In this section:
Application: The Flavors of Europe
States :
Les Saveurs d'Europe, a company specializing in the import of traditional food products, wants to evaluate the profitability of its products sold on the French market. To do this, it wants to calculate the margin made on some of its products in order to optimize its pricing policy. Here is the information concerning one of its flagship products: a cheese platter. The purchase price excluding tax (PA HT) is €80, and it is sold at €120 excluding tax (PV HT).
Work to do :
- Calculate the unit margin in euros for the cheese platter.
- What is the margin rate applied to this product?
- At what selling price excluding tax should this tray be sold to obtain a margin rate of 20%?
- If the quantity sold of this tray is 500 units, what is the overall margin achieved?
- Discuss the strategic implications of this overall margin on the decision to import more of this product.
Proposed correction:
-
To calculate the unit margin in euros, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €120 – €80 = €40.
The unit margin for the cheese platter is €40. -
To calculate the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing, ((€120 – €80) ÷ €80) x 100 = 50%.
The margin rate applied to this product is 50%. -
To obtain a margin rate of 20%, use the formula: PV HT = PA HT x (1 + Margin rate).
By replacing, €80 x (1 + 0,20) = €96.
The selling price excluding tax should be €96 to achieve a margin rate of 20%.
-
To calculate the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
Replacing, €40 x 500 = €20.
The overall margin achieved for 500 units is €20. -
An overall margin of €20 indicates that the product is profitable. This may encourage Les Saveurs d'Europe to import more of this tray, thus supporting future sales growth and increasing the company's profitability. However, demand must be carefully assessed to avoid market saturation.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with margin rate | PA HT x (1 + Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Tech Innovators
States :
Tech Innovators, a startup specializing in the development of educational software, wants to analyze the financial performance of its latest software program. The development cost per license is €75, and each license is sold at €150 excluding taxes (PV HT). The team must verify whether the margins achieved allow for future investments.
Work to do :
- Determine the unit margin in euros made on each license sold.
- Calculate the markup rate applied to this product.
- Remove a 25% margin on the excluding tax price. What would be the maximum development cost accepted?
- If the company plans to sell 1 licenses, calculate the overall expected margin.
- Explain how this overall margin may influence future investment decisions.
Proposed correction:
-
To determine the unit margin in euros, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €150 – €75 = €75.
The unit margin for each license sold is €75. -
To calculate the markup rate, use the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacing, ((€150 – €75) ÷ €150) x 100 = 50%.
The markup rate applied to this product is 50%. -
To apply a margin rate of 25%, use the formula: PA HT = PV HT ÷ (1 + Margin rate).
By replacing, €150 ÷ (1 + 0,25) = €120.
The maximum development cost for a 25% margin rate would be €120.
-
To calculate the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
By replacing, €75 x €1 = €200.
The overall margin expected is €90 for 000 licenses sold. -
This figure indicates a substantial margin that can be reinvested in the development of new software or the improvement of existing services. This ensures continued growth and competitiveness in the market.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PA HT with margin rate | PV HT ÷ (1 + Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Green Haven
States :
Green Haven, a garden centre, wants to assess the profits generated by its popular flower arrangements. An arrangement is purchased for €30 excluding VAT and sold for €45 excluding VAT. Management wants to review the viability of this range and adjust the pricing policy if necessary.
Work to do :
- Calculate the unit margin in euros for each floral arrangement.
- What is the margin rate applied to this composition?
- If the objective is to achieve a mark-up rate of 30%, what adjustment of the net selling price would be necessary?
- For 800 compositions sold, calculate the overall margin.
- Analyze how this overall margin might guide decisions on future marketing initiatives.
Proposed correction:
-
To calculate the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €45 – €30 = €15.
The unit margin for each composition is €15. -
To calculate the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
As a replacement, ((€45 – €30) ÷ €30) x 100 = 50%.
The margin rate is therefore 50% on this composition. -
To achieve a markup rate of 30%, use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Substituting, €30 ÷ (1 – 0,30) = €42,86.
The selling price excluding VAT should be adjusted to around €42,86.
-
To calculate the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
Replacing, €15 x 800 = €12.
The overall margin for 800 compositions sold is €12. -
With a healthy overall margin, Green Haven could invest in targeted marketing campaigns to increase awareness of its floral range, while retaining its existing customer base.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with mark rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Fit & Tone
States :
Fit & Tone, a chain of fitness centers, wants to determine the financial viability of its new personal nutrition program. The cost for developing each plan is €25 excluding VAT, and the program is sold at €50 excluding VAT.
Work to do :
- Calculate the unit margin in euros for each nutrition program sold.
- What is the markup rate of this program?
- If Fit & Tone wants to achieve a margin rate of 35%, what should be the selling price excluding VAT of the program?
- For 1 plans sold, what is the overall margin generated?
- Discuss the potential impacts of this overall margin on the diversification of services offered by the centers.
Proposed correction:
-
To calculate the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €50 – €25 = €25.
The unit margin is €25 per program sold. -
To calculate the markup rate, use the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacing, ((€50 – €25) ÷ €50) x 100 = 50%.
The markup rate is therefore 50%. -
To obtain a margin rate of 35%, use the formula: PV HT = PA HT x (1 + Margin rate).
By replacing, €25 x (1 + 0,35) = €33,75.
The selling price excluding VAT should be €33,75.
-
To calculate the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
By replacing, €25 x €1 = €000.
The overall margin for 1 programs is €000. -
The overall margin generated could allow Fit & Tone to explore new avenues of diversification such as online courses or specialized workshops, thus increasing the value perceived by their members.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT with margin rate | PA HT x (1 + Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Vintage Vogue
States :
Vintage Vogue is a retro clothing store. They want to analyze the margins made on a floral dress sold for €90 excluding tax and purchased for €60 excluding tax. The store wants to adjust their collection based on the financial results.
Work to do :
- Calculate the unit margin of the floral dress.
- Determine the current margin rate being applied.
- If an increase in the mark-up rate to 40% is considered, what would be the necessary variation in the selling price excluding tax?
- For 600 dresses sold, what is the total margin achieved?
- Consider possible communication strategies to capitalize on this margin.
Proposed correction:
-
To calculate the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €90 – €60 = €30.
The unit margin for the floral dress is €30. -
For the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing, ((€90 – €60) ÷ €60) x 100 = 50%.
The margin rate is therefore 50%. -
For a markup rate of 40%, use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Substituting, €60 ÷ (1 – 0,40) = €100.
The new selling price excluding VAT should be €100.
-
For total margin, use the formula: Total Margin = Unit Margin x Quantity Sold.
Replacing, €30 x 600 = €18.
The total margin is €18 for the dresses sold. -
With a substantial margin, Vintage Vogue can strengthen its communication strategy by highlighting the authenticity and uniqueness of its pieces, thus attracting a clientele in search of distinction.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with mark rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Eco Bright
States :
Eco Bright, a manufacturer of eco-friendly cleaning products, wants to evaluate its profitability on a dishwashing liquid. The unit cost is €3 and it is sold for €7 excluding taxes. Following the analysis of the results, the company plans to develop new products.
Work to do :
- Calculate the margin in euros per unit sold for dishwashing liquid.
- What is the current markup rate of the liquid?
- If Eco Bright wants to increase the margin rate to 70%, what should the selling price excluding VAT be?
- Calculation of total profit on a production of 5 units.
- Discuss the potential impact of improved profit on product line diversification.
Proposed correction:
-
To calculate the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €7 – €3 = €4.
The margin per unit sold is €4. -
For the markup rate, use the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Replacing, ((€7 – €3) ÷ €7) x 100 = 57,14%.
The markup rate is therefore 57,14%. -
To obtain a margin rate of 70%, use the formula: PV HT = PA HT x (1 + Margin rate).
By replacing, €3 x (1 + 0,70) = €5,10.
For this margin rate, the price increase is set at €5,10, although it has already been exceeded.
-
For total profit, use the formula: Overall Margin = Unit Margin x Quantity Sold.
By replacing, €4 x €5 = €000.
The total expected profit is €20. -
The ability to increase overall profit would allow Eco Bright to invest in diversifying its products, including attractive and sustainable all-in-one solutions.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT with margin rate | PA HT x (1 + Margin rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Travel Gear
States :
Travel Gear, a suitcase manufacturer, wants to evaluate the margins made on one of its composite suitcases, purchased at €40 excluding VAT and sold at €80 excluding VAT. The aim is to optimize financing to improve its product ranges.
Work to do :
- Calculate the unit margin made on each composite suitcase.
- What is the margin rate applied to this suitcase?
- A markup rate of at least 20% is desired, what should be the adjustment to the excluding tax selling price?
- For a sales volume of 400 suitcases, determine the overall margin.
- Analyze how this overall margin would allow targeting strategic investments for innovative design?
Proposed correction:
-
For the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €80 – €40 = €40.
The margin made on each suitcase is therefore €40. -
For the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing, ((€80 – €40) ÷ €40) x 100 = 100%.
Travel Gear applies a 100% markup on this suitcase. -
To obtain at least a 20% markup rate, use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Substituting, €40 ÷ (1 – 0,20) = €50.
The selling price excluding tax can therefore be reduced to €50 while still respecting the desired profit threshold.
-
For the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
Replacing, €40 x 400 = €16.
The overall margin for 400 suitcases is therefore €16. -
This margin would allow Travel Gear to invest in lighter materials and improved safety mechanisms, which could positively influence future sales and customer loyalty.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with mark rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Urban Lights
States :
Urban Lights, a company manufacturing solar street lights, wants to analyze the margins made on its basic model sold for €300 excluding VAT, while its production cost is €180 excluding VAT. The company wants to develop a strategy to improve its margins.
Work to do :
- Calculate the unit margin of solar street lights.
- What is the margin rate applied to this product?
- To aim for a markup rate of 25%, what would be the ideal price excluding tax?
- Estimate the overall margin for selling 2 units.
- Comment on possible strategic options to maximize these overall margins.
Proposed correction:
-
For the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €300 – €180 = €120.
The unit margin for solar street lights is €120. -
For the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing, ((€300 – €180) ÷ €180) x 100 = 66,67%.
The margin rate applied is therefore 66,67%. -
To achieve a markup rate of 25%, use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Substituting, €180 ÷ (1 – 0,25) = €240.
The ideal price excluding VAT for this markup rate would be €240.
-
For the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
By replacing, €120 x €2 = €000.
The overall margin for 2 units is €000. -
With such an overall margin, Urban Lights could consider investments in research and development to improve the energy efficiency of its street lights, capture a larger market and increase its competitiveness.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with mark rate | PA HT ÷ (1 – Mark rate) |
| Overall margin | Unit margin x Quantity sold |
Application: Gourmet Globe
States :
Gourmet Globe, known for its sale of exotic culinary products, wants to evaluate the margins of its homemade jam sold for €12 excluding VAT, with a cost of €7 excluding VAT. The strategy is to determine whether the extension of a new range is viable.
Work to do :
- Calculate the unit margin per jam sold.
- Determine the current margin rate for this jam.
- Aiming for a margin rate of 22%, what would be the necessary adjustment for the selling price excluding tax?
- Calculate the overall margin expected for a production of 3 pots.
- Consider what strategic investments this overall margin would allow.
Proposed correction:
-
For the unit margin, use the formula: Unit margin = PV HT – PA HT.
As a replacement, €12 – €7 = €5.
The unit margin per jam is €5. -
For the margin rate, use the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Replacing, ((€12 – €7) ÷ €7) x 100 = 71,43%.
The margin rate is therefore 71,43%. -
To aim for a margin rate of 22%, use the formula: PV HT = PA HT x (1 + Margin rate).
By replacing, €7 x (1 + 0,22) = €8,54.
The selling price excluding VAT must be adjusted to €8,54.
-
To calculate the overall margin, use the formula: Overall Margin = Unit Margin x Quantity Sold.
By replacing, €5 x €3 = €000.
The overall margin expected for 3 pots is €000. -
With this margin, Gourmet Globe could invest in the diversification of flavors and the quality of its products, allowing an increase in brand positioning with its customers.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| PV HT with margin rate | PA HT x (1 + Margin rate) |
| Overall margin | Unit margin x Quantity sold |