Summary
- Application: The Bakery of Delights
- Application: Full Pages Bookstore
- Application: The Creation Workshop
- Application: Electronics For All
- Application: To Orchard Fruits
- Application: Ultra Sports Equipment
- Application: Bistrot Bon Gourmand
- Application: Mathilde's Gardens
- Application: The Bookstore of the Future
Application: The Bakery of Delights
States :
Boulangerie des Délices, located in the small town of Saint-Florent, is renowned for its delicious croissants and pains au chocolat. It wants to optimize its cost management and improve its profitability in the long term. Currently, the bakery buys 1 croissants at €000 each. It resells them at €0,50 each. The manager wants to evaluate the different margins and their implications.
Work to do :
- Calculate the unit margin for a croissant sold at La Boulangerie des Délices.
- What is the margin rate for croissants from this bakery?
- Determine the markup rate for croissants.
- If the bakery wants to achieve a margin rate of 30%, what should its selling price excluding tax be?
- Analyze the strategic implications of increasing the selling price to achieve a 30% margin rate.
Proposed correction:
1.
The unit margin is calculated using the formula: Unit margin = PV HT – PA HT.
PV excluding tax = €1, PA excluding tax = €0,50
Unit margin = €1 – €0,50 = €0,50
The unit margin for a croissant sold is €0,50.
2.
The margin rate is calculated using the formula: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€1 – €0,50) ÷ €0,50) x 100 = 100%
The margin rate for croissants is 100%.
3.
The markup rate is determined by the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Brand rate = ((€1 – €0,50) ÷ €1) x 100 = 50%
The markup rate for croissants is 50%.
4.
To obtain a margin rate of 30%, we use the formula: PV HT = PA HT ÷ (1 – Margin rate).
Replacing, €0,50 ÷ (1 – 0,30) = €0,71
The selling price excluding tax should be €0,71 to achieve a margin rate of 30%.
5.
Increasing the selling price to achieve a 30% margin rate requires communication on the added value provided by the products, to justify the price increase and maintain customer satisfaction.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| PV HT for a rate | PA HT ÷ (1 – Margin rate) |
Application: Full Pages Bookstore
States :
The Librairie Plein de Pages, located in the city center of Marseille, is known for the diversity of its book selection. It currently offers a novel at the price of €15 including tax. The purchase cost of this novel is €10 excluding tax. The bookstore wants to analyze its margins in order to decide on a more competitive pricing policy.
Work to do :
- Determine the selling price excluding tax of the novel.
- Calculate the unit margin generated by each novel sold.
- What is the margin rate for this novel?
- Determine how high the markup rate is applied to this novel.
- Discuss the pros and cons of a 5% price reduction on the retail price including tax for this novel.
Proposed correction:
1.
To obtain the sales price excluding VAT, we use the formula: Sales price excluding VAT = Sales price including VAT ÷ (1 + VAT rate).
Replacing with a VAT rate of 5,5%, €15 ÷ (1 + 0,055) = €14,22
The selling price of the novel excluding tax is €14,22.
2.
The unit margin is calculated as follows: Unit margin = PV HT – PA HT.
Unit margin = €14,22 – €10 = €4,22
The unit margin generated by each novel sold is €4,22.
3.
The margin rate is given by: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€14,22 – €10) ÷ €10) x 100 = 42,2%
The margin rate for this novel is 42,2%.
4.
The markup rate is calculated by: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Brand rate = ((€14,22 – €10) ÷ €14,22) x 100 = 29,67%
The markup rate applied to this novel is 29,67%.
5.
A 5% price reduction could improve competitiveness and attract more customers, increasing sales volume. However, it could reduce unit margin and overall profitability if the additional sales volume does not compensate for the decrease in unit margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: The Creation Workshop
States :
L'Atelier de Création, which specializes in handmade fashion items, sells handcrafted handbags. The cost price of a bag is €45. The bags are sold at €90 including tax. Given the competition, the workshop is considering reviewing its pricing strategy and wants to know how this would affect its margins.
Work to do :
- Calculate the selling price excluding tax of a handbag.
- Find the current unit margin for each bag.
- What is the margin rate for the workshop?
- If the sale price has to be reduced to €85 including VAT, what will the new markup rate be?
- Evaluate the impact of this reduction on the perception of the luxury product.
Proposed correction:
1.
The selling price excluding VAT is found with: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT rate of 20%, we have €90 ÷ 1,20 = €75
The selling price excluding tax of a handbag is €75.
2.
The unit margin is obtained by: Unit margin = PV HT – PA HT.
Unit margin = €75 – €45 = €30
The current unit margin for each bag is €30.
3.
The margin rate is calculated as follows: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€75 – €45) ÷ €45) x 100 = 66,67%
The margin rate for the workshop is 66,67%.
4.
For the new PV HT, we have: PV HT = €85 ÷ 1,20 = €70,83
New markup rate: Markup rate = ((€70,83 – €45) ÷ €70,83) x 100 = 36,47%
The new markup rate will be 36,47% if the sale price is reduced to €85 including tax.
5.
Price reduction could expand the target audience, but it can also alter the perception of the brand as a luxury product. An effective communication strategy must be implemented to maintain the brand image.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Electronics For All
States :
The company Électronique Pour Tous specializes in selling high-tech gadgets. Currently, a tablet is purchased at a cost of €120 and sold for €200 including tax. The company wants to increase its margins in order to improve profitability.
Work to do :
- Calculate the selling price excluding VAT of the tablet.
- Determine the unit margin obtained per sale of each tablet.
- What is the margin rate associated with this tablet?
- If the purchase cost drops to €100, what happens to the margin rate with a sale price of €200 including tax?
- Consider the potential benefits and drawbacks of lower purchase cost on perceived quality.
Proposed correction:
1.
The selling price excluding VAT is determined by: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT rate of 20%, €200 ÷ 1,20 = €166,67
The selling price of the tablet excluding VAT is €166,67.
2.
The unit margin is: Unit margin = PV HT – PA HT.
Unit margin = €166,67 – €120 = €46,67
The unit margin per tablet is €46,67.
3.
The margin rate is calculated as: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€166,67 – €120) ÷ €120) x 100 = 38,89%
The margin rate for this tablet is 38,89%.
4.
With a purchase cost of €100, the new margin rate is:
Margin rate = ((€166,67 – €100) ÷ €100) x 100 = 66,67%
By lowering the purchase cost to €100, the margin rate increases to 66,67%.
5.
Reducing purchasing costs can increase profitability, but it can compromise the perceived quality of the product if the manufacturer reduces the quality of components. This requires rigorous quality monitoring to avoid possible negative repercussions on the brand reputation.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: To Orchard Fruits
States :
Aux Fruits du Verger, a short-circuit organic fruit and vegetable store, sells apples from organic farming. The purchase cost of a kilo of apples is €2 and they are resold at €3,50 per kilo including tax. The store seeks to adjust its margins to support its ethical mission while remaining economically viable.
Work to do :
- Determine the selling price excluding tax per kilo of apples.
- Calculate the unit margin for each kilo of apples sold.
- What is the margin rate for apples?
- If the VAT rate were reduced to 5,5%, what would the new selling price excluding VAT be?
- Question the choice between profitability and ethical commitments in view of a possible price adjustment.
Proposed correction:
1.
The selling price excluding VAT is obtained by: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT rate of 5,5%, €3,50 ÷ 1,055 = €3,31
The selling price excluding tax per kilo of apples is €3,31.
2.
The unit margin is: Unit margin = PV HT – PA HT.
Unit margin = €3,31 – €2 = €1,31
The unit margin for each kilo of apples is €1,31.
3.
The margin rate is determined by: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€3,31 – €2) ÷ €2) x 100 = 65,5%
The margin rate for apples is 65,5%.
4.
In the event of a reduction in VAT to 5,5%, the calculated selling price excluding VAT would be:
Selling price excluding VAT = €3,50 ÷ €1,055 = €3,31
The new selling price excluding VAT would therefore be €3,31 at a VAT rate of 5,5%.
5.
The decision requires considering financial balance while maintaining access to organic products for all. Ethical pricing can help build customer loyalty while supporting healthy farming practices, although it may reduce unit margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Ultra Sports Equipment
States :
Ultra Sports Equipment, a dynamic store, offers a wide range of sportswear. A pair of running pants is purchased for €25 and resold for €60 including tax. The manager wants to evaluate his margins in order to determine whether an investment in the digital market is relevant.
Work to do :
- Find the selling price excluding VAT of each pair of pants.
- Calculate the unit margin generated by the sale of a pair of pants.
- What is the current margin rate on pants?
- If the company is considering a sales price of €70 including VAT, what will the new markup rate be?
- Consider the impact of this pricing change on the overall digital marketing strategy.
Proposed correction:
1.
The selling price excluding VAT is given by: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT rate of 20%, €60 ÷ 1,20 = €50
The selling price excluding tax of a pair of trousers is €50.
2.
The unit margin is calculated by: Unit margin = PV HT – PA HT.
Unit margin = €50 – €25 = €25
The unit margin generated by each pair of pants sold is €25.
3.
The margin rate is calculated as follows: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€50 – €25) ÷ €25) x 100 = 100%
The margin rate for pants is 100%.
4.
For a sale price of €70 including tax, the new PV excluding tax: €70 ÷ 1,20 = €58,33
New markup rate: Markup rate = ((€58,33 – €25) ÷ €58,33) x 100 = 57,14%
The new markup rate would be 57,14%.
5.
Increasing the selling price can fund more digital marketing activities, but may also require a new communications strategy to justify the increase and attract a broader customer base.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Bistrot Bon Gourmand
States :
Bistrot Bon Gourmand, located in the heart of Paris, is known for its authentic bistro cuisine. The purchase price of a bottle of wine is €8 and it is sold for €25 including tax. The owner wants to check the consistency of his margins before expanding his wine list.
Work to do :
- Calculate the selling price excluding tax of the bottle of wine.
- Determine the unit margin achieved per bottle.
- What is the current margin rate applied to bottles of wine?
- If the purchase price drops to €7 and the sale price remains unchanged, what is the new margin rate?
- Consider the potential effects on the bistro's image of increasing the wine selection.
Proposed correction:
1.
Selling price excluding VAT: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT of 5,5%, €25 ÷ 1,055 = €23,70
The selling price excluding tax of the bottle of wine is €23,70.
2.
Unit margin: Unit margin = PV HT – PA HT.
Unit margin = €23,70 – €8 = €15,70
The unit margin per bottle is €15,70.
3.
Margin rate: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€23,70 – €8) ÷ €8) x 100 = 196,25%
The current margin rate is 196,25%.
4.
Margin rate with PA at €7:
Margin rate = ((€23,70 – €7) ÷ €7) x 100 = 238,57%
With the decrease in the purchase cost, the margin rate is 238,57%.
5.
An increased wine selection may enrich the bistro's offering, adding to its overall culinary appeal, but it may also require a price adjustment consistent with the restaurant's positioning.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Mathilde's Gardens
States :
Les Jardins de Mathilde offers a wide range of indoor plants. Currently, a plant costs €6 to buy and is resold at €15 including tax. The company is considering revising its pricing strategy to adapt to the increasing demand for ecological products.
Work to do :
- Calculate the selling price excluding tax of a plant.
- Determine the unit margin per plant sold.
- What markup rate does Les Jardins de Mathilde apply for each plant?
- If the purchase cost increases by €1, how does this affect the unit margin?
- Consider the strategic implications of increasing the selling price in terms of green positioning.
Proposed correction:
1.
The selling price excluding VAT: Selling price excluding VAT = Selling price including VAT ÷ (1 + VAT rate).
With a VAT of 20%, €15 ÷ 1,20 = €12,50
The selling price excluding tax per plant is €12,50.
2.
Unit margin: Unit margin = PV HT – PA HT.
Unit margin = €12,50 – €6 = €6,50
The unit margin per plant sold is €6,50.
3.
Markup rate: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Brand rate = ((€12,50 – €6) ÷ €12,50) x 100 = 52%
The markup rate applied for each plant is 52%.
4.
If the purchase cost increases by €1, the new PA excluding tax = €7
Unit margin = €12,50 – €7 = €5,50
The unit margin falls to €5,50.
5.
The price increase can reinforce the green positioning if it is justified by sustainable and environmentally friendly practices, thus attracting an ecologically conscious clientele.
Formulas Used:
| Title | Formulas |
|---|---|
| Selling price excluding tax | Selling price including VAT ÷ (1 + VAT rate) |
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: The Bookstore of the Future
States :
La Librairie d'Avenir is an online store specializing in the sale of digital books. An e-book is purchased for a cost of €8 and sold at €20 excluding VAT. The bookstore wants to optimize its offers and study the impact of different pricing strategies.
Work to do :
- Calculate the unit margin per e-book sold.
- What is the proposed margin rate for this e-book?
- Determine the markup rate associated with the sale of each e-book.
- If the bookstore decides to lower the selling price excluding tax to €18, what happens to the margin rate?
- Analyze the effects of such a price reduction on the bookstore's sales and competitiveness.
Proposed correction:
1.
Unit margin: Unit margin = PV HT – PA HT.
Unit margin = €20 – €8 = €12
The unit margin for each e-book sold is €12.
2.
Margin rate: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((€20 – €8) ÷ €8) x 100 = 150%
The margin rate for this e-book is 150%.
3.
Markup rate: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Brand rate = ((€20 – €8) ÷ €20) x 100 = 60%
The markup rate for the e-book is 60%.
4.
For a new selling price excluding tax of €18, the margin rate is:
Margin rate = ((€18 – €8) ÷ €8) x 100 = 125%
With a selling price of €18, the margin rate becomes 125%.
5.
Reducing price may increase sales through better market competitiveness, but it will also increase pressure on margins, possibly requiring greater sales volume to maintain profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |