 80 – 55 = €25
If the PA increases, the unit margin would drop to €25, a significant reduction. -
A global strategy for Artisanat Lux&Co to maintain high margins would include diversifying distribution channels to reduce fixed costs, integrating backwards to control production costs, and strengthening their luxury brand positioning to justify higher prices. Knowing the market and adapting collections to trends while respecting artisanal authenticity would ensure increased customer loyalty and maintaining profit margins.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New PV HT for target margin | PA HT x (1 + desired margin rate) |
| Unit margin | PV HT – PA HT |
| New PA HT after increase | PA HT + (PA HT x increase) |
Application: Green Energy Solutions
States :
Énergie Verte Solutions develops eco-friendly solar lamps for public lighting. With the rise of interest in renewable energies, the company wants to evaluate the profitability of its products. The available information is:
- Solar Lamp X1: PV excluding tax of €150, PA excluding tax of €95
- Projection of a new lamp: PV HT 180 €, PA HT 115 €
Work to do :
- Calculate the margin rate for solar lamp X1.
- What is the markup rate for the new lamp projection?
- If the purchase price of the Solar X1 lamp drops by €5, how does this affect the unit margin?
- What would be the overall margin achieved by selling 600 units of the new lamp at the projected price?
- Assess the challenges for Énergie Verte Solutions in maintaining preserved margins in the face of an overall reduction in the selling price of 10%, dictated by competition.
Proposed correction:
-
The margin rate for the X1 solar lamp is calculated by:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((150 – 95) ÷ 95) x 100 = 57,89%.
The margin rate of X1 solar lamp is 57,89%. -
The mark rate for the new projected lamp is:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((180 – 115) ÷ 180) x 100 = 36,11%.
The markup rate is 36,11%. -
If the AP of the Solar X1 lamp decreases by €5:
New PA HT = 95 – 5 = 90 €
New unit margin = PV HT – New PA HT = 150 – 90 = €60
The unit margin would increase from €55 to €60, thus improving unit profit.
-
For the overall margin on 600 units of the new lamp:
Unit margin = PV HT – PA HT = 180 – 115 = 65 €
Total margin = 65 x 600 = €39
The overall margin would then be €39. -
In the event of a 10% reduction in the sales price, the new PV excluding tax of the X1 lamp would be:
New PV HT = 150 – (150 x 0,10) = 135 €
New unit margin = 135 – 95 = €40
Reducing prices could help to remain competitive, but it raises challenges in terms of maintaining margins. The company must consider savings on high volume or the development of complementary high-value products to compensate for the decrease in unit margins. It also requires investments in optimizing internal processes.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| New unit margin | PV HT – New PA HT |
| Overall margin | Unit margin x quantity sold |
| New PV HT (reduction) | PV HT – (PV HT x reduction) |
Application: Natural BioBeauty
States :
BioBeauté Naturelle is an organic cosmetics brand dedicated to transparency and eco-design. The company analyzes its margins for its skincare creams in order to support its ecological mission while ensuring solid financial health. The data on the day cream are:
- PV excluding tax of €25, PA excluding tax of €15
- New product coming soon: PV excluding tax of €30, PA excluding tax of €20
Work to do :
- Calculate the margin rate for the current day cream.
- What is the unit margin of the new upcoming cream?
- If BioBeauté Naturelle increases the PV of its day cream by €2, what will be the impact on its unit margin?
- What are the financial risks if the cost of purchasing raw materials for the new cream increases by 15%?
- Propose a marketing strategy to increase sales while improving margins.
Proposed correction:
-
The margin rate for day cream is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((25 – 15) ÷ 15) x 100 = 66,67%.
The margin rate for this cream is 66,67%. -
The unit margin for the new cream will be:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 30 – 20 = €10.
The unit margin is €10. -
By increasing the PV of the day cream by €2:
New PV HT = 25 + 2 = 27 €
New unit margin = 27 – 15 = €12
An increase of €2 in the PV excluding tax improves the unit margin by €2, going from €10 to €12.
-
If the cost of raw materials for the new cream increases by 15%:
New PA HT = 20 + (20 x 0,15) = €23
New margin = 30 – 23 = €7
The increase in costs reduces the unit margin by €3, highlighting the need to monitor costs and possibly adapt the PV HT to maintain margins. -
To boost sales and improve margins, BioBeauté Naturelle can strengthen its storytelling by emphasizing the naturalness and ecological impact of its products. Offering bundled offers helps increase the average basket while attracting new customers. Investing in consumer education on the benefits of natural ingredients can also justify a premium price, thus improving margins.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Unit margin | PV HT – PA HT |
| New unit margin | New PV HT – PA HT |
| Cost increase | PA HT + (PA HT x increase) |
Application: Bistro Delights and Sweets
States :
Bistro Délices et Douceurs offers an authentic culinary experience where each dish is an ode to the terroir. The restaurant wants to analyze its margins on its signature dishes. Here is its data:
- Beef cheek casserole: PV excluding tax of €24, cost price (PA excluding tax) of €14
- Lemon meringue pie: PV excluding tax of €9, PA excluding tax of €4
Work to do :
- Calculate the margin rate for the beef cheek casserole.
- Determine the markup rate of lemon meringue pie.
- What unit margin does Bistro make on a casserole dish?
- What overall margin would Bistro obtain by selling 100 cocottes?
- Consider the impacts of a 10% discount on all Bistro dishes and discuss the viability of such a strategy.
Proposed correction:
-
The margin rate for beef cheek casserole is:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((24 – 14) ÷ 14) x 100 = 71,43%.
The margin rate for the pressure cooker is 71,43%. -
For lemon meringue pie, the markup rate is:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((9 – 4) ÷ 9) x 100 = 55,56%.
The markup rate for lemon meringue pie is 55,56%. -
The unit margin for a casserole is calculated by:
Unit margin = PV excluding tax – PA excluding tax
Substituting, 24 – 14 = €10.
The unit margin for a casserole dish is €10.
-
The overall margin achieved for 100 hens:
Total margin = Unit margin x quantity sold
Replacing, 10 x 100 = €1.
The overall margin obtained would be €1. -
The 10% discount on all dishes would give for the casserole:
New PV HT = 24 – (24 x 0,10) = 21,60 €
Both the reduction and the break-even result must be considered. A general reduction could lead to an increase in volume sold, but this increase must imperatively cover the decreases in unit margins, while ensuring that the overall cost remains below the revenue. The option of increasing footfall and customer loyalty could be worth more than mass discounts.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x quantity sold |
| New PV HT (reduction) | PV HT – (PV HT x reduction rate) |
Application: GreenCity Bikes
States :
GreenCity Bikes is reinventing urban mobility with its eco-friendly electric bikes. In order to remain competitive while promoting its eco-responsible values, the company wants to optimize the margins of its flagship models. The details of the urban bikes are:
- Zero Urban Bike: PV excluding tax of €1, PA excluding tax of €200
- Urban Pleasure Bike: PV excluding tax of €1, PA excluding tax of €500
Work to do :
- Calculate the margin rate for the Zero Urban Bike.
- What is the markup rate of the Urban Pleasure Bike?
- What is the unit margin achieved on the Urban Pleasure Bike?
- If GreenCity Bikes adjusts the PV HT of the Zero Urban Bike to €1, what is its margin rate?
- Consider the challenges of maintaining high margins while developing new eco-friendly features in bicycles.
Proposed correction:
-
The margin rate for the Zero Urban Bike is calculated as follows:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
Substituting, ((1 – 200) ÷ 800) x 800 = 100%.
The margin rate is 50%. -
For the Urban Pleasure Bike, the mark rate is as follows:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
Substituting, ((1 – 500) ÷ 950) x 1 = 500%.
The markup rate for this bike is 36,67%. -
The unit margin achieved on the Urban Pleasure Bike is calculated by:
Unit margin = PV excluding tax – PA excluding tax
Replacing, 1 – 500 = €950.
The unit margin is €550.
-
By adjusting the PV HT of the Zero Urban Bike to €1:
New margin rate = ((1 – 000) ÷ 800) x 800
Replacing, = 25%.
The new margin rate would be 25%. -
Maintaining excellent margins while enriching bikes with eco-friendly features presents GreenCity Bikes with a challenge. While adding advanced green technology, additional costs can be offset by increased perceived value. Increasing brand awareness of sustainability innovation can help sell at a justified premium price, while convincing the market that quality and eco-innovation prevail, ensuring sustainable margins.
Formulas Used:
| Title | Formulas |
|---|---|
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Unit margin | PV HT – PA HT |
| New margin rate | ((New PV HT – PA HT) ÷ PA HT) x 100 |