In this section:
Application: Sweet Pastry
States :
Pâtisserie Douceur, located in Lyon, wants to assess the profitability of its delicious macarons. The macarons are sold in boxes of 12, with a selling price excluding tax of €18. Each box costs €12 excluding tax to produce. The pastry shop sells an average of 500 boxes per month. It wants to adjust its margins to maximize its profits.
Work to do :
- Calculate the unit margin for a box of macarons.
- Determine the overall monthly margin for the 500 boxes sold.
- What is the pastry margin rate for a box of macarons?
- Calculate the markup rate on each of the boxes.
- Propose a strategy to increase the overall margin of the bakery.
Proposed correction:
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The unit margin is calculated as the difference between the selling price excluding VAT and the purchase price or the production cost excluding VAT.
Unit margin = PV excluding tax – PA excluding tax = €18 – €12 = €6.
The unit margin for a box of macaroons is therefore €6.
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The overall margin is obtained by multiplying the unit margin by the quantity sold.
Overall margin = Unit margin x Quantity sold = €6 x 500 = €3.
The overall monthly margin for the 500 boxes sold is €3.
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The margin rate expresses profitability in relation to the cost of production.
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((18 € – 12 €) ÷ 12 €) x 100 = 50%.
The margin rate for a box of macarons is therefore 50%.
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The markup rate indicates the margin over the selling price.
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((18 € – 12 €) ÷ 18 €) x 100 = 33,33%.
The markup rate on macaron boxes is 33,33%.
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To increase overall margin, the bakery could consider optimizing production to reduce costs, increasing sales prices or diversifying products to attract more customers.
By applying these strategies, overall profitability could be improved without compromising quality.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Innovative Technologies
States :
The company "Les Technologies Innovantes" sells technological gadgets. For one of their flagship gadgets, the selling price excluding tax is set at €150, while the manufacturing cost is €100 excluding tax. In one month, with an intensive marketing campaign, the company manages to sell 1 units. The management wants to analyze the margins to adjust their strategy.
Work to do :
- Calculate the unit margin for each gadget sold.
- Estimate the overall monthly margin resulting from these sales.
- Determine the margin rate for this gadget.
- Calculate the markup rate applied to the gadget.
- What adjustments could the company make to improve its margins?
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV excluding tax – PA excluding tax = €150 – €100 = €50.
The unit margin for each gadget is therefore €50.
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The overall margin is calculated by the formula:
Overall margin = Unit margin x Quantity sold = €50 x 1 = €200.
The overall monthly margin is €60.
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The margin rate is given by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((150 € – 100 €) ÷ 100 €) x 100 = 50%.
The margin rate for the gadget is 50%.
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To establish the markup rate:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((150 € – 100 €) ÷ 150 €) x 100 = 33,33%.
The markup rate for the gadget is 33,33%.
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To improve margins, the company could reduce manufacturing costs through process optimization or seek out lower-cost suppliers. Similarly, exploring market segments willing to pay a higher price could be a viable strategy.
By re-evaluating these aspects, the company could increase its profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Eclectic Clothing
States :
Vêtements Éclectiques is a fashion boutique offering original, locally made collections. One of their popular garments, a linen jacket, has a retail price of €90 excluding VAT, with a production cost of €55 excluding VAT. The boutique manages to sell 300 jackets per month. The management team wants to calculate margins to target possible improvements.
Work to do :
- Calculate the unit margin for a linen jacket.
- What is the overall monthly margin for these sales?
- Determine the margin rate for this jacket.
- Calculate the markup rate applied to the jacket.
- Recommend a strategy to increase the profitability of the store.
Proposed correction:
-
The unit margin is determined as follows:
Unit margin = PV excluding tax – PA excluding tax = €90 – €55 = €35.
The unit margin for a jacket is therefore €35.
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The monthly overall margin is calculated as follows:
Overall margin = Unit margin x Quantity sold = €35 x 300 = €10.
The overall monthly margin is €10.
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The margin rate is given by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((90 € – 55 €) ÷ 55 €) x 100 = 63,64%.
The margin rate for the jacket is 63,64%.
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To determine the markup rate:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((90 € – 55 €) ÷ 90 €) x 100 = 38,89%.
The markup rate for the jacket is 38,89%.
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To increase profitability, the store could consider negotiating better raw material costs or increasing sales prices by justifying the unique quality of its products. At the same time, increasing product customization could also attract a broader customer segment.
These strategic approaches can help increase profits while strengthening brand image.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Provencal Santons
States :
The “Santons Provençaux” manufacturing workshop produces a range of handcrafted clay figurines. A popular santon model sells for €25 excluding VAT, with a manufacturing cost of €15 excluding VAT per piece. Each month, 1 units are sold. The aim is to analyse margins to optimise the workshop’s financial management.
Work to do :
- Calculate the unit margin for this santon model.
- Evaluate the overall margin generated monthly.
- What is the margin rate for this santon?
- Calculate the markup rate applied to the sale of the santon.
- Suggest actions to be implemented to improve financial performance.
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV excluding tax – PA excluding tax = €25 – €15 = €10.
The unit margin for each santon is €10.
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The monthly overall margin is calculated as follows:
Overall margin = Unit margin x Quantity sold = €10 x 1 = €000.
The overall margin generated monthly is €10.
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The margin rate is determined by this formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((25 € – 15 €) ÷ 15 €) x 100 = 66,67%.
The margin rate for the santon is 66,67%.
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The calculation of the markup rate is:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((25 € – 15 €) ÷ 25 €) x 100 = 40%.
The markup rate for the santons sold is 40%.
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To improve financial performance, the shop could reduce manufacturing costs by increasing efficiency or optimizing supply purchases. Increasing international visibility and distribution could also increase sales.
These actions would help increase profitability while expanding the market for craft products.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: FitNow Fitness Equipment
States :
FitNow, a fitness equipment manufacturer, sells a treadmill model for €800 excluding VAT. The manufacturing cost for each machine is €500 excluding VAT. Over a three-month period, they sell 200 units. Management reviews margins to optimize their sales and manufacturing strategies.
Work to do :
- Calculate the unit margin for a treadmill.
- What is the total margin after three months of sales?
- Evaluate the margin rate for the treadmill.
- Calculate the markup rate that applies to the sale of the treadmill.
- What recommendation would you give to increase margin without increasing sales prices?
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV excluding tax – PA excluding tax = €800 – €500 = €300.
The unit margin for each treadmill is €300.
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The total margin over three months is determined by:
Overall margin = Unit margin x Quantity sold = €300 x 200 = €60.
The total margin over three months is €60.
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For the margin rate, we have:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((800 € – 500 €) ÷ 500 €) x 100 = 60%.
The margin rate for the treadmill is 60%.
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The markup rate is calculated as follows:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((800 € – 500 €) ÷ 800 €) x 100 = 37,5%.
The markup rate from treadmill sales is 37,5%.
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Without raising prices, FitNow could explore cost-cutting initiatives, such as streamlining production or using lower-cost alternative materials while maintaining quality. Improving logistics processes could also help reduce expenses.
By adopting these measures, the company can hope for an increase in its profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Exotic flavors
States :
The company "Exotic Flavors" specializes in the sale of rare spices. A bag of spices is sold for €15 excluding tax, while its supply cost is €9 excluding tax. The company sells 700 bags per month. Its managers want to examine the margins to assess the profitability of the products.
Work to do :
- Calculate the unit margin for a bag of spices.
- What is the total margin generated in one month for the bags sold?
- Determine the margin rate for spice bags.
- Calculate the markup rate applied to a bag of spices.
- What strategic advice can you offer to optimize the margins of this company?
Proposed correction:
-
The unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €15 – €9 = €6.
The unit margin for each sachet of spices is €6.
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The total monthly margin is:
Overall margin = Unit margin x Quantity sold = €6 x 700 = €4.
The total margin generated in one month is €4.
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To calculate the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((15 € – 9 €) ÷ 9 €) x 100 = 66,67%.
The margin rate for spice bags is 66,67%.
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Let's calculate the markup rate:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((15 € – 9 €) ÷ 15 €) x 100 = 40%.
The markup rate applied by Saveurs exotiques is 40%.
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To optimize margins, the company could seek to diversify its product range to increase revenue or further improve the efficiency of procurement processes to reduce initial costs.
