Summary
Application: Bakery Aux Délices
States :
The Aux Délices bakery wants to analyze the profitability of its sales of traditional breads. The purchase price excluding tax of a loaf is €1,20, and it is sold at a price of €2,00 excluding tax. The bakery sells an average of 500 loaves per week.
Work to do :
- Calculate the unit margin for the sale of a loaf of bread.
- Determine the margin rate on the loaf of bread.
- Calculate the overall weekly margin generated by sales of loaves of bread.
- Estimate the number of loaves the bakery must sell to achieve an overall margin of €1000.
- Analyze the strategic implications if the purchase price increases by €0,10 per unit, while maintaining the same selling price.
Proposed correction:
-
The unit margin is the difference between the selling price excluding VAT and the purchasing price excluding VAT.
Unit margin = €2,00 – €1,20 = €0,80.
Each loaf of bread generates a margin of €0,80. -
The margin rate is calculated using the following formula:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((2,00 – 1,20) ÷ 1,20) x 100 = 66,67%.
The margin rate on each loaf is 66,67%. -
The overall weekly margin is obtained by multiplying the unit margin by the quantity sold.
Overall margin = 0,80 x 500 = €400.
The bakery generates a margin of €400 per week.
-
To achieve an overall margin of €1000, we use the formula:
Quantity required = Total margin required ÷ Unit margin.
Quantity needed = 1000 ÷ 0,80 = 1250.
The bakery needs to sell 1250 loaves to reach a margin of €1000. -
If the purchase price increases by €0,10, the new purchase price is €1,30.
The new unit margin will be: €2,00 – €1,30 = €0,70.
This reduces unit margin, affecting the break-even point and potentially requiring a revised pricing strategy or cost reduction to maintain profitability.
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 |
| Quantity needed | Overall margin required ÷ Unit margin |
Application: TechnoSound
States :
TechnoSound, a company specializing in high-quality audio headphones, wants to optimize its sales prices. The purchase price excluding tax of a headset is €50, and it is sold at €80 excluding tax.
Work to do :
- Calculate the unit margin on a helmet.
- Determine the markup rate of this product.
- If during a special sale the sale price is reduced to €70, calculate the new unit margin.
- Estimate how many helmets need to be sold to generate €5000 of tangential margin at €70 of selling price.
- Discuss the implications for the business if the purchase price increases by 10%.
Proposed correction:
-
The unit margin is calculated as follows:
Unit margin = €80 – €50 = €30.
Each helmet generates a margin of €30. -
The markup rate is calculated using the following formula:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((80 – 50) ÷ 80) x 100 = 37,5%.
The helmet enjoys a brand rate of 37,5%. -
New unit margin = Reduced selling price – Purchase price.
New unit margin = €70 – €50 = €20.
The unit margin drops to €20 during the promotion.
-
To reach a margin of €5000 at a sale price of €70:
Quantity = 5000 ÷ 20 = 250.
TechnoSound has to sell 250 headphones for a total margin of €5000. -
If the purchase price increases by 10%, the new purchase price is €55 (€50 x 1,10).
The unit margin would be €80 – €55 = €25 (or even €15 with the reduced price).
An increase in production costs would require a strategic re-evaluation of pricing or sourcing policy to maintain profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Unit margin | PV HT – PA HT |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
| Quantity needed | Overall margin required ÷ Unit margin |
Application: EcoGarden
States :
EcoJardin, a company dedicated to the sale of ecological flower pots, seeks to improve its understanding of the cost of storage. Annual requests amount to 24000 units, with an order cost of €100 per order and a unit storage cost of €0,50.
Work to do :
- Calculate the Economic Order Quantity (EOQ) for EcoJardin.
- Determine the total number of orders per year based on the QEC.
- Consider a 10% reduction in storage cost, calculate the new QEC.
- Evaluate the financial implication for EcoJardin if the order cost decreases by €10.
- Discuss the benefits of optimizing QEC for a green business.
Proposed correction:
-
The QEC is calculated by the following formula:
QEC = ?((2 x Annual demand x Ordering cost) ÷ Storage cost).
QEC = ?((2 x 24000 x 100) ÷ 0,50) = ?(4800000 ÷ 0,50) = ?9600000.
QEC = 3099,61 units, or approximately 3100 units for practical purposes. -
Number of orders per year = Annual demand ÷ QEC.
Number of orders = 24000 ÷ 3100 = 7,74, or approximately 8 orders. -
New QEC with a 10% reduction in storage costs (new cost: €0,45):
QEC = ?((2 x 24000 x 100) ÷ 0,45) = ?10666667.
QEC = 3264,38 units, so approximately 3264 units.
