Summary
Application: Organic Delights
States :
Les Délices Bio is a small company specializing in the production of artisanal jams. Currently, the company is looking to adjust its pricing and inventory management policies to maximize its profitability. Below are data regarding its activities:
- Unit purchase price excluding tax for a jar of jam: €3,00
- Unit sale price excluding VAT: €5,00
- Quantity sold: 1 pots
- Annual demand: 3 pots
- Cost per order: €50
- Annual storage cost per pot: €0,40
Work to do :
- Calculate the unit margin made per jar of jam.
- Determine the markup rate of the jam jars sold.
- Calculate the overall margin made by Les Délices Bio on the pots sold.
- Evaluate the QEC (Economic Order Quantity) to optimize stocks.
- Express an analysis on the interest of optimizing the stock level for the company.
Proposed correction:
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The unit margin is calculated by the difference between the selling price excluding VAT and the purchasing price excluding VAT. We apply the formula: Unit margin = PV excluding VAT – PA excluding VAT. Therefore, Unit margin = €5,00 – €3,00 = €2,00. Each pot sold generates a margin of €2,00.
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The markup rate is determined from the formula: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. Replacing, Markup rate = ((€5,00 – €3,00) ÷ €5,00) x 100 = 40%. The markup rate for jam jars is 40%.
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To get the overall margin, use Overall Margin = Unit Margin x Quantity Sold. So, Overall Margin = €2,00 x €1 = €200. The company makes an overall margin of €2 on the sale of the pots.
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The Economic Order Quantity (EOQ) is given by the formula: EOQ = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Applying the values, EOQ = ?((2 x 3 x 600) ÷ 50) = ?(0,40 ÷ 360) = 000 jars (rounded). Optimizing the order to approximately 0,40 jars will minimize the total ordering and storage costs.
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Optimizing inventory levels helps reduce storage costs while ensuring sufficient product availability, which can improve the company's profitability in the long term.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: TechnoGadgets
States :
TechnoGadgets is an innovative company in the field of technology accessories. It is working on accurately assessing its profitability in order to improve its margins. Here are some financial details of the company's flagship item:
- Unit purchase price excluding VAT of a gadget: €25,00
- Unit sale price excluding VAT: €45,00
- Quantity sold: 500 gadgets
- Expected annual demand: 2 gadgets
- Cost of ordering: €120
- Storage cost per unit per year: €0,80
Work to do :
- Calculate the unit margin for each gadget sold.
- Establish the margin rate achieved on the gadget.
- Evaluate the overall margin obtained on sales of the gadgets.
- Calculate the QEC (Economic Order Quantity) to minimize costs.
- Discuss the implications for TechnoGadgets of having a high unit margin.
Proposed correction:
-
The unit margin is defined by the difference between the sale price and the purchase price. It is calculated as follows: Unit margin = PV excluding tax – PA excluding tax. Therefore, Unit margin = €45,00 – €25,00 = €20,00. Unified on a gadget generates €20,00 of margin.
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To obtain the margin rate, use: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. Applying our data, Margin rate = ((€45,00 – €25,00) ÷ €25,00) x 100 = 80%. The margin rate is 80%.
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The overall margin is calculated by: Overall margin = Unit margin x quantity sold. Which gives: Overall margin = €20,00 x 500 = €10. TechnoGadgets obtains an overall margin of €000.
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The QEC is determined by: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Substituting, QEC = ?((2 x 2 x 000) ÷ 120) = ?(0,80 ÷ 480) = 000 gadgets (rounded). The company should order approximately 0,80 gadgets.
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A high unit margin represents a strong profitability potential per product sold. It also allows TechnoGadgets to invest in developing new products or improving existing ones to maintain a competitive advantage.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: Modes&Style
States :
Modes&Style, a modern company specializing in trendy clothing, is looking to refine its pricing strategy to increase its competitive advantage. Here is some updated financial data for a batch of jackets:
- Unit purchase price excluding tax for a jacket: €40,00
- Unit sale price excluding VAT: €80,00
- Quantity sold: 300 jackets
- Projected annual demand: 1 jackets
- Order cost: €200
- Annual storage cost per jacket: €1,00
Work to do :
- Determine the unit margin on a jacket sold.
- Calculate the markup rate applied to a jacket.
- Evaluate the overall margin generated by jacket sales.
- Identify QEC for better inventory management.
- Analyze the importance for Modes&Style to adapt their strategies based on these results.
Proposed correction:
-
The unit margin is determined using the formula: Unit margin = PV HT – PA HT. By performing the calculation, Unit margin = €80,00 – €40,00 = €40,00. Each jacket generates a margin of €40,00.
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The markup rate is found by: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. Thus, Markup rate = ((€80,00 – €40,00) ÷ €80,00) x 100 = 50%. The markup rate on jackets is 50%.
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To find the overall margin, use: Overall Margin = Unit Margin x Quantity Sold. Hence, Overall Margin = €40,00 x 300 = €12. The company makes an overall margin of €000 on its jackets sold.
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The calculation of the QEC is as follows: QEC = ?((2 x Annual Demand x Order Cost) ÷ Storage Cost). Substituting, QEC = ?((2 x 1 x 500) ÷ 200) = ?(1,00 ÷ 600) = 000 jackets (rounded). Modes&Style should order approximately 1,00 jackets.
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Adapting their strategy based on these results helps Modes&Style maintain optimal inventory management, reduce costs while maximizing profitability and remain competitive in the market.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: BioSanté
States :
BioSanté, a leading company in the distribution of natural health products, evaluates its margins and its supply to improve its financial performance. Below is information relating to a food supplement sold:
- Unit purchase price excluding VAT: €12,00
- Unit sale price excluding VAT: €20,00
- Quantity sold: 800 units
- Annual demand forecast: 2 units
- Acquisition cost per order: €75
- Annual storage cost per unit: €0,50
Work to do :
- Calculate the unit margin obtained for each unit sold.
- Determine the margin rate associated with this dietary supplement.
- Estimate the overall margin made on the sale of supplements.
- Evaluate QEC to optimize replenishment.
- Consider the opportunities for BioSanté arising from financial analyses.
Proposed correction:
-
The unit margin can be calculated as follows: Unit margin = PV HT – PA HT. Therefore, Unit margin = €20,00 – €12,00 = €8,00. BioSanté earns a margin of €8,00 per unit.
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The margin rate is calculated as: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. Which gives: Margin rate = ((€20,00 – €12,00) ÷ €12,00) x 100 = 66,67% (rounded). The margin rate is 66,67%.
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The overall margin is: Overall margin = Unit margin x quantity sold. Result: Overall margin = €8,00 x €800 = €6. BioSanté achieves an overall margin of €400.
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For QEC, use: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Applying, QEC = ?((2 x 2 x 400) ÷ 75) = ?(0,50 ÷ 360) = 000 units (rounded). Order approximately 0,50 units to optimize cost.
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These analyses indicate opportunities to increase supply chain efficiency and maximize profitability. Significant savings can be achieved through optimized orders.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: EcoMaison
States :
EcoMaison, specialized in ecological home equipment, works on optimizing its profitability by product. Below are the financial details of a solar panel sold:
- Unit purchase price excluding VAT: €150,00
- Unit sale price excluding VAT: €299,00
- Quantity sold: 200 units
- Annual demand forecast: 1 units
- Cost per order: €100
- Annual storage cost per unit: €5,00
Work to do :
- Evaluate the unit margin on solar panels.
- Calculate the markup rate of the panels sold.
- Calculate the overall margin achieved for the sales period.
- Determine the QEC to manage supply effectively.
- Discuss the decisions that EcoMaison can make based on this economic data.
Proposed correction:
-
The unit margin is calculated using: Unit margin = PV HT – PA HT. Result: Unit margin = €299,00 – €150,00 = €149,00. A unit margin of €149,00 is obtained per panel.
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The markup rate is obtained by: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. By calculating: Markup rate = ((€299,00 – €150,00) ÷ €299,00) x 100 = 49,83%. The markup rate for solar panels is 49,83%.
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The overall margin is found by: Overall margin = Unit margin x quantity sold. Which gives: Overall margin = €149,00 x 200 = €29. A total margin of €800 is obtained for sales.
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The QEC is formulated as follows: QEC = ?((2 x Annual Demand x Order Cost) ÷ Storage Cost). Applied to our case: QEC = ?((2 x 1 x 000) ÷ 100) = ?(5 ÷ 200) = 000 units. EcoMaison should order approximately 5 units.
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EcoMaison can invest in cost reduction or unit margin improvement to further benefit from these significant margins. Choosing an optimized sourcing strategy is crucial for future competitiveness.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: LuxAir
States :
LuxAir, an air purifier manufacturing company, wants to optimize its business performance by studying different financial indicators. Here are the key data for their product:
- Unit purchase price excluding VAT: €85,00
- Unit sale price excluding VAT: €160,00
- Quantity sold: 600 units
- Anticipated annual demand: 2 units
- Cost per order: €80
- Annual storage cost per unit: €2,00
Work to do :
- Calculate the unit margin for each air purifier sold.
- Determine the margin rate applied to this product.
- Calculate the overall margin obtained from the sales made.
- Establish the QEC to optimize order management.
- Analyze the impact that these financial results may have on LuxAir's debt repayment strategy.
Proposed correction:
-
The unit margin is defined by the formula: Unit margin = PV HT – PA HT. By substituting, Unit margin = €160,00 – €85,00 = €75,00. LuxAir achieves a margin of €75,00 per unit.
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For the margin rate, use: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. This gives: Margin rate = ((€160,00 – €85,00) ÷ €85,00) x 100 = 88,24% (rounded). The margin rate is 88,24%.
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The overall margin is calculated by: Overall margin = Unit margin x quantity sold. Result: Overall margin = €75,00 x 600 = €45. A total margin of €000 is obtained on air purifiers.
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The QEC is given by: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Calculating, QEC = ?((2 x 2 x 000) ÷ 80) = ?(2 ÷ 320) = 000 units. LuxAir is expected to order approximately 2 units.
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The high margins provide LuxAir with additional funds to quickly repay its debts or reinvest in the business to improve competitiveness and product innovation.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: GreenFurniture
States :
GreenFurniture, which specializes in eco-friendly furniture, evaluates its financial parameters to ensure the efficiency of its supply chain. Here are financial elements on a range of chairs:
- Unit purchase price excluding VAT: €22,00
- Unit sale price excluding VAT: €50,00
- Quantity sold: 400 chairs
- Estimated annual demand: 1 chairs
- Cost per order: €60
- Annual storage cost per unit: €1,20
Work to do :
- Identify the unit margin on chairs sold.
- Calculate the markup rate applied to this product range.
- Evaluate the overall margin made on all chair sales.
- Calculate QEC for optimized inventory management.
- Consider what financial sustainability strategies GreenFurniture could adopt based on the results obtained.
Proposed correction:
-
The unit margin is obtained by: Unit margin = PV HT – PA HT. By applying, Unit margin = €50,00 – €22,00 = €28,00. Each chair brings a margin of €28,00.
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The markup rate is calculated by: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. Which gives: Markup rate = ((€50,00 – €22,00) ÷ €50,00) x 100 = 56%. The markup rate is 56%.
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The overall margin is calculated as follows: Overall margin = Unit margin x quantity sold. Thus, Overall margin = €28,00 x 400 = €11. The overall margin achieved is €200.
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The QEC is formulated as: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Substituting, QEC = ?((2 x 1 x 600) ÷ 60) = ?(1,20 ÷ 192) = 000 chairs. GreenFurniture is expected to order approximately 1,20 chairs.
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The results encourage GreenFurniture to continue investing in eco-design to improve margins while reducing costs in the long term. Decisions on future investments can also be informed by a clear understanding of the benefits of their products.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: NutriSnack
States :
NutriSnack, in the healthy snacks sector, is studying its profitability indicators to maintain its growth. Here is some data concerning its range of energy bars:
- Unit purchase price excluding VAT: €1,50
- Unit sale price excluding VAT: €3,00
- Quantity sold: 4 bars
- Expected annual demand: 12 bars
- Cost per order: €300
- Annual storage cost per unit: €0,10
Work to do :
- Determine the unit margin per energy bar sold.
- Calculate the margin rate applied to this product.
- Estimate the overall margin generated by bar sales.
- Identify QEC to minimize inventory and ordering costs.
- Analyze how NutriSnack can use these results to improve its future offerings.
Proposed correction:
-
The unit margin is found via: Unit margin = PV HT – PA HT. We obtain: Unit margin = €3,00 – €1,50 = €1,50. Each bar provides a margin of €1,50.
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The margin rate is calculated as follows: Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100. Which gives: Margin rate = ((€3,00 – €1,50) ÷ €1,50) x 100 = 100%. The margin rate is 100%.
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The overall margin uses the formula: Overall margin = Unit margin x quantity sold. Result: Overall margin = €1,50 x 4 = €000. The overall margin is €6.
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The formula for QEC is: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost). Applied, QEC = ?((2 x 12 x 000) ÷ 300) = ?(0,10 ÷ 7) = 200 bars. NutriSnack should order approximately 000 bars at a time.
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NutriSnack could leverage these findings to create volume offerings, attract new customers, and leverage cost economies of scale. These margins and savings motivate the company to continue innovating its product line.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
Application: PureWaves
States :
PureWaves, a water sports equipment company, wants to optimize its margins and purchasing processes to achieve greater profitability. Here is the data for paddle boards:
- Unit purchase price excluding VAT: €110,00
- Unit sale price excluding VAT: €220,00
- Quantity sold: 150 units
- Estimated annual demand: 600 units
- Order cost: €150
- Annual storage cost per unit: €3,00
Work to do :
- Calculate the unit margin made by PureWaves for each paddle board.
- Determine the markup rate on these boards.
- Evaluate the overall margin generated by the sale of the boards.
- Evaluate QEC to optimize inventory and procurement costs.
- Discuss strategies that PureWaves could adopt based on this data to access new markets.
Proposed correction:
-
The unit margin is obtained as follows: Unit margin = PV HT – PA HT. By calculating: Unit margin = €220,00 – €110,00 = €110,00. PureWaves earns a unit margin of €110,00 per board.
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The markup rate is calculated by: Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100. Therefore, Markup rate = ((€220,00 – €110,00) ÷ €220,00) x 100 = 50%. The markup rate is 50%.
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The overall margin is given by: Overall margin = Unit margin x quantity sold. Which gives: Overall margin = €110,00 x 150 = €16. An overall margin of €500 is achieved.
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For the QEC, the formula is: QEC = ?((2 x Annual Demand x Ordering Cost) ÷ Inventory Cost). Substituting: QEC = ?((2 x 600 x 150) ÷ 3) = ?(180 ÷ 000) = 3 units (approximately). PureWaves should order approximately 245 units.
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These margins and cost savings can allow PureWaves to reduce prices or increase product offerings to better penetrate new markets. By exploiting economies of scale and optimal inventory management, it can strengthen its competitiveness.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Overall margin | Unit margin x quantity sold |
| Economic Order Quantity | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |