How-to-calculate-a-margin-at-40

How to calculate a margin at 40 | 11 Exercises

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Application: Ocean Mode

States :

Océan Mode is a ready-to-wear boutique looking to improve its profitability. Julia, the manager, wants to set a selling price that would allow for a 40% margin. She offers several products, but is currently focusing on a new coat collection. The purchase cost excluding tax (HT) for a coat is €150.

Work to do :

  1. Calculate the sales price excluding tax (HT) required to obtain a margin of 40%.
  2. What would be the sales price including all taxes (TTC) if the applicable VAT is 20%?
  3. Determine the amount of gross margin made on a batch of 50 coats sold.
  4. If the store decides to reduce the purchase cost by 10%, what would be the new selling price excluding tax with a margin of 40%?
  5. Analyze the implications for Ocean Mode of maintaining high margins in a competitive industry.

Proposed correction:

  1. To calculate the selling price excluding tax with a margin of 40%, use the formula: PV excluding tax = PA excluding tax + (PA excluding tax x 0,40). Here, PA excluding tax = €150. Thus, PV excluding tax = 150 + (150 x 0,40) = €210. To obtain the desired margin, the selling price excluding tax of the coat must be €210.

  2. The sales price including tax is calculated by adding VAT to the sales price excluding tax. Thus, PV including tax = PV excluding tax + (PV excluding tax x VAT rate). The VAT rate is 20%, so PV including tax = 210 + (210 x 0,20) = €252. The sales price including tax would be €252.

  3. The total margin on the lot of 50 coats is calculated by multiplying the unit margin by the quantity sold. The unit margin is 210 – 150 = €60. For 50 coats, the total margin is 60 x 50 = €3. Therefore, the margin made on the lot would be €000.

  1. If the purchase cost is reduced by 10%, the new HT PA is 150 – (150 x 0,10) = €135. The new HT PV for a 40% margin is therefore 135 + (135 x 0,40) = €189. With the reduction in the purchase cost, the HT selling price would be €189.

  2. Maintaining high margins can be crucial for profitability, but it can also make products less price competitive compared to other players in the market. Julia will need to ensure that the value proposition justifies the high price, either through quality, service or a strong brand.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Purchase Cost Reduction New PA HT = PA HT – (PA HT x Reduction Percentage)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Technotronic

States :

Technotronic, an innovative electronic gadget company, is planning to launch a new headset. The unit production cost excluding VAT is estimated at €80. To remain competitive while maximizing profits, Technotronic is targeting a 40% margin on its sales.

Work to do :

  1. Calculate the selling price excluding VAT to achieve a margin of 40% on each helmet sold.
  2. If VAT is 5,5%, what would be the price including VAT of a helmet?
  3. What is the total margin amount if Technotronic sells 200 helmets?
  4. By how much should the net selling price be adjusted if production costs increase by 15%?
  5. Discuss the importance for Technotronic to effectively manage its margins in a high-tech market.

Proposed correction:

  1. The formula for the selling price excluding VAT is: PV excluding VAT = PA excluding VAT + (PA excluding VAT x 0,40). With a production cost of €80, PV excluding VAT = 80 + (80 x 0,40) = €112. The selling price excluding VAT must be €112 to achieve a margin of 40%.

  2. The price including tax is calculated by adding VAT to the price excluding tax: PV including tax = PV excluding tax + (PV excluding tax x VAT rate), so PV including tax = 112 + (112 x 0,055) = €118,16. The price including tax would be €118,16.

  3. The unit margin is 112 – 80 = €32. For 200 helmets, the total margin is 32 x 200 = €6. The total margin amount for 400 helmets is €200.

  1. If the production cost increases by 15%, the new HT PA is 80 + (80 x 0,15) = €92. The HT PV to maintain a 40% margin is 92 + (92 x 0,40) = €128,80. The HT selling price must be adjusted to €128,80.