-
With a reduction of €10 in the cost of the order, i.e. a cost of €90:
QEC = ?((2 x 24000 x 90) ÷ 0,50) = ?(4320000 ÷ 0,50) = ?8640000.
QEC = 2939,82 units, or approximately 2940 units.
This means that the company orders more frequently in smaller quantities. -
Optimizing QEC helps reduce storage costs and risks related to product immobilization, which is essential for an ecological company to ensure sustainable and economical management of resources.
Formulas Used:
| Title | Formulas |
|---|---|
| QEC | ?((2 x Annual Demand x Ordering Cost) ÷ Storage Cost) |
| Number of orders | Annual request ÷ QEC |
Application: EliteMode
States :
ModeÉlite, an online fashion company, wants to analyze its cost structure for its latest collection of decorative green plants. The purchase cost per unit is €15, and the selling price excluding VAT is €35. The company estimates selling 1000 units.
Work to do :
- Calculate the unit margin on each plant sold by ModeÉlite.
- Determine the margin rate for this collection.
- Establish the overall margin expected from these sales.
- If a 20% discount on the selling price is offered, calculate the new unit margin rate.
- Consider the implications of a sudden increase in purchasing cost of €5 per unit.
Proposed correction:
-
The unit margin is:
Unit margin = €35 – €15 = €20.
Each unit sold generates a margin of €20. -
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((35 – 15) ÷ 15) x 100 = 133,33%.
The margin rate for this collection is 133,33%. -
The expected overall margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 20 x 1000 = €20000.
ModeÉlite hopes to generate a total margin of €20000.
-
If a 20% discount is applied, the new sale price is:
New PV = 35 x (1 – 0,20) = €28.
New unit margin = €28 – €15 = €13.
New margin rate = ((28 – 15) ÷ 15) x 100 = 86,67%.
A discount results in a margin rate of 86,67% per unit. -
With an increase in the purchase cost of €5, the new cost is €20.
The unit margin is then €35 – €20 = €15, thus reducing profitability.
ModeÉlite may have to review its pricing strategy or negotiations with suppliers.
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 |
| New PV | Initial PV x (1 – Discount) |
Application: RestoGourmet
States :
RestoGourmet offers a variety of high-end dishes to its customers. The cost of preparing a dish is €12, and it is sold at €40 excluding VAT. Currently, the establishment sells 200 dishes per week.
Work to do :
- Calculate the unit margin per dish sold.
- Determine the markup rate of this dish.
- Estimate the weekly margin obtained from the sale of dishes.
- If the preparation cost increases by 50%, calculate the new impact on the unit margin.
- Analyze how RestoGourmet could adapt its prices to maintain margins in the event of continued cost increases.
Proposed correction:
-
The unit margin per dish is:
Unit margin = €40 – €12 = €28.
Each dish generates a margin of €28. -
The markup rate is determined as follows:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((40 – 12) ÷ 40) x 100 = 70%.
The dish has a brand rate of 70%. -
The weekly margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 28 x 200 = €5600.
RestoGourmet generates a total margin of €5600 per week.
-
With a 50% increase in preparation cost:
New cost = €12 x 1,50 = €18.
New unit margin = €40 – €18 = €22.
The increase in costs reduces the margin to €22 per dish. -
To maintain margins, RestoGourmet could adjust its prices based on new profitability calculations or diversify its suppliers to reduce costs. The option of reformulating menus or offering combined offers with a higher margin can also be considered.
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 |
| New cost | Initial PA x Adjustment |
Application: FitnessPro
States :
FitnessPro, a distributor of fitness equipment, wants to readjust its prices after analyzing the cost structure. The purchase price excluding VAT of a treadmill is €400, sold at €800 excluding VAT. The company plans to sell 300 units during the year.
Work to do :
- Calculate the unit margin of each treadmill.
- Determine the margin rate achieved by FitnessPro.
- Calculate the expected annual overall margin.
- How would the margin rate be affected if the selling price increased by 10%?
- Suggest adjustments in FitnessPro's strategy to improve its margins.
Proposed correction:
-
The unit margin per treadmill is:
Unit margin = €800 – €400 = €400.
Each sale brings in a margin of €400. -
The margin rate is calculated by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((800 – 400) ÷ 400) x 100 = 100%.
FitnessPro achieves a 100% margin rate. -
The annual overall margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 400 x 300 = €120000.
FitnessPro expects a total annual margin of €120000.
-
If the selling price increases by 10%, the new price will be:
New PV = 800 x 1,10 = €880.
New unit margin = €880 – €400 = €480.
New margin rate = ((880 – 400) ÷ 400) x 100 = 120%.
The price increase increases the margin rate to 120%. -
To improve its margins, FitnessPro could invest in increasing the perceived quality of its products, thereby justifying a higher price or by expanding the range of associated services (such as free delivery and installation). Reducing costs by optimizing the supply chain or negotiating better terms with suppliers could also be effective.
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 |
| New PV | Initial PV x Adjustment |
Application: ArtisAnalytik
States :
ArtisAnalytik, a company specializing in market analysis, charges its services at €500 excluding VAT per study, with a service provision cost of €300 per study. The company carries out 150 studies per year.
Work to do :
- Evaluate the unit margin achieved by ArtisAnalytik on each study.
- Calculate the margin rate on these services.
- What is the overall annual margin achieved by ArtisAnalytik?
- How many studies need to be done to obtain a total margin of €90000?
- Consider the impact on company margins if costs increase by 20%.
Proposed correction:
-
The unit margin is:
Unit margin = €500 – €300 = €200.
Each study generates a margin of €200. -
The margin rate is determined by:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((500 – 300) ÷ 300) x 100 = 66,67%.
The margin rate per study is 66,67%. -
The annual overall margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 200 x 150 = €30000.
ArtisAnalytik generates a total margin of €30000 per year.
-
To obtain a total margin of €90000, we multiply:
Quantity needed = 90000 ÷ 200 = 450.
ArtisAnalytik must carry out 450 studies to achieve this margin. -
With a 20% increase in costs, the new cost is €360 (€300 x 1,20).
New unit margin = €500 – €360 = €140.
Increasing costs reduce margin, implying the need for a revised pricing strategy or improved operational efficiency to maintain profitability.
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 |
| Quantity needed | Overall margin required ÷ Unit margin |
Application: GreenTech Innovations
States :
GreenTech Innovations, a provider of renewable energy solutions, structures its offers with a production cost of €1200 per solution sold at a price of €3000 excluding VAT. The company wants to evaluate its profitability potential for 400 solutions sold annually.
Work to do :
- Calculate the unit margin per energy solution.
- Establish the margin rate for these sales.
- Determine the overall annual margin achieved by GreenTech Innovations.
- With a 10% decrease in production costs, recalculate the new unit margin.
- Discuss the strategic implications of massive cost reductions in the renewable energy sector.
Proposed correction:
-
The unit margin is:
Unit margin = €3000 – €1200 = €1800.
Each solution sold offers a margin of €1800. -
The margin rate is:
Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100.
Margin rate = ((3000 – 1200) ÷ 1200) x 100 = 150%.
The margin on each solution is 150%. -
The annual overall margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 1800 x 400 = €720000.
The company achieves an annual margin of €720000.
-
With a 10% reduction in production costs, the new cost is €1080 (€1200 x 0,90).
New unit margin = €3000 – €1080 = €1920.
Lower costs improve unit margin. -
Cost reduction can allow GreenTech to lower its prices to gain competitiveness or increase its margins, aligning its pricing strategies with its expansion objectives while effectively contributing to a greener energy transition.
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 |
| New cost | Initial PA x Cost Reduction |
Application: Bellevue Soap Factory
States :
Savonnerie Bellevue manufactures and sells artisanal soaps. The production cost of a soap is €2, and the selling price excluding tax is €6. The company estimates that it will sell 5000 soaps each month.
Work to do :
- Calculate the unit margin on each soap sold.
- Determine the brand rate for each soap.
- What total monthly margin can Savonnerie Bellevue expect?
- If the production cost decreases by €0,50 per soap, calculate the new unit margin.
- Analyze how the company could strengthen its market position through cost reduction.
Proposed correction:
-
The unit margin is:
Unit margin = €6 – €2 = €4.
Each soap generates a margin of €4. -
The markup rate is calculated by:
Mark rate = ((PV HT – PA HT) ÷ PV HT) x 100.
Markup rate = ((6 – 2) ÷ 6) x 100 = 66,67%.
The soap enjoys a brand rate of 66,67%. -
The total monthly margin is:
Overall margin = Unit margin x Quantity sold.
Overall margin = 4 x 5000 = €20000.
The company can expect a total monthly margin of €20000.
-
With a reduction of €0,50 in production costs:
New production cost = €2 – €0,50 = €1,50.
New unit margin = €6 – €1,50 = €4,50.
The reduction in production costs improves the margin to €4,50. -
By reducing costs, Savonnerie Bellevue could either pass on some of the savings to its customers to boost sales, or increase its margins to reinvest in developing new products or new market strategies.
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 |
| New cost | Initial PA – Cost Reduction |