These actions can improve profitability while serving a better customer experience.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Luxury Designer Furniture
States :
Mobilier Design Luxe offers high-end handmade furniture. An iconic coffee table is sold at €1 excluding VAT, with a production cost of €200 excluding VAT. The company sells 700 tables per month. The management team wants to understand margins in order to maximize profit.
Work to do :
- Calculate the unit margin for each coffee table sold.
- Evaluate the overall monthly margin.
- What is the margin rate for this table?
- Calculate the markup rate applied by Mobilier Design Luxe.
- What strategy would you suggest to increase sales volume and therefore overall margin?
Proposed correction:
-
The unit margin is calculated by:
Unit margin = PV excluding tax – PA excluding tax = €1 – €200 = €700.
The unit margin for each coffee table sold is €500.
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The monthly overall margin is established as follows:
Overall margin = Unit margin x Quantity sold = €500 x 50 = €25.
The overall monthly margin is €25.
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To find the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((€1 – €200) ÷ €700) x 700 = 100%.
The margin rate for the coffee table is 71,43%.
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To determine the markup rate, we have:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€1 – €200) ÷ €700) x 1 = 200%.
The markup rate for coffee table sales is 41,67%.
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To increase sales volume, Mobilier Design Luxe could intensify its marketing efforts, target high-end customer segments more effectively, or create special collections that would attract new customers.
Adopting this strategy could increase awareness and lead to increased sales volume and overall margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Adventure Travel
States :
Voyages Aventure is an agency specializing in personalized tourist circuits. A typical circuit is sold at €1 excluding VAT, while the cost of structuring and services is €500 excluding VAT. On average, the agency organizes 900 circuits per year. The objective is to analyze the profitability of these circuits.
Work to do :
- Calculate the unit margin for one of the tourist circuits.
- Determine the overall annual margin generated by the circuits.
- What is the margin rate for a circuit?
- Calculate the markup rate on a sold circuit.
- Recommend improvements to increase agency profitability.
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = PV excluding tax – PA excluding tax = €1 – €500 = €900.
The unit margin for each circuit is €600.
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The annual overall margin is determined by:
Overall margin = Unit margin x Quantity sold = €600 x 60 = €36.
The overall annual margin generated by the circuits is €36.
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To assess the margin rate:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((€1 – €500) ÷ €900) x 900 = 100%.
The margin rate for a circuit is 66,67%.
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For the mark rate, we have:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((€1 – €500) ÷ €900) x 1 = 500%.
The markup rate for the circuits sold is 40%.
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To increase profitability, the agency could develop strategic partnerships to reduce costs or introduce premium services that would increase the value perceived by the client. Diversifying its channels to meet little-explored market niches could also increase sales volumes.
These strategic actions would aim to improve profitability while enriching the customer experience.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: BioBox Delivery
States :
BioBox Livraison, a company dedicated to the delivery of organic meal baskets, offers a formula at a price of €30 excluding VAT per unit, with a cost price of €18 excluding VAT. The company delivers an average of 2 baskets per month. The team wants to evaluate its margins to adjust the commercial strategy.
Work to do :
- Calculate the unit margin of each organic meal basket.
- What is the total monthly margin for delivered baskets?
- Evaluate the margin rate for meal baskets.
- Calculate the markup rate of meal box sales.
- How could the company increase its margin without touching the selling price?
Proposed correction:
-
The unit margin is:
Unit margin = PV excluding tax – PA excluding tax = €30 – €18 = €12.
The unit margin for a packed lunch is €12.
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The total monthly margin is calculated as follows:
Overall margin = Unit margin x Quantity sold = €12 x 2 = €500.
The total monthly margin for delivered baskets is €30.
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The margin rate is given by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((30 € – 18 €) ÷ 18 €) x 100 = 66,67%.
The margin rate for meal baskets is 66,67%.
-
Let's calculate the markup rate:
Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((30 € – 18 €) ÷ 30 €) x 100 = 40%.
The markup rate of sales is 40%.
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To increase margin, BioBox Livraison could explore more cost-effective supply solutions, or optimize its logistics to benefit from economies of scale. Strengthening bulk purchasing protocols could also reduce production costs.
These measures would help improve the overall margin while maintaining attractive prices for customers.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Overall margin | Unit margin x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |