In this section:
Application: Bakery Gourmet Pastries
States :
The bakery "Pâtisseries Gourmandes" wants to review its sales prices to achieve a forecast margin of 30% on its flagship products: croissants. Current production costs are calculated at €1,15 per croissant (purchase price excluding tax, PA HT). The management, wishing to improve its profitability, asks you to determine the sales price excluding tax (PV HT) necessary to achieve this margin objective.
Work to do :
- Calculate the selling price excluding tax required to obtain a margin of 30%.
- Determine the resulting markup rate for this selling price.
- How many croissants should the bakery sell to achieve an overall margin of €3?
- Analyze the strategic implications if the set selling price is deemed too high by consumers.
- If production costs increase to €1,30 per croissant, what impact would this have on the PV excluding tax?
Proposed correction:
-
For a margin of 30%, the formula used is: PV HT = PA HT x (1 + Margin rate).
Here, PV HT = €1,15 x (1 + 0,30) = €1,495.
The selling price excluding tax must be €1,495 per croissant to achieve a margin of 30%. -
The markup rate is calculated by the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Here, Markup Rate = ((1,495 – 1,15) ÷ 1,495) x 100 = 23,04%.
The resulting markup rate is 23,04%. -
For an overall margin of €3, use the formula: Overall margin = Unit margin x Quantity sold.
Unit margin = PV excluding tax – PA excluding tax = €1,495 – €1,15 = €0,345.
Quantity sold = €3 ÷ €000 = 0,345 croissants.
It is necessary to sell 8 croissants to reach an overall margin of €696.
-
If the price is deemed too high, the company could lose market share or have to adjust its strategy, potentially by changing ingredients to reduce costs, or improving customer service and overall quality to justify the price.
-
With a PA HT of €1,30, the new PV HT would be calculated by PV HT = €1,30 x (1 + 0,30) = €1,690.
The additional cost increases the PV excluding VAT to €1,690, which could potentially reduce sales volume if demand is price sensitive.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Brand taxes | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Quantity sold (overall margin) | Quantity sold = Overall margin ÷ Unit margin |
Application: TechInnovations
States :
TechInnovations, a young company specializing in technological gadgets, wants to launch a new smartphone accessory. The production cost of each unit is €25. The goal is to achieve a margin of 30%. In order to position itself competitively in the market, TechInnovations must determine the appropriate selling price, while maintaining a strategic analysis of costs and demand.
Work to do :
- Calculate the selling price excluding tax to be established to ensure a margin of 30%.
- What would be the margin rate if the selling price excluding tax is set at €35?
- Estimate the number of units to sell for TechInnovations to make a profit of €5 with this product.
- What could be the financial risks if demand for this accessory is lower than expected?
- If production costs increase by 10%, how will this affect the initially planned selling price?
Proposed correction:
-
To achieve a 30% margin, the formula is: PV HT = PA HT x (1 + Margin rate).
Here, PV HT = €25 x (1 + 0,30) = €32,50.
The target selling price excluding tax is €32,50 for a margin of 30%. -
The margin rate is calculated: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
With a PV excluding tax of €35, Margin rate = ((€35 – €25) ÷ €25) x 100 = 40%.
The margin rate at €35 is 40%. -
Use the formula: Profit = Unit Margin x Quantity Sold, so Quantity Sold = Profit ÷ Unit Margin.
Unit margin = €32,50 – €25 = €7,50.
Quantity sold = €5 ÷ €000 = 7,50 units.
TechInnovations needs to sell 667 units to make a profit of €5.
-
If demand is lower, TechInnovations could face excess inventory, which would tie up capital. The company would have to adopt price reduction strategies or increase its marketing visibility.
-
If production costs increase by 10%, the cost becomes €27,50. The new PV HT with a margin of 30% will be: PV HT = €27,50 x (1 + 0,30) = €35,75.
The increase in costs results in a selling price of €35,75 to maintain the margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Profit | Quantity sold = Profit ÷ Unit margin |
Application: UrbanMode
States :
ModeUrbain, a ready-to-wear company, is planning to launch a new collection of eco-friendly t-shirts. The manufacturing cost per t-shirt is €12. The marketing department is aiming for a 30% margin to support awareness campaigns on sustainable fashion.
Work to do :
- Calculate the selling price excluding tax that would allow you to achieve the 30% margin target.
- If ModeUrbain wants to display a 20% markup rate, what should their selling price be excluding tax?
- Estimate the volume of sales needed to make a total profit of €8.
- Discuss the implications of a possible shift in consumer preferences towards non-green products.
- How would the selling price be affected if direct costs increased by 15%?
Proposed correction:
-
The calculation of the selling price excluding tax with a margin of 30% is: PV excluding tax = PA excluding tax x (1 + Margin rate).
Thus, PV HT = €12 x (1 + 0,30) = €15,60.
The selling price excluding tax set at €15,60 will provide a margin of 30%. -
For a markup rate of 20%, use the formula: PV HT = PA HT ÷ (1 – Markup rate).
PV excluding tax = €12 ÷ (1 – 0,20) = €15.
For a markup rate of 20%, the selling price should be €15. -
Use the profit formula: Profit = Unit Margin x Quantity Sold.
Unit margin = €15,60 – €12 = €3,60.
Quantity sold = €8 ÷ €000 = 3,60 units.
ModeUrbain will have to sell 2 t-shirts to achieve a profit of €223.
-
A shift in preferences toward non-eco-friendly products could lead to a decline in sales. The company could consider increased awareness campaigns or adjust its product mix to include more variety.
-
With a 15% increase, the cost again will be €13,80. Therefore, PV HT = €13,80 x (1 + 0,30) = €17,94.
The increase in costs will increase the selling price excluding VAT to €17,94 to maintain the desired margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Selling price excluding VAT (brand) | PV HT = PA HT ÷ (1 – Mark rate) |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Profit | Quantity sold = Profit ÷ Unit margin |
Application: Flavors of the World
States :
Saveurs du Monde, a fast food company, wants to introduce a new gourmet sandwich to its menu. The cost of ingredients for each sandwich is €3. The company wants to make a 30% margin on this item.
Work to do :
- Determine the selling price excluding tax required to obtain a margin of 30%.
- What markup rate would be achieved with a selling price excluding tax of €4,50?
- Calculate the number of sandwiches to sell to reach an overall margin of €2.
- What strategic adjustments should be considered if sandwich sales do not meet expectations?
- If the quality of the ingredients improves the cost to €2,70, how does this impact the initially planned selling price?
Proposed correction:
-
To obtain a margin of 30%, apply the formula: PV HT = PA HT x (1 + Margin rate).
PV excluding tax = €3 x (1 + 0,30) = €3,90.
The selling price excluding tax should be €3,90 for a margin of 30%. -
For a markup rate, use: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
With a PV excluding tax of €4,50, Markup rate = ((€4,50 – €3) ÷ €4,50) x 100 = 33,33%.
The markup rate would therefore be 33,33%. -
To reach €2 overall margin: Unit margin = PV excluding tax – PA excluding tax = €250 – €3,90 = €3.
Quantity sold = €2 ÷ €250 = 0,90 sandwiches.
The sale of 2 sandwiches is necessary to achieve this overall margin target.
-
If sales are lower than expected, Saveurs du Monde could adjust its price or modify its promotions. The possibility of introducing combined offers could also encourage sales.
-
With an improved quality of €2,70, let's recalculate: PV HT = €2,70 x (1 + 0,30) = €3,51.
The new cost adjustment would allow a reduced selling price of €3,51 to maintain the targeted margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Brand taxes | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Quantity sold (overall margin) | Quantity sold = Overall margin ÷ Unit margin |
Application: Ecotransport
States :
Écotransports, a company specializing in urban ecological transport, wants to increase the profitability of a bicycle rental service. The average cost for maintaining a bicycle is €75 per year. Aiming for a margin of 30%, Écotransports wants to adjust its annual rental rates.
Work to do :
- Calculate the annual rental rate excluding tax required for a 30% margin.
- If the rental rate is set at €100 per bike, what will the margin rate be?
- Estimate how many bikes need to be rented to generate an overall annual margin of €15.
- Analyze the potential effects of competition on lower prices.
- Let's assume that improving infrastructure reduces the cost to €65: what is the impact on the proposed tariff?
Proposed correction:
-
The calculation of the annual rental rate excluding tax to obtain a margin of 30% is: PV excluding tax = PA excluding tax x (1 + Margin rate).
Here, PV HT = €75 x (1 + 0,30) = €97,50.
To obtain a margin of 30%, the annual rate excluding tax should be set at €97,50. -
For a margin rate with PV excluding tax of €100, the formula is: Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100.
So, Margin rate = ((€100 – €75) ÷ €75) x 100 = 33,33%.
The margin rate would therefore be 33,33%. -
For an overall margin of €15, with Unit Margin = €000 – €97,50 = €75, use: Quantity Rented = Overall Margin ÷ Unit Margin.
Quantity rented = €15 ÷ €000 = 22,50 bicycles.
Ecotransports must rent 667 bicycles to achieve this overall margin.
-
Competition could force Ecotransports to adjust its prices downward, which could lead to a reduction in margin unless costs can also be reduced or the company increases the volume of rentals.
-
With a cost reduced to €65, let's recalculate the PV excluding tax: PV excluding tax = €65 x (1 + 0,30) = €84,50.
The cost reduction allows us to offer a lower annual rate, while maintaining the same margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Rental rate (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Rented quantity (overall margin) | Rented quantity = Overall margin ÷ Unit margin |
Application: BioCosmetics
States :
BioCosmetics, an organic cosmetics brand, is preparing to launch a new moisturizer. The production cost is €17 per pot. They are projecting a 30% margin to finance product development and marketing campaigns.
Work to do :
- Calculate the selling price excluding tax allowing a margin of 30%.
- To achieve a markup rate of 25%, what is the selling price excluding tax to consider?
- Determine the number of pots to sell to make €10 in profit.
- What strategic issues arise if margins have to be reduced in the long term?
- How is the selling price adjusted if the cost increases by 18%?
Proposed correction:
-
For the 30% margin, the formula is: PV HT = PA HT x (1 + Margin rate).
Thus, PV HT = €17 x (1 + 0,30) = €22,10.
The selling price excluding tax would be €22,10 to guarantee the 30% margin. -
With a desired markup rate of 25%, use: PV HT = PA HT ÷ (1 – Markup rate).
PV excluding tax = €17 ÷ (1 – 0,25) = €22,67.
For a markup rate of 25%, the selling price excluding tax must be €22,67. -
For a profit of €10, with Unit Margin = €000 – €22,10 = €17, use: Quantity sold = Profit ÷ Unit Margin.
Quantity sold = €10 ÷ €000 = 5,10 pots.
1 pots of cream must be sold to achieve this profit.
-
A sustained reduction in margins could slow investment in product development and harm differentiation from competitors. BioCosmetics may need to rethink its value proposition towards other advantages or cost savings.
-
For a production cost increased to 18%, the new cost is €20,06 (€17 x 1,18). The formula gives: PV HT = €20,06 x (1 + 0,30) = €26,08.
The new selling price in order to maintain the same margin would be €26,08.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Selling price excluding VAT (brand) | PV HT = PA HT ÷ (1 – Mark rate) |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Profit | Quantity sold = Profit ÷ Unit margin |
Application: GoodFoodMarkets
States :
GoodFoodMarkets, a specialist supermarket chain, is to introduce a range of artisan cheeses. The purchase cost per gram is €0,45. The aim is to generate a 30% margin on these products.
Work to do :
- Calculate the selling price excluding tax per gram for a margin of 30%.
- If GoodFoodMarkets offers a price of €0,60 per gram, what margin rate does this represent?
- To generate an overall margin of €6, how many grams must be sold?
- Identify potential risks to the chain if these cheeses attract little interest.
- What would be the impact on the selling price if purchase prices increase by 25%?
Proposed correction:
-
The formula for a 30% margin is: PV HT = PA HT x (1 + Margin rate).
With a PA excluding tax of €0,45, PV excluding tax = €0,45 x (1 + 0,30) = €0,585 per gram.
The selling price excluding tax per gram to obtain a margin of 30% will be €0,585. -
For a price of €0,60, the margin rate is given by: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€0,60 – €0,45) ÷ €0,45) x 100 = 33,33%.
Thus, the margin rate would be 33,33%. -
For an overall margin of €6: Unit margin = €000 – €0,585 = €0,45.
Quantity sold = €6 ÷ €000 = 0,135 grams.
Selling 44 grams will generate an overall margin of €444.
-
Low interest could reflect excessive inventory investment, leading to potential losses. GoodFoodMarkets should then consider targeted promotions or adjust its assortment to stimulate purchasing.
-
If the cost increases by 25%, the purchase cost becomes €0,5625 (€0,45 x 1,25). The formula: PV HT = €0,5625 x (1 + 0,30) = €0,73125.
The selling price should be readjusted to €0,73125 to maintain the targeted margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Quantity sold (overall margin) | Quantity sold = Overall margin ÷ Unit margin |
Application: Renewable Energies France
States :
Energies Renouvelables France, a company offering photovoltaic solar panels, wants to increase its offer with a new eco-responsible model. The total manufacturing cost is €850 per panel, and they want to achieve a margin of 30% for these products of the future.
Work to do :
- What is the selling price excluding tax to obtain a margin of 30%?
- If the PV excluding tax is set at €1, what margin rate does this generate?
- Determine how many panels need to be sold for a total margin of €50.
- Discuss the long-term implications for the business if margin must be sacrificed to keep prices competitive.
- If the manufacturing cost decreases by 10%, adjust the PV HT accordingly.
Proposed correction:
-
Use the formula: PV HT = PA HT x (1 + Margin rate).
Here, PV HT = €850 x (1 + 0,30) = €1.
The selling price excluding tax must be set at €1 to obtain a margin of 105%. -
For a PV excluding tax of €1, the margin rate is given by: Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 200.
Margin rate = ((€1 – €200) ÷ €850) x 850 = 100%.
Thus, the margin rate would be 41,18%. -
For a margin of €50, with Unit Margin = €000 – €1 = €105, use: Quantity sold = Total margin ÷ Unit margin.
Quantity sold = €50 ÷ €000 = 255 panels.
It will be necessary to sell 196 panels to obtain this overall margin.
-
Sacrificing margin to maintain low prices in the long term could erode the company's ability to invest in innovation and continuous improvement. Energies Renouvelables France must then carefully align its pricing strategy with its financial and environmental objectives.
-
With a 10% cost reduction, the cost decreases to €765 (€850 x 0,90). So: PV HT = €765 x (1 + 0,30) = €994,50.
A cost reduction therefore lowers the required PV excluding tax to €994,50, while maintaining the initial margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Quantity sold (overall margin) | Quantity sold = Overall margin ÷ Unit margin |
Application: EditionCulture
States :
ÉditionCulture, a digital publishing house, is preparing the release of an interactive book. The digital production cost is €4 per copy. The team is aiming for a 30% margin to boost promotion and innovation.
Work to do :
- What should the selling price of a book be to obtain a 30% margin?
- If EditionCulture decides to sell at €6, what will be the markup rate achieved?
- What is the minimum quantity that must be sold to make a profit of €12?
- What happens if new competitors offer a similar product at a lower price?
- Suppose the production cost decreases by 5%, adjust the corresponding PV HT.
Proposed correction:
-
For a 30% margin, use: PV HT = PA HT x (1 + Margin rate).
PV excluding tax = €4 x (1 + 0,30) = €5,20.
The selling price must be set at €5,20 to ensure a 30% margin. -
For a price of €6, the markup rate is: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((€6 – €4) ÷ €6) x 100 = 33,33%.
The markup rate achieved is therefore 33,33%. -
For a profit of €12, with Unit Margin = €000 – €5,20 = €4, use: Quantity = Profit ÷ Unit Margin.
Quantity = €12 ÷ €000 = 1,20 copies.
10 copies must be sold to reach this profit level.
-
A lower price from competitors could reduce EditionCulture's market share. The company should analyze whether it wants to differentiate itself through quality, service, or adjust its price to remain competitive.
-
With a 5% cost reduction, the cost becomes €3,80 (€4 x 0,95). Therefore: PV HT = €3,80 x (1 + 0,30) = €4,94.
A reduction in cost makes it possible to offer a reduced price of €4,94 while maintaining the margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding VAT (margin) | PV excluding tax = PA excluding tax x (1 + Margin rate) |
| Brand taxes | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Profit | Quantity = Profit ÷ Unit Margin |