In this section:
Application: Birch Delights
States :
Les Délices du Bouleau, a local pastry shop, is looking to expand its sales strategy for the holiday season. It currently sells a Yule log at a tax-free retail price of €25 and is considering lowering the retail price to boost sales. The tax-free purchase cost of this log is €15.
Work to do :
- Calculate the current margin rate.
- Determine the pre-tax sales price needed to achieve a 30% markup rate.
- Imagine that the selling price excluding tax is reduced to €22, describe the impact on the margin rate.
- If the company wants to sell 300 units this season, calculate the overall margin at the initial selling price of €25.
- Now consider a VAT of 5,5%, what will be the initial sales price including VAT of the log?
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
Here: ((25 – 15) ÷ 15) x 100 = 66,67%.
The current margin rate is 66,67%. -
To obtain a markup rate of 30%, we use the formula: PV HT = PA HT ÷ (1 – Markup rate).
Substituting, 15 ÷ (1 – 0,30) = €21,43.
The selling price excluding VAT should be €21,43 to achieve a mark-up rate of 30%. -
New margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
That is: ((22 – 15) ÷ 15) x 100 = 46,67%.
The drop to €22 reduces the margin rate to 46,67%.
-
Overall margin = Unit margin x quantity sold.
Unit margin = PV HT – PA HT = 25 – 15 = 10 €.
Overall margin = 10 x 300 = €3.
The overall margin would be €3 for 000 units sold. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 25 x (1 + 0,055) = €26,38.
The initial sales price including tax for the log is €26,38.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: TechGénie
States :
TechGénie, a local distributor of technological gadgets, is questioning the profitability of its new flagship product, the TechX. This gadget has a sales price excluding tax of €120, while its purchase cost excluding tax amounts to €90.
Work to do :
- Calculate the current markup rate.
- For a desired margin rate of 40%, determine the ideal selling price excluding tax.
- If the selling price excluding tax is reduced by 10%, assess the new margin rate.
- Determine the overall margin if TechGénie sells 500 units at the initial selling price.
- Calculate the sales price including VAT with a VAT rate of 20%.
Proposed correction:
-
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100).
That is: ((120 – 90) ÷ 120) x 100 = 25%.
The current markup rate is 25%. -
For a margin rate of 40%, use: PV HT = PA HT x (1 + Margin rate).
So: 90 x (1 + 0,40) = €126.
The ideal selling price excluding tax would be €126. -
New PV excluding tax = 120 x (1 – 0,10) = €108.
New margin rate = ((108 – 90) ÷ 90) x 100 = 20%.
The 10% reduction in the net selling price reduces the margin rate to 20%.
-
Unit margin = PV HT – PA HT = 120 – 90 = 30 €.
Overall margin = 30 x 500 = €15.
The overall margin would be €15 for 000 units sold. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 120 x (1 + 0,20) = €144.
The sales price including VAT is €144.
Formulas Used:
Title | Formulas |
---|---|
Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
PV HT for Margin Rate | PA HT x (1 + Margin rate) |
Selling price after reduction | PV HT x (1 – decrease in %) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: Page-Tournee Bookstore
States :
The Page-Tournée bookstore is organizing a special sale for rare manuscripts. It is offering a book at a sale price of €300 excluding VAT. The acquisition cost excluding VAT of each book is €200.
Work to do :
- Evaluate the current margin rate of this work.
- Calculate the selling price excluding VAT if the desired markup rate is 35%.
- If the selling price is increased by 15%, determine the new impact on the margin rate.
- If 50 books are sold at the original price, calculate the overall margin.
- Calculate the amount of the price including VAT with a VAT of 5,5%.
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
Here: ((300 – 200) ÷ 200) x 100 = 50%.
The current margin rate is 50%. -
For a markup rate of 35%: PV HT = PA HT ÷ (1 – Markup rate).
So: 200 ÷ (1 – 0,35) = €307,69.
The selling price excluding VAT for a markup rate of 35% is €307,69. -
New PV excluding tax = 300 x (1 + 0,15) = €345.
New margin rate = ((345 – 200) ÷ 200) x 100 = 72,5%.
The 15% price increase pushes the margin rate up to 72,5%.
-
Unit margin = PV HT – PA HT = 300 – 200 = 100 €.
Overall margin = 100 x 50 = €5.
The overall margin for 50 works sold is €5. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 300 x (1 + 0,055) = €316,50.
The sales price including VAT is €316,50.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
Selling price after increase | PV HT x (1 + increase in %) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: The Green Shop
States :
L'Échoppe Verte, an eco-friendly products store, sells reusable bottles at a retail price of €10 excluding VAT, each with a purchase cost of €7 excluding VAT.
Work to do :
- Calculate the current sales rate for these bottles.
- Find the selling price excluding tax to maintain a margin rate of 20%.
- If the selling price drops by €2, what will the new margin rate be?
- Assuming 2000 bottles are sold at this price, deduct the overall margin.
- By adding 20% VAT, determine the price including VAT.
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
That is: ((10 – 7) ÷ 7) x 100 = 42,86%.
The current margin rate is 42,86%. -
PV HT for a margin rate of 20% = PA HT x (1 + Margin rate).
So: 7 x (1 + 0,20) = €8,40.
The selling price excluding tax would be €8,40 for a margin of 20%. -
New PV excluding tax = 10 – 2 = 8 €.
New margin rate = ((8 – 7) ÷ 7) x 100 = 14,29%.
The €2 drop reduces the margin rate to 14,29%.
-
Unit margin = 10 – 7 = €3.
Overall margin = 3 x 2000 = €6.
The overall margin for 2000 bottles is €6. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 10 x (1 + 0,20) = €12.
The selling price including tax for a bottle is €12.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Margin Rate | PA HT x (1 + Margin rate) |
New sale price | PV HT – drop |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: Fashionnova
States :
Fashionnova, a clothing brand, sells jeans with a retail price excluding VAT of €50, while the purchase cost is €30.
Work to do :
- Determine the current markup rate for jeans.
- Identify the ideal selling price excluding tax for a margin rate of 60%.
- If the selling price increases by €5, what will the new margin rate be?
- Calculate the overall margin if 1000 units are sold at the original price.
- Applying 20% VAT, find the sales price including VAT.
Proposed correction:
-
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100).
That is: ((50 – 30) ÷ 50) x 100 = 40%.
The current markup rate is 40%. -
For a margin rate of 60%: PV HT = PA HT x (1 + Margin rate).
So: 30 x (1 + 0,60) = €48.
The ideal selling price excluding tax would be €48. -
New PV excluding tax = 50 + 5 = 55 €.
New margin rate = ((55 – 30) ÷ 30) x 100 = 83,33%.
The increase of €5 brings the margin rate to 83,33%.
-
Unit margin = 50 – 30 = €20.
Overall margin = 20 x 1000 = €20.
The overall margin for 1000 jeans sold is €20. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 50 x (1 + 0,20) = €60.
The retail price including tax for a pair of jeans is €60.
Formulas Used:
Title | Formulas |
---|---|
Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
PV HT for Margin Rate | PA HT x (1 + Margin rate) |
Selling price after increase | PV HT + increase |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: Golden Wheat Bakery
States :
Boulangerie Aux Blés d'Or sells specialty breads at a selling price excluding tax of €3,50, with a purchase cost excluding tax of €2,00 per loaf.
Work to do :
- Calculate the margin rate on bread sales.
- Describe the selling price excluding VAT required to obtain a markup rate of 40%.
- If the selling price is reduced by €0,50, what will the new margin rate be?
- Calculate the overall margin if 500 loaves are sold daily for a month (30 days).
- Add the 5,5% VAT to determine the sales price including VAT of the bread.
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
That is: ((3,50 – 2,00) ÷ 2,00) x 100 = 75%.
The margin rate on bread sales is 75%. -
For a markup rate of 40%: PV HT = PA HT ÷ (1 – Markup rate).
So: 2,00 ÷ (1 – 0,40) = €3,33.
The required selling price excluding tax for a markup rate of 40% is €3,33. -
New PV excluding tax = 3,50 – 0,50 = 3,00 €.
New margin rate = ((3,00 – 2,00) ÷ 2,00) x 100 = 50%.
The reduction of €0,50 lowers the margin rate to 50%.
-
Unit margin = 3,50 – 2,00 = €1,50.
Overall margin = 1,50 x 500 x 30 = €22.
The overall margin for a month of sales is €22. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 3,50 x (1 + 0,055) = €3,69.
The selling price including tax per loaf is €3,69.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
New sale price | PV HT – reduction |
Overall margin | Unit margin x quantity sold x days |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: Spark Flowers
States :
Les Fleurs d'Étincelle, a flower shop, is offering a special bouquet at a retail price excluding tax of €30, with a purchase cost excluding tax of €18.
Work to do :
- Deduct the current margin rate on this bouquet.
- Calculate the selling price excluding tax that you would establish for a markup rate of 25%.
- Analyze the new margin rate if the selling price increases by 10%.
- If 150 bouquets are sold at the initial rate, calculate the overall margin.
- With a VAT of 5,5%, determine the sales price including VAT of the bouquet.
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
That is: ((30 – 18) ÷ 18) x 100 = 66,67%.
The current margin rate on the bouquet is 66,67%. -
For a markup rate of 25%: PV HT = PA HT ÷ (1 – Markup rate).
So: 18 ÷ (1 – 0,25) = €24.
The selling price excluding VAT for a markup rate of 25% is €24. -
New PV excluding tax = 30 x (1 + 0,10) = €33.
New margin rate = ((33 – 18) ÷ 18) x 100 = 83,33%.
A 10% increase raises the margin rate to 83,33%.
-
Unit margin = 30 – 18 = €12.
Overall margin = 12 x 150 = €1.
The overall margin for 150 bouquets sold is €1. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 30 x (1 + 0,055) = €31,65.
The sales price including tax for the bouquet is €31,65.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
Selling price after increase | PV HT x (1 + increase in %) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: Restaurant Le Gourmet Moderne
States :
Le Gourmet Moderne offers a daily special with a cost price excluding tax of €5 and a selling price excluding tax of €12.
Work to do :
- What is the margin rate for this dish?
- Calculate the selling price excluding tax if the restaurant wants a 50% markup rate.
- Let's look at the impact if the selling price is reduced by 20%.
- Calculate the overall margin if the restaurant sells 1000 dishes at this initial selling price.
- Adding 10% VAT, what is the sales price including VAT?
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
So: ((12 – 5) ÷ 5) x 100 = 140%.
The margin rate for this dish is 140%. -
For a markup rate of 50%: PV HT = PA HT ÷ (1 – Markup rate).
So: 5 ÷ (1 – 0,50) = €10.
The target selling price excluding VAT for a 50% markup rate is €10. -
New PV excluding tax after reduction: 12 x (1 – 0,20) = €9,60.
New margin rate = ((9,60 – 5) ÷ 5) x 100 = 92%.
Reducing it by 20% lowers the margin rate to 92%.
-
Unit margin = 12 – 5 = €7.
Overall margin = 7 x 1000 = €7.
The overall margin for 1000 dishes is €7. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
That is: 12 x (1 + 0,10) = €13,20.
The sales price including tax for this dish is €13,20.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
Sale price after reduction | PV HT x (1 – reduction in %) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |
Application: FitSanté Clinic
States :
The FitSanté Clinic offers a medical consultation service with an operating cost excluding tax of €30 and a sales price excluding tax of €70.
Work to do :
- Calculate the margin rate for this consultation.
- Determine the selling price excluding tax to achieve a markup rate of 40%.
- If the selling price excluding tax is increased by 15%, what is the new margin rate?
- Considering 500 consultations carried out at this price, determine the overall margin.
- With a VAT of 20%, what will the sales price including VAT be?
Proposed correction:
-
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100).
So: ((70 – 30) ÷ 30) x 100 = 133,33%.
The margin rate for this consultation is 133,33%. -
For a markup rate of 40%: PV HT = PA HT ÷ (1 – Markup rate).
That is: 30 ÷ (1 – 0,40) = €50.
The required selling price excluding tax for a markup rate of 40% is €50. -
New PV excluding tax = 70 x (1 + 0,15) = €80,50.
New margin rate = ((80,50 – 30) ÷ 30) x 100 = 168,33%.
The 15% increase results in a new margin rate of 168,33%.
-
Unit margin = 70 – 30 = €40.
Overall margin = 40 x 500 = €20.
The overall margin for 500 consultations is €20. -
Selling price including tax = PV excluding tax x (1 + VAT rate).
So: 70 x (1 + 0,20) = €84.
The sales price including tax for the consultation is €84.
Formulas Used:
Title | Formulas |
---|---|
Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
PV HT for Brand Rate | PA HT ÷ (1 – Mark rate) |
Selling price after markup | PV HT x (1 + increase in %) |
Overall margin | Unit margin x quantity sold |
Sales price including tax | PV excluding VAT x (1 + VAT rate) |