  2. In the technology sector, higher margins allow for reinvestment in innovation, which is essential to stay ahead of the competition. Disciplined margin management ensures financial stability while driving long-term growth.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Increase in Production Cost New HT PA = HT PA + (HT PA x Increase)
Adjustment of Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Unique Gourmets

States :

Gourmets Uniques, a catering service specializing in gourmet food, wants to offer a new duck confit dish. The cost of the ingredients to prepare a plate is €25 excluding VAT. The goal is to achieve a margin of 40% in order to cover service costs and generate profit.

Work to do :

  1. Determine the selling price excluding tax required for this plate in order to achieve the target margin of 40%.
  2. If the VAT for catering is 10%, calculate the price including VAT of the plate of duck confit.
  3. How much profit (total margin) is made if 150 plates are sold?
  4. Re-evaluate the selling price excluding VAT if the cost of ingredients drops by 20%.
  5. Explain the impact of ingredient cost variations on Gourmets Uniques' pricing strategies.

Proposed correction:

  1. To achieve a 40% margin, the formula is: PV HT = PA HT + (PA HT x 0,40). The PA HT is €25, so PV HT = 25 + (25 x 0,40) = €35. The selling price HT must be €35 to achieve the margin target.

  2. The price including VAT is obtained by adding VAT to the price excluding VAT: PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate). With a VAT of 10%, PV including VAT = 35 + (35 x 0,10) = €38,50. The price including VAT would be €38,50.

  3. The unit margin is 35 – 25 = €10. For 150 plates, the total profit is 10 x 150 = €1. The total profit made is €500.

  1. If the cost of ingredients drops by 20%, the new HT PA is 25 – (25 x 0,20) = €20. The HT selling price for a 40% margin would be 20 + (20 x 0,40) = €28. If the cost drops, the HT selling price would be €28.

  2. Changes in ingredient costs directly influence the selling prices needed to maintain margins. A cost reduction can allow prices to be lowered to attract more customers or increase profit margins, while an increase requires prices to be revised upwards to preserve margins.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Reduced Cost of Ingredients New PA HT = PA HT – (PA HT x Reduction)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Startup Innovatek

States :

Innovatek, a startup developing IT security solutions, needs to set the price of its newly launched cybersecurity software. The development cost per license is €200. Management aims for a margin of 40%.

Work to do :

  1. Calculate the selling price excluding tax per license to obtain a margin of 40% on each sale.
  2. With a VAT of 20%, what would be the price including VAT per license?
  3. If Innovatek sells 500 licenses, what is the total margin?
  4. Estimate the new selling price excluding VAT if development costs are reduced by 25%.
  5. Discuss the importance for Innovatek of balancing margins and competitiveness in the software market.

Proposed correction:

  1. The formula for determining the PV excluding tax at a margin of 40% is: PV excluding tax = PA excluding tax + (PA excluding tax x 0,40). The PA excluding tax being €200, therefore PV excluding tax = 200 + (200 x 0,40) = €280. Thus, the selling price excluding tax per license must be €280.

  2. The sales price including tax is: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 20%, PV including tax = 280 + (280 x 0,20) = 336 €. Therefore, the price including tax is 336 €.

  3. The unit margin is 280 – 200 = €80. For 500 licenses, the total margin is 80 x 500 = €40. The total amount of margin realized is €000.

  1. If the development cost decreases by 25%, the new HT PA is 200 – (200 x 0,25) = €150. The new HT PV for a 40% margin is 150 + (150 x 0,40) = €210. The HT selling price must therefore be adjusted to €210.

  2. In the technology sector, margin management is essential to ensure funds for continued innovation while remaining attractive to customers. A balance between competitive pricing and margins is essential to maintain Innovatek's market position while ensuring financial sustainability.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Decrease Development Cost New HT PA = HT PA – (HT PA x Decrease)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Green Energy

States :

Green Energy, a solar panel company, is looking to introduce a new model to the market. The production cost of one unit is €400. To ensure the financial viability of this product line, the company wants to maintain a margin of 40%.

Work to do :

  1. Calculate the selling price excluding tax to achieve a margin of 40% on each solar panel.
  2. If VAT is 5,5%, what is the price including VAT of a solar panel?
  3. What is the turnover from the sale of 300 panels?
  4. Recalculate the selling price excluding tax if the production cost drops by 5%.
  5. Analyze the potential challenges for Green Energy in maintaining a fixed margin in a constantly evolving technological market.

Proposed correction:

  1. The selling price excluding tax with a margin of 40% is given by: PV excluding tax = PA excluding tax + (PA excluding tax x 0,40). With a PA excluding tax of €400, PV excluding tax = €400 + (400 x 0,40) = €560. Thus, the selling price excluding tax must be €560 to achieve the desired margin.

  2. The price including tax is calculated by: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 5,5%, PV including tax = 560 + (560 x 0,055) = €590,80. The price including tax therefore amounts to €590,80.

  3. The turnover for 300 panels at a PV excluding VAT of €560 is: CA = Quantity x PV excluding VAT = 300 x 560 = €168. Thus, the turnover is €000.

  1. If the production cost decreases by 5%, the new HT PA is 400 – (400 x 0,05) = €380. The new HT PV for a 40% margin is 380 + (380 x 0,40) = €532. The new HT selling price would be €532.

  2. Rapid technological advances are constantly changing costs and customer expectations. Green Energy must adapt to these changes to maintain its margins while remaining competitive on price and integrating technological innovations.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Turnover CA = Quantity x PV HT
Production Cost Reduction New PA HT = PA HT – (PA HT x Reduction)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: BioBeauty

States :

BioBeauté, a natural cosmetics company, is considering selling a new moisturizer. The manufacturing cost per unit is €12. BioBeauté wants to offer a 40% margin on this product to ensure coverage of significant fixed costs.

Work to do :

  1. Determine the selling price excluding VAT for this moisturizer in order to achieve a margin of 40%.
  2. With a VAT of 20%, what would the price be including VAT?
  3. What is the total profit if 1 units are sold?
  4. What will be the new selling price excluding tax if the production cost decreases by 10%?
  5. Evaluate how a fixed margin strategy impacts BioBeauté's decisions during periods of inflation.

Proposed correction:

  1. To determine the PV HT with a margin of 40%, the formula is: PV HT = PA HT + (PA HT x 0,40). With a PA HT of €12, PV HT = 12 + (12 x 0,40) = €16,80. The selling price HT must be €16,80 to reach the margin.

  2. The calculation of the price including tax is obtained by: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 20%, PV including tax = 16,80 + (16,80 x 0,20) = €20,16. The price including tax is therefore €20,16.

  3. With a unit margin of €4,80, for 1 units sold, the total profit is: 000 x 4,80 = €1. The total profit is €000.

  1. If the production cost drops by 10%, the new HT PA is 12 – (12 x 0,10) = €10,80. The new HT PV with a 40% margin is 10,80 + (10,80 x 0,40) = €15,12. The new HT selling price would be €15,12.

  2. A fixed margin strategy in times of inflation requires BioBeauté to regularly adjust its prices to continue to cover its costs. This may result in frequent readjustments of the selling price, which could affect customer perception and competitiveness in the market.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Profit Total Profit = Unit Margin x Quantity Sold
Decrease in Production Cost New HT PA = HT PA – (HT PA x Decrease)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: VelociTrek

States :

VelociTrek is a brand specializing in high-end bicycles. It wants to introduce a new model of electric bicycle. The unit manufacturing cost is €2. To finance innovation and marketing costs, the company is targeting a margin of 000%.

Work to do :

  1. Calculate the selling price excluding VAT required to obtain a margin of 40% on each bike.
  2. What would the price be including tax with a VAT of 5,5%?
  3. How much profit does VelociTrek make if 220 bikes are sold?
  4. Determine the selling price excluding VAT if manufacturing costs are reduced by 12%.
  5. Discuss the need for VelociTrek to adjust its selling prices based on fluctuations in production costs.

Proposed correction:

  1. The calculation of the PV HT with a margin of 40% follows: PV HT = PA HT + (PA HT x 0,40). With PA HT of €2, PV HT = 000 + (2 x 000) = €2. The selling price HT should be €000.

  2. To determine the price including tax: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 5,5%, PV including tax = €2 + (800 x 2) = €800. The sales price including tax would be €0,055.

  3. The unit margin is 2 – 800 = €2. For 000 bikes, the total margin is: 800 x 220 = €800. The total margin for 220 bikes is €176.

  1. With a 12% reduction in manufacturing cost, the new HT PA is 2 – (000 x 2) = €000. The new HT PV to achieve a 0,12% margin is 1 + (760 x 40) = €1. The new HT selling price is €760.

  2. Fluctuations in production costs affect sales profitability. VelociTrek must regularly monitor these costs to adjust its prices and maintain its profit margin, while ensuring that it remains competitive in the face of rivalry in the high-end bicycle market.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Manufacturing Cost Reduction New PA HT = PA HT – (PA HT x Reduction)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Lunaria Editions

States :

Lunaria Éditions, a publishing house specializing in literary works, plans to publish a new novel. The production cost per copy, including printing and distribution, is €8. The company wants to make a 40% margin to make its investment in this author profitable.

Work to do :

  1. Calculate the selling price excluding tax per copy to achieve a margin of 40%.
  2. If the VAT applicable to the book is 5,5%, what will the price including VAT be?
  3. What would be the total margin for 5 copies sold?
  4. Recalculate the selling price excluding VAT if the cost per copy increases by 15%.
  5. Analyze how Lunaria Éditions can maintain the balance between setting prices and promoting its authors.

Proposed correction:

  1. The selling price excluding tax for a margin of 40% is calculated as follows: PV excluding tax = PA excluding tax + (PA excluding tax x 0,40). With a PA cost excluding tax of €8, PV excluding tax = 8 + (8 x 0,40) = €11,20. The required selling price excluding tax is €11,20.

  2. To obtain the price including VAT: PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate). With a VAT of 5,5%, PV including VAT = 11,20 + (11,20 x 0,055) = 11,82 €. The price including VAT per copy is 11,82 €.

  3. The unit margin on each copy is 11,20 – 8 = €3,20. For 5 copies, the total margin is: 000 x 3,20 = €5. The total margin for selling 000 copies is €16.

  1. If the cost per copy increases by 15%, the new HT PA is 8 + (8 x 0,15) = €9,20. Then, the new HT PV with a 40% margin is 9,20 + (9,20 x 0,40) = €12,88. The new HT PV would be €12,88.

  2. For Lunaria Éditions, it is crucial to set a competitive price that respects the market while ensuring sufficient margins to reward authors and invest in their development. It is therefore a question of finding the right balance between cost management and maximizing authors' income.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Increase Cost per Copy New HT PA = HT PA + (HT PA x Increase)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: NeoPharma

States :

NeoPharma, a biotechnology company, has designed a new drug. The production cost of one box is €50. With high costs in research and development, the company is targeting a margin of 40% to ensure the profitability of its products.

Work to do :

  1. Determine the required selling price excluding tax for a margin of 40% per box.
  2. What would the price be including tax with a VAT of 5,5%?
  3. What is the total margin if 10 boxes are sold?
  4. Calculate the new selling price excluding VAT if costs increase by 20%.
  5. Discuss the influence of margins on NeoPharma's ability to invest in innovation.

Proposed correction:

  1. The selling price excluding tax to obtain a margin of 40% is as follows: PV excluding tax = PA excluding tax + (PA excluding tax x 0,40). With a PA excluding tax of €50, PV excluding tax = 50 + (50 x 0,40) = €70. The selling price excluding tax should be €70.

  2. To calculate the price including tax: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 5,5%, PV including tax = 70 + (70 x 0,055) = €73,85. The price including tax is €73,85.

  3. The margin per box is 70 – 50 = €20. For 10 boxes, the total margin is: 000 x 20 = €10. The total margin made on these sales is €000.

  1. If costs increase by 20%, the new HT PA is 50 + (50 x 0,20) = €60. The new HT PV for a 40% margin is 60 + (60 x 0,40) = €84. The new HT selling price becomes €84.

  2. High margins allow NeoPharma to have the resources to reinvest in research and development, which is essential in the biotechnology industry to maintain innovation and remain competitive in the face of complex health challenges.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Increase in Production Cost New HT PA = HT PA + (HT PA x Increase)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Equinox Mode

States :

Mode Équinoxe, a company committed to sustainable fashion, offers shoes made from recycled materials. The cost of manufacturing a pair is €25. To support its ecological mission, the company aims to generate a margin of 40%.

Work to do :

  1. Calculate the selling price excluding VAT to obtain a margin of 40%.
  2. If VAT is 20%, what will the price be including VAT?
  3. What is the total margin if 2 pairs of shoes are sold?
  4. What price excluding VAT would be necessary if costs fall by 8%?
  5. Evaluate the challenges of maintaining a fixed margin strategy in the sustainable fashion industry.

Proposed correction:

  1. The formula for a PV excluding VAT at a margin of 40% is: PV excluding VAT = PA excluding VAT + (PA excluding VAT x 0,40). For a PA excluding VAT of €25, PV excluding VAT = 25 + (25 x 0,40) = €35. The selling price excluding VAT must be €35.

  2. To calculate the price including tax: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 20%, PV including tax = 35 + (35 x 0,20) = €42. The price including tax would therefore be €42.

  3. The unit margin is 35 – 25 = €10. For 2 pairs, the total margin is: 500 x 10 = €2. The total margin is therefore €500.

  1. If costs decrease by 8%, the new HT PA becomes 25 – (25 x 0,08) = €23. The new HT PV with a 40% margin is 23 + (23 x 0,40) = €32,20. The new HT selling price would be €32,20.

  2. In the sustainable fashion industry, maintaining a fixed margin can be challenging due to the variability of sustainable material costs and market expectations. Mode Équinoxe must adapt its strategy to take these challenges into account while maintaining its ethical commitments.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Manufacturing Cost Reduction New PA HT = PA HT – (PA HT x Reduction)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

Application: Little Gourmets

States :

Petits Gourmets, a restaurant chain specializing in children's meals, wants to introduce an organic meal tailored to their clientele. The cost of ingredients for a meal is estimated at €4,50. In order to support the company's high fixed costs, a margin of 40% is necessary.

Work to do :

  1. Determine the selling price excluding tax for a meal in order to aim for a margin of 40%.
  2. What is the price of the meal including tax if VAT is applied at 10%?
  3. By selling 3 meals, what is the total margin generated?
  4. Recalculate the selling price excluding VAT if costs increase by 5%.
  5. Consider the impact of pricing on customer loyalty for Petits Gourmets.

Proposed correction:

  1. The excluding tax selling price required for a 40% margin is: excluding tax PV = excluding tax PA + (excluding tax PA x 0,40). With excluding tax PA of €4,50, excluding tax PV = €4,50 + (4,50 x 0,40) = €6,30. The excluding tax selling price must be €6,30.

  2. The calculation of the price including tax is: PV including tax = PV excluding tax + (PV excluding tax x VAT rate). With a VAT of 10%, PV including tax = 6,30 + (6,30 x 0,10) = €6,93. The price including tax for the meal is €6,93.

  3. The unit margin is 6,30 – 4,50 = 1,80 €. For 3 meals, the total margin is: 000 x 1,80 = 3 €. The total margin generated is 000 €.

  1. If costs increase by 5%, the new HT PA is 4,50 + (4,50 x 0,05) = 4,725. The new HT PV for a 40% margin is 4,725 + (4,725 x 0,40) = 6,615. The new HT selling price would be approximately €6,62.

  2. Price plays a crucial role in customer loyalty. Petits Gourmets must ensure that their prices reflect the quality and experience while remaining affordable for families, which is essential to retaining their loyal customer base.

Formulas Used:

Title Formulas
Sale price excl. VAT PV HT = PA HT + (PA HT x 0,40)
Sales price including tax PV including VAT = PV excluding VAT + (PV excluding VAT x VAT rate)
Total Margin Total Margin = Unit Margin x Quantity Sold
Increase Cost Ingredients New HT PA = HT PA + (HT PA x Increase)
New Selling Price excluding VAT New PV HT = New PA HT + (New PA HT x 0,40)

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