How to calculate a margin of 10 | 9 Exercises

Application: VerteLux Aquaponic Farm

States :

Leeloo is the manager of Ferme Aquaponique VerteLux, a company specializing in organic vegetable production combined with sustainable fish farming. She wants to assess the financial health of her business by calculating several margins in order to adjust her pricing strategy. For her organic tomato salad, the whole numbers of the economic recipe must be determined to ensure that the business makes an optimal profit.

Work to do :

1. Calculate the unit margin of the organic tomato salad knowing that the selling price excluding tax is €3,50 and the purchase price excluding tax is €2,80.
2. Determine the margin rate for these organic tomatoes using the previous data.
3. What would be the selling price excluding tax if Ferme Aquaponique VerteLux wanted to apply a markup rate of 25%?
4. If the farm plans to sell 1000 units of organic tomato salads, what would be the overall margin?
5. How could choosing a higher markup rate influence consumer perception and sales?

Proposed correction:

1. The unit margin is calculated by subtracting the pre-tax purchase price from the pre-tax sale price, i.e.:
   3,50 € – 2,80 € = 0,70 €.
   So, the unit margin for an organic tomato salad is €0,70.

2. The margin rate is calculated using the formula:
   Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((3,50 € – 2,80 €) ÷ 2,80 €) x 100 = 25%.
   So the margin rate is 25%.

3. To obtain a markup rate of 25%, we use the formula:

PV HT = PA HT ÷ (1 – Mark rate).
Substituting, €2,80 ÷ (1 – 0,25) = €3,73.
The selling price excluding VAT should be €3,73 to achieve a mark-up rate of 25%.

4. The overall margin is the unit margin multiplied by the quantity sold, i.e.:
   €0,70 x 1000 = €700.
   Therefore, the overall margin would be €700.

5. Considering a higher markup rate can amplify the image of the premium quality of the products. However, this must be balanced to avoid a negative impact on sales if consumers perceive the price as excessively high.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Selling price excluding tax	PA HT ÷ (1 – Mark rate)
Overall margin	Unit margin x Quantity sold

Application: NeoPulse Digital Agency

States :

NeoPulse, an innovative digital agency, is reviewing its business strategies to optimize its profits. Julie, the sales manager, wants to focus on one of its offerings: digital marketing services. She has obtained some key figures and wants to determine different margins to make informed pricing decisions.

Work to do :

1. Determine the unit margin of the digital marketing service if the selling price excluding tax is set at €1 and its cost price excluding tax is €200.
2. Calculate the margin rate on this service.
3. If NeoPulse wants to have a 40% markup, what would be the appropriate selling price excluding VAT?
4. If the agency plans to sell 300 digital marketing services, what is the total expected margin?
5. Analyze the potential impact of market competitiveness on profit margin.

Proposed correction:

1. The unit margin is found by subtracting the cost price excluding VAT from the selling price excluding VAT:
   €1 – €200 = €900.
   Thus, the unit margin of the service is €300.

2. The margin rate is calculated by:
   Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((€1 – €200) ÷ €900) x 900 = 100%.
   The margin rate on this service is therefore 33,33%.

3. The selling price excluding VAT corresponding to a markup rate of 40% can be found by:

PV HT = PA HT ÷ (1 – Markup rate) = €900 ÷ (1 – 0,40) = €1.
The selling price excluding tax must be €1.

4. The total projected margin is calculated by multiplying the unit margin by the number of services sold:
   €300 x 300 = €90.
   So, NeoPulse could expect a total margin of €90.

5. In a competitive market, maintaining a high margin rate can be difficult. The company may have to adjust its prices to remain competitive, which could reduce the profit margin.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Selling price excluding tax	PA HT ÷ (1 – Mark rate)
Total margin	Unit margin x Number of services sold

Application: Eco-Couture Clothing Store

States :

Éco-Couture is a company that advocates responsible fashion by offering clothing made from recycled materials. Lucie, the owner, wants to review the margins of her new dress collections to define her pricing strategy and maximize her income while keeping a reduced environmental footprint.

Work to do :

1. Calculate the unit margin for a dress from the collection knowing that the selling price excluding tax is €75 while the manufacturing cost excluding tax is €50.
2. What is the current markup rate of this dress?
3. If Lucie's goal is to achieve a 100% gross margin on this dress, what should the manufacturing cost excluding tax be?
4. If she sells 150 dresses, what is the cumulative margin?
5. Discuss the impacts on consumer perception of increasing prices to achieve a higher margin while marketing eco-responsible products.

Proposed correction:

1. The unit margin is the selling price excluding tax minus the manufacturing cost excluding tax:
   75 € – 50 € = 25 €.
   The unit margin on each dress is therefore €25.

2. For the markup rate, the formula is:
   Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((75 € – 50 €) ÷ 75 €) x 100 = 33,33%.
   The markup rate for this dress is 33,33%.

3. To achieve a gross margin of 100%, the selling price should be equal to the manufacturing cost excluding tax multiplied by 2. So:

Manufacturing cost excluding tax = PV excluding tax ÷ 2 = €75 ÷ 2 = €37,50.
The manufacturing cost should be a maximum of €37,50.

4. The cumulative margin for 150 dresses is:
   €25 x 150 = €3.
   Eco-Couture could obtain a cumulative margin of €3.

5. A higher price could induce a perception of better quality while reinforcing the image of environmental commitment, but care must be taken not to lose price-sensitive customers.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Brand taxes	((PV HT – PA HT) ÷ PV HT) x 100
Manufacturing cost excluding VAT	PV HT ÷ 2
Cumulative margin	Unit margin x Quantity sold

Application: L'Ecrin des Mots Bookstore

States :

L'Ecrin des Mots is an independent bookstore that has just launched a series of limited edition rare books. The owner, Alice, is looking to understand the different components of margins in order to adapt her prices. She also wants to evaluate the impact of her pricing decisions on sales.

Work to do :

1. Establish the unit margin for a book if the selling price excluding tax is €100 and the purchase price excluding tax is €80.
2. Determine the margin rate for this rare book.
3. If the bookstore wants to maintain a 20% margin while reducing the sale price to €90, what would be the maximum authorized purchase price?
4. Projecting the sale of 200 books, what would be the total margin generated?
5. Assess the implications for the bookstore's image if Alice decided to raise prices to boost her margin.

Proposed correction:

1. The unit margin is obtained by subtracting the purchase price excluding VAT from the sale price excluding VAT:
   100 € – 80 € = 20 €.
   So the unit margin for each book is €20.

2. The margin rate is given by:
   Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((100 € – 80 €) ÷ 80 €) x 100 = 25%.
   The margin rate is therefore 25%.

3. In order to maintain a margin rate of 20%, the formula is:

PA HT = PV HT ÷ (1 + Margin rate) = €90 ÷ (1 + 0,20) = €75.
The maximum permitted purchase price should be €75.

4. The total margin for 200 books is calculated from the unit margin multiplied by the number of books sold:
   €20 x 200 = €4.
   The bookstore is therefore expecting a total margin of €4.

5. Raising prices could reinforce the image of exclusivity and rarity, but it could also make the books less accessible to some customers.

Formulas Used:

Title	Formulas
Unit margin	PV HT – PA HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Purchase price excluding tax	PV HT ÷ (1 + Margin rate)
Total margin	Unit margin x Number of books sold

Application: Gourmet & Co Cooking School

States :

Gourmet & Co is a cooking school that offers cooking classes for amateurs and professionals. Michael, the director, wants to analyze the profitability of each class in order to offer interesting solutions to students while maximizing the income of his school. He would like to start with a new class on Asian cuisine.

Work to do :

1. Determine the unit margin for the Asian cooking course, if the selling price excluding tax is €200 and the cost excluding tax is €150.
2. Calculate the markup rate for this course.
3. How much should the cost excluding tax be set at if Gourmet & Co wishes to maintain a unit margin of €80?
4. If the school hopes to sell 50 courses, what would the total margin be?
5. Consider whether discounts can be introduced without negatively affecting unit margin, and how this could attract more students.

Proposed correction:

1. The unit margin is calculated by subtracting the cost excluding tax from the selling price excluding tax:
   200 € – 150 € = 50 €.
   The unit margin for each course is €50.

2. The markup rate can be calculated by:
   Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((200 € – 150 €) ÷ 200 €) x 100 = 25%.
   The markup rate is 25%.

3. For a unit margin of €80, we use:

Cost excluding tax = PV excluding tax – Unit margin = €200 – €80 = €120.
The cost excluding tax should be €120.

4. The total margin with 50 courses sold is:
   €50 x 50 = €2.
   By selling 50 courses, Gourmet & Co would make a total margin of €2.

5. Offering limited time discounts may attract more participants, but it is essential to ensure that the minimum unit margin remains profitable.

Formulas Used:

Title	Formulas
Unit margin	PV HT – Cost HT
Brand taxes	((PV HT – Cost HT) ÷ PV HT) x 100
Cost excluding VAT	PV HT – Unit margin
Total margin	Unit margin x Number of courses sold

Application: Tech InnoSolution Company

States :

InnoSolution is a technology startup that develops applications for businesses. Marie, the founder, evaluates the profitability of their latest product, a project management application, to ensure that their pricing position is optimized to finance future innovations.

Work to do :

1. What is the unit margin on the application if the selling price excluding tax per license is €500 and the production cost excluding tax is €350?
2. Calculate the margin rate for the project management application.
3. If InnoSolution wants a profitability of 120% per license, what would be the selling price excluding tax to set?
4. Making 200 license sales, what would be the overall margin generated?
5. Analyze the importance of setting a competitive price in the context of today's technology industry.

Proposed correction:

1. The unit margin is calculated by subtracting the production cost excluding tax from the selling price excluding tax:
   500 € – 350 € = 150 €.
   Each license generates a unit margin of €150.

2. The margin rate can be determined by:
   Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((500 € – 350 €) ÷ 350 €) x 100 = 42,86%.
   The margin rate is 42,86%.

3. To aim for a profitability of 120%, the selling price excluding tax is calculated with:

PV HT = PA HT x (1 + Profitability rate) = €350 x (1 + 1,20) = €770.
The selling price excluding tax for a profitability of 120% is €770.

4. The overall margin with 200 licenses sold is:
   €150 x 200 = €30.
   This provides an overall margin of €30.

5. In the technology sector, competitive pricing is crucial to maintain attractiveness in the face of rapid innovation and strong international competition.

Formulas Used:

Title	Formulas
Unit margin	PV HT – Production cost HT
Margin rate	((PV HT – PA HT) ÷ PA HT) x 100
Selling price excluding tax	PA HT x (1 + Profitability rate)
Overall margin	Unit margin x Number of licenses sold

Application: EcoDynamics Consulting Firm

States :

EcoDynamics is a firm specializing in environmental consulting for businesses. Isabelle, the financial manager, wants to assess the profitability of a new offering: environmental audits. She must align financial strategies with the company's green growth objectives while ensuring good profitability.

Work to do :

1. Find the unit margin for audits if the selling price excluding tax for an audit is €800 and the cost excluding tax is €600.
2. What is the margin rate for this service?
3. Set a selling price excluding VAT if EcoDynamics wishes to maintain a margin rate of 50%.
4. Selling 120 audits, calculate the total margin.
5. Discuss the challenges of adequate pricing to capture a growing market and retain their loyalty.

Proposed correction:

1. The unit margin is obtained by:
   800 € – 600 € = 200 €.
   The audit generates a unit margin of €200.

2. The margin rate is calculated by:
   Margin rate = ((PV HT – Cost HT) ÷ Cost HT) x 100 = ((€800 – €600) ÷ €600) x 100 = 33,33%.
   The service has a margin rate of 33,33%.

3. With a desired margin rate of 50%, the selling price excluding tax is calculated by:

PV HT = Cost HT x (1 + Margin rate) = €600 x (1 + 0,50) = €900.
The selling price excluding VAT should be €900.

4. The total margin with 120 audits is:
   €200 x 120 = €24.
   This gives a total margin of €24.

5. In this growing sector, maintaining balanced pricing is essential to attract new customers, ensure their satisfaction and retain their loyalty in the face of growing ecological awareness.

Formulas Used:

Title	Formulas
Unit margin	PV HT – Cost HT
Margin rate	((PV HT – Cost HT) ÷ Cost HT) x 100
Selling price excluding tax	Cost excluding tax x (1 + Margin rate)
Total margin	Unit margin x Number of audits sold

Application: Clair&Net Glass Workshop

States :

Clair&Net is a workshop that manufactures and sells hand-blown glass vases. Marc, the master glassmaker, plans to adjust his price list for his unique creations while ensuring the profitability of his artisanal business which is receiving growing appeal.

Work to do :

1. What is the unit margin on a vase if its selling price excluding tax is €150 and the manufacturing costs excluding tax are €95?
2. What is the markup rate for this vase?
3. Decide on a maximized manufacturing cost excluding tax if the selling price remains at €150 and the constant unit margin must be €80.
4. With the projected sale of 70 vases, calculate the cumulative margin.
5. Analyze the benefits of emphasizing the uniqueness of pieces in the pricing strategy to attract premium customers.

Proposed correction:

1. The unit margin is given by:
   150 € – 95 € = 55 €.
   The vases have a unit margin of €55.

2. The markup rate is calculated by:
   Markup rate = ((PV HT – Cost HT) ÷ PV HT) x 100 = ((150 € – 95 €) ÷ 150 €) x 100 = 36,67%.
   The markup rate is therefore 36,67%.

3. To maintain a unit margin of €80, the manufacturing cost excluding tax is:

Cost excluding tax = PV excluding tax – Unit margin = €150 – €80 = €70.
The maximum cost of materials should be €70.

4. The cumulative margin with 70 vases is:
   €55 x 70 = €3.
   Therefore, this provides a cumulative margin of €3.

5. Highlighting the handmade and unique aspect of vases can justify a higher price and appeal to a niche market, thus supporting the notion of luxury and exclusivity.

Formulas Used:

Title	Formulas
Unit margin	PV HT – Cost HT
Brand taxes	((PV HT – Cost HT) ÷ PV HT) x 100
Cost excluding VAT	PV HT – Unit margin
Cumulative margin	Unit margin x Number of vases sold

Application: Fit&Flex Gym

States :

Fit&Flex, a growing gym, offers a monthly membership that includes access to equipment and group classes. Andréa, the financial manager, must optimize the packages by balancing service costs and member requirements while increasing margins.

Work to do :

1. Evaluate the unit margin if the monthly subscription is sold for €60 and the cost excluding tax per subscriber is €40.
2. Calculate the markup rate for this subscription.
3. In order to keep the unit margin at €25, what could the cost excluding tax be if the selling price is reduced to €55?
4. Estimating 300 monthly subscriptions, calculate the overall margin achieved.
5. Discuss flexible pricing strategy and its benefits in improving customer loyalty.

Proposed correction:

1. The unit margin is defined by:
   60 € – 40 € = 20 €.
   Thus, each subscription generates €20 of unit margin.

2. The mark rate is obtained with:
   Markup rate = ((PV HT – Cost HT) ÷ PV HT) x 100 = ((60 € – 40 €) ÷ 60 €) x 100 = 33,33%.
   The markup rate is 33,33%.

3. To maintain a unit margin of €25, the cost excluding tax can be calculated by:

Cost excluding tax = PV excluding tax – Unit margin = €55 – €25 = €30.
The cost excluding tax can be €30.

4. The overall margin with 300 subscriptions is:
   €20 x 300 = €6.
   Therefore, the total margin is €6.

5. A flexible pricing strategy can increase customer satisfaction and encourage loyalty, while giving Fit&Flex the agility to respond to market fluctuations and retain customers over the long term.

Formulas Used:

Title	Formulas
Unit margin	PV HT – Cost HT
Brand taxes	((PV HT – Cost HT) ÷ PV HT) x 100
Cost excluding VAT	PV HT – Unit margin
Overall margin	Unit margin x Number of subscriptions sold