Welcome to this article on exercises on business calculations and more specifically on examples of calculations of the commercial margin. You will find here no less than 11 detailed corrected management exercises on commercial calculations for Operational Management.
At the end of this article, you will know how to perform examples of trade margin calculations in business calculations without any worries.
In this section:
- Example 1: EcoBoutique Company
- Example 2: MarketGrowth Company
- Example 3: EcoWear Company
- Example 4: GourmetDelight Company
- Example 5: EnergieClim Company
- Example 6: Zephyr & Co Distributor
- Example 7: FleursDuJour Company
- Example 8: The Little Gourmand
- Example 9: Luminous Jewelry
- Example 10: Bocage Cheese Factory
- Example 11: Manon's shop
Example 1: EcoBoutique Company
Trade margin is a key indicator for businesses, especially those like EcoBoutique, that specialize in selling sustainable products. Understanding how to calculate and analyze trade margin can help EcoBoutique optimize its selling prices and purchasing costs. To learn more about this topic, check out our article on calculation of the commercial margin in percentage and explore other helpful resources like Inventory management exercises with detailed answers for a comprehensive understanding of operational management.
States :
EcoBoutique, a retail company focused on sustainable products, is looking to analyze its sales performance. The company has sold various items over the past month. Here are some key data points:
- Total purchase price of goods: €120
- Total selling price of goods: €200
- Additional purchase costs: €5
- Discounts obtained on purchases: €3
Work to do :
- Calculate the gross profit margin of EcoBoutique.
- Determine the net purchase cost of goods sold.
- Calculate the commercial margin rate.
- Analyze the impact of incidental costs and discounts on the commercial margin.
- Propose strategies to improve EcoBoutique's sales margin.
Proposed correction
- Calculation of gross margin : Gross margin = Total selling price – Total purchase cost.
Gross sales margin = €200 – €000 = €120 - Net purchase cost of goods sold : Net purchase cost = Total purchase cost + Additional purchase costs – Discounts obtained.
Net purchase cost = €120 + €000 – €5 = €000 - Calculation of the commercial margin rate : Commercial margin rate = (Gross commercial margin / Total selling price) x 100.
Margin rate = (€80 / €000) x 100 = 40% - Impact of incidental charges and discounts : Incidental costs increase the net purchase cost, thereby reducing the sales margin. Conversely, discounts obtained decrease the net purchase cost, increasing the sales margin.
- Strategies for improvement :
- Negotiate better purchasing terms to reduce the net purchase cost.
- Increase selling prices without significantly affecting demand.
- Optimize inventory management to reduce incidental costs.
Formulas used
| Formulas | Description |
|---|---|
| Gross sales margin = Total selling price – Total purchase cost | Calculation of gross margin |
| Net purchase cost = Total purchase cost + Additional purchase costs – Discounts obtained | Determination of net purchase cost |
| Sales margin rate = (Gross sales margin / Total sales price) * 100 | Calculation of the commercial margin rate |
| Impact of fees and discounts | Analysis of the influence of fees and discounts on the margin |
Example 2: MarketGrowth Company
MarketGrowth, a company specializing in organic food products, offers a unique opportunity to study the commercial margin in the organic sector. Before starting this exercise, it is recommended to consult the article on how to calculate a discount percentage, which can be useful for understanding certain aspects of business management.
States :
MarketGrowth recorded the following financial data for year N:
- Turnover (CA): €4
- Cost of goods sold (CAMV): €2
- Customer discounts: €200
Work to do :
- Calculate MarketGrowth's gross sales margin for year N.
- Determine the net trade margin after taking into account discounts.
- Calculate the net trade margin rate as a percentage.
- Analyze the effect of a 5% reduction in purchasing costs on the net sales margin.
- Discuss the impact of discounts on MarketGrowth's sales margin and business strategy.
Proposed correction
- Gross sales margin: Gross commercial margin = CA – CAMV = €4 – €000 = €000.
- Net sales margin: Net sales margin = Gross margin – Discounts = €1 – €200 = €000.
- Net commercial margin rate: Net commercial margin rate = (Net margin / Turnover) x 100 = (€1 / €000) x 000 = 4%.
- Effect of a reduction in purchasing costs: New CAMV = CAMV – 5% of CAMV = €2 – (800% of €000) = €5. New net margin = Turnover – New CAMV – Discounts = €2 – €800 – €000 = €2.
- Impact of discounts:
- Discounts reduce the net sales margin.
- They can attract more customers, potentially increasing turnover.
- Importance of balance between attracting customers and maintaining profitability.
Formulas used
| Spas | Formulas |
|---|---|
| Gross Commercial Margin | CA – CAMV |
| Net Commercial Margin | Gross Commercial Margin – Discounts |
| Net Commercial Margin Rate | (Net Commercial Margin / Turnover) x 100 |
For more information on discounts and their impact, see the article on how to calculate a discount can be useful.
Example 3: EcoWear Company
EcoWear, an eco-friendly fashion company, offers us the opportunity to explore the trade margin from a different angle. This exercise focuses on the impact of eco-friendly choices on the trade margin. It is recommended to read the article on how to remove VAT from a price to better understand certain financial aspects related to pricing.
States :
EcoWear, with its commitment to sustainable fashion, has the following financial data for year N:
- Turnover (CA): €3
- Cost of goods sold (CAMV), including durable materials: €2
- Additional costs related to sustainable practices: €100
Work to do :
- Calculate EcoWear's initial sales margin for year N.
- Evaluate the commercial margin after incorporating additional costs.
- Discuss the impact of sustainable practices on business margin.
- Suggest ways to improve the trade margin without compromising ecological values.
- Explain the importance of the commercial margin in a sustainable development context.
Proposed correction
- Initial commercial margin: Initial commercial margin = CA – CAMV = €3 – €200 = €000.
- Trade margin after additional costs: Adjusted sales margin = Initial margin – Additional costs = €800 – €000 = €100.
- Impact of sustainable practices:
- Sustainable practices increase costs, thereby reducing the business margin.
- However, they can increase brand value and attract environmentally conscious customers.
- Improvement of the commercial margin:
- Increase production efficiency to reduce costs.
- Partner with suppliers of sustainable materials at lower costs.
- Use marketing campaigns to promote sustainable products and justify a higher price.
- Importance of the commercial margin:
- Crucial for long-term financial sustainability.
- Allows for greater investment in sustainable initiatives.
- Indicator of the company's ability to balance social responsibility and financial performance.
Formulas used
| Spas | Formulas |
|---|---|
| Initial Commercial Margin | CA – CAMV |
| Adjusted Commercial Margin | Initial Commercial Margin – Additional Costs |
For more information on sustainable business practices, see the article on supply management may offer useful insights.
Example 4: GourmetDelight Company
GourmetDelight, a gourmet food supplier, presents an interesting situation to study the impact of variable costs on sales margin. For a deeper understanding, it is advisable to consult the article on how to calculate the selling price before starting this exercise.
States :
GourmetDelight has the following financial data for year N:
- Turnover (CA): €5
- Cost of goods sold (CAMV): €2
- Variable costs related to production: €500
- Total fixed costs: €1
Work to do :
- Calculate GourmetDelight's variable cost margin (MCV) for year N.
- Determine the sales margin after taking into account fixed costs.
- Discuss the relevance of contribution margin for a company like GourmetDelight.
- Evaluate the effect of a 10% increase in variable costs on the sales margin.
- Suggest strategies to optimize variable costs and improve sales margin.
Proposed correction
- Margin on variable costs (MCV): MCV = CA – CAMV – Variable costs = €5 – €000 – €000 = €2.
- Sales margin after fixed costs: Commercial margin = MCV – Fixed costs = €2 – €500 = €000.
- Relevance of MCV:
- The MCV shows the contribution of sales to covering fixed costs.
- Important for assessing the viability of high-end products.
- Effect of an increase in variable costs: New variable costs = €500 + 000% of €10 = €500. New MCV = CA – CAMV – New variable costs = €000 – €550 – €000 = €5.
- Optimization of variable costs:
- Negotiate preferential rates with suppliers.
- Improve production efficiency to reduce waste.
- Investing in more efficient production technologies.
Formulas used
| Spas | Formulas |
|---|---|
| Margin on Variable Costs (MCV) | CA – CAMV – Variable Costs |
| Commercial Margin | MCV – Fixed Costs |
To deepen your knowledge on cost management, the article on calculate a cost price can be consulted.
Example 5: EnergieClim Company
States :
The EnergieClim Company specializes in the sale of air conditioning systems. Its three main products are the ClimA, the ClimB and the ClimC, which are mainly differentiated by their power and technology. Here is the available information:
| Products | Purchase price excluding tax (PA HT) in € | Sale price excluding tax (PV HT) in € | Quantity sold |
|---|---|---|---|
| ClimA | 200 | 500 | 1000 |
| ClimB | 400 | 800 | 800 |
| ClimC | 600 | 1 200 | 600 |
The VAT rate is 20%.
Work to do :
- Calculate the company's overall sales margin on each product.
- Calculate the company's margin rate on each product.
- Calculate the company's markup rate on each product.
- Establish a classification of products according to their commercial margin.
- Propose an interpretation of the results and recommend a strategy for the company.
Proposed correction:
- The overall margin is calculated:
Overall margin = Unit margin x quantity sold.
For each product:
– ClimA: Overall margin = (500 – 200) x 1000 = €300
– ClimB: Overall margin = (800 – 400) x 800 = €320
– ClimC: Overall margin = (1 – 200) x 600 = €600 - The margin rate is calculated:
Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100
For each product:
– ClimA: Margin rate = ((500 – 200) ÷ 200) x 100 = 150%
– ClimB: Margin rate = ((800 – 400) ÷ 400) x 100 = 100%
– ClimC: Margin rate = ((1 – 200) ÷ 600) x 600 = 100% - The markup rate is calculated:
Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100
For each product:
– ClimA: Mark rate = ((500 – 200) ÷ 500) x 100 = 60%
– ClimB: Mark rate = ((800 – 400) ÷ 800) x 100 = 50%
– ClimC: Mark rate = ((1 – 200) ÷ 600) x 1 = 200% - The classification of products according to their commercial margin is:
1) ClimC with a margin of €360
2) ClimB with €320 margin
3) ClimA with a margin of €300 - ClimC and ClimB products are the most profitable in terms of commercial margin. However, ClimA has the highest margin and brand rates.
The company could therefore consider maximizing the sale of ClimA to increase its profitability. However, it will have to take into account other factors such as production and distribution costs, consumer preferences and competition.
Summary of Formulas Used:
| 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 |
Example 6: Zephyr & Co Distributor
States :
Zephyr & Co, is an electronics distributor that collects financial data to analyze its performance. Below is the data for a certain product A:
– Purchase price excluding tax (PA HT): €80
– Sale price excluding tax (PV HT): €120
– Quantity sold: 150 units
The VAT rate applied is 20%.
Work to do :
1. Calculate the unit margin for product A.
2. Calculate the overall margin amount for product A.
3. Calculate the margin rate on purchase cost for product A.
4. Calculate the markup rate for product A.
5. Calculate the sales price including tax for one unit of product A.
Proposed correction:
1. Unit margin = PV HT – PA HT = €120 – €80 = €40.
The unit margin for product A is €40.
2. Overall margin = Unit margin x quantity sold = €40 x 150 = €6000.
So the overall margin amount for product A is €6000.
3. Margin rate = ((PV HT – PA HT) ÷ PA HT) x 100 = ((120 € – 80 €) ÷ 80 €) x 100 = 50%.
The margin rate on purchase cost for product A is therefore 50%.
4. Markup rate = ((PV HT – PA HT) ÷ PV HT) x 100 = ((120 € – 80 €) ÷ 120 €) x 100 = 33,33%
The markup rate for product A is therefore 33,33%.
5. Selling price including tax = PV excluding tax + (PV excluding tax x VAT rate) = €120 + (€120 x 20/100) = €144.
For one unit of product A, the sales price including tax is therefore €144.
Summary of Formulas Used:
| Concept | Formulas |
|---|---|
| Unit margin | Unit margin = PV excluding tax – PA excluding tax |
| Overall margin | Overall margin = Unit margin x quantity sold |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Brand taxes | Mark rate = ((PV HT – PA HT) / PV HT) x 100 |
| Sales price including tax | Selling price including tax = PV excluding tax + (PV excluding tax x VAT rate / 100) |
Example 7: FleursDuJour Company
States :
The FleursDuJour Company is a small flower sales company based in Paris. It imports Belgian roses at €3 excluding VAT per unit and resells them to the public at €6,5 excluding VAT per unit. The FleursDuJour Company sells an average of 1000 roses per week. The applicable VAT rate is 20%.
Work to do :
1. Calculate the Purchase Price excluding tax (PA HT) of the roses for one week.
2. Calculate the Sales Price excluding tax (SVP excluding tax) of the roses for one week.
3. Calculate the unit margin excluding tax.
4. Calculate the overall margin excluding tax for one week.
5. Calculate the markup rate excluding tax.
Proposed correction:
1. The Purchase Price excluding tax (PA HT) for one week is €3 x 1000 = €3.
2. The Sales Price excluding tax (SVP HT) for one week is €6,5 x 1000 = €6.
3. The unit margin excluding tax is PV excluding tax – PA excluding tax = €6,5 – €3 = €3,5.
4. The overall margin excluding tax for one week is unit margin x quantity sold = €3,5 x 1000 = €3.
5. The markup rate excluding tax is ((PV HT – PA HT) ÷ PV HT) x 100 = ((€6,5 – €3) ÷ €6,5) x 100 = 53,85%.
Summary of Formulas Used:
| Packages | Explanations |
|---|---|
| Purchase Price Excluding Tax (PA HT) | PA HT = Unit purchase cost HT x Quantity |
| Sale Price Excluding Tax (PV HT) | PV HT = Unit selling price HT x Quantity |
| Unit margin excluding tax | Unit margin = PV excluding tax – PA excluding tax |
| Overall margin excluding tax | Overall margin = Unit margin x Quantity sold |
| Brand rate excluding tax | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
Example 8: The Little Gourmand
States :
Le P'tit Gourmand is a pastry company that makes and sells various types of pastries. The company wants to evaluate its commercial performance. Here are some data:
– The purchase price excluding tax of its macarons is €2 per unit.
– The sales price excluding tax for the macarons is €4 per unit.
– In total, 15000 macaroons were sold during the year.
Work to do :
1. What is the unit margin of macarons?
2. How much did the bakery earn in terms of overall margin on macarons?
3. What is the margin rate for macarons?
4. What is the pastry markup rate on macarons?
5. If the bakery decides to increase the purchase price by €1, how does this affect the margin rate?
Proposed correction:
1. The unit margin is the difference between the sales price excluding tax and the purchase price excluding tax. That is, €4 – €2 = €2.
2. The overall margin is the unit margin multiplied by the quantity sold. That is, €2 x €15 = €000.
3. The margin rate is the unit margin divided by the purchase price excluding tax, all multiplied by 100. That is ((€4 – €2) ÷ €2) x 100 = 100%.
4. The markup rate is the unit margin divided by the sales price excluding tax, all multiplied by 100. That is ((€4 – €2) ÷ €4) x 100 = 50%.
5. If the purchase price increases by €1, the margin rate will be ((€4 – €3) ÷ €3) x 100 = 33,33%.
Summary of Formulas Used:
| Packages | Interpretation & translation services |
|---|---|
| Unit margin = PV excluding tax – PA excluding tax | Unit margin is the amount of profit made on the sale of a product. |
| Overall margin = Unit margin x quantity sold | The overall margin is the total amount of profit made on the sale of all products. |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | The margin rate is the percentage of profit made on the pre-tax purchase price of a product. |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | The markup rate is the percentage of profit made on the tax-free selling price of a product. |
Example 9: Luminous Jewelry
States :
Bijouterie Lumineux, which specializes in the sale of gold and silver jewelry, has hired you as a financial management expert. You are responsible for evaluating its performance in terms of sales margin.
Here is the information needed for your analysis and calculations:
– Cost of purchasing a gold object: €500.
– Cost of purchasing a silver item: €200.
– Selling price excluding tax of a gold object: €800.
– Selling price excluding tax of a silver object: €350.
– Quantity of gold items sold: 50.
– Quantity of silver items sold: 80.
– VAT rate: 20%.
Work to do :
1. Calculate the unit margin on each type of jewelry.
2. Calculate the overall margin on each type of jewelry.
3. Calculate the overall trade margin rate.
4. Calculate the overall markup rate.
5. Evaluate the jewelry store's business performance.
Proposed correction:
1. The unit margin for gold objects is (€800 – €500) or €300, and that for silver objects is (€350 – €200) or €150.
2. The overall margin for gold objects is (€300 x 50) or €15, and that for silver objects is (€000 x 150) or €80.
3. The overall commercial margin rate is ((€15000 + €12000) ÷ (€500 x 50 + €200 x 80)) x 100 = 51,7%.
4. The overall markup rate is ((€15000 + €12000) ÷ (€800 x 50 + €350 x 80)) x 100 = 38,22%.
5. With an overall sales margin rate of over 50% and an overall mark-up rate of nearly 38,2%, Bijouterie LUMINEUX appears to have a good sales performance. However, this information should be compared to industry standards and the company's previous performances for a more accurate and comprehensive assessment.
Summary of Formulas Used:
| Formulas | Description |
|---|---|
| (Sale price excluding VAT – Purchase price excluding VAT) | Unit margin |
| unit margin x quantity sold | Overall margin |
| ((Overall Margin) ÷ (Total Purchase Cost)) x 100 | Commercial margin rate |
| ((Global Margin) ÷ (Total Net Sales)) x 100 | Brand taxes |
Example 10: Bocage Cheese Factory
States :
La Fromagerie du Bocage is a family business specializing in the manufacture and sale of cheese. As part of their annual budget, they are looking for a way to assess their sales margin in order to improve their pricing strategy.
The company produces a cheese called "Le Boisé". Le Boisé is sold at a sales price excluding tax (PV HT) of €5,50 per unit and the company sold 2000 units of this cheese last year. The purchase price excluding tax (PA HT) of Le Boisé is €3,00.
Work to do :
1. Calculate the unit margin of the Woodland.
2. Calculate the overall margin of the Fromagerie du Bocage for the Boisé.
3. Calculate the margin rate of the Fromagerie du Bocage for the Boisé.
4. Calculate the markup rate of the Fromagerie du Bocage for the Boisé.
5. How can the company increase its sales margin?
Proposed correction:
1. The unit margin is calculated by subtracting the HT PA from the HT PV. It is therefore €5,50 – €3,00 = €2,50.
2. The overall margin is calculated by multiplying the unit margin by the quantity sold. It is therefore €2,50 x 2000 = €5000.
3. The margin rate is calculated by subtracting the PA HT from the PV HT, dividing the result by the PA HT, then multiplying the result by 100 to obtain the percentage. It is therefore ((€5,50 – €3,00) ÷ €3,00) x 100 = 83,33%.
4. The markup rate is calculated by subtracting the AP HT from the PV HT, dividing the result by the PV HT, then multiplying the result by 100 to obtain the percentage. It is therefore ((€5,50 – €3,00) ÷ €5,50) x 100 = 45,45%.
5. To increase its sales margin, the company can increase its selling price, decrease its purchase price, or do a combination of both. It can also try to sell in larger quantities in order to increase the overall margin.
Summary of Formulas Used:
| Concept | Formulas |
|---|---|
| Unit margin | MU = PV HT – PA HT |
| Overall margin | MG = MU x quantity sold |
| Margin rate | Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 |
| Brand taxes | Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 |
Example 11: Manon's shop
States :
Manon's boutique is a store specializing in the sale of high-end women's clothing. This year, Manon has decided to implement a new pricing policy to increase her profits. The data relating to the items are as follows:
– She bought a batch of 100 dresses at €45 excluding tax each.
– A dress is sold to a customer at the price of €100 excluding VAT.
– The applicable VAT rate is 20%.
Work to do :
1. Calculate the unit margin on each dress sale.
2. Calculate the overall margin expected by Manon for the sale of all the dresses.
3. Determine Manon's margin rate on the sale of each dress.
4. Calculate Manon's markup on the sale of each dress.
5. Manon wants to increase the selling price to reach a unit margin of €60 per dress, what will be the new selling price excluding and including tax?
Proposed correction:
1. The unit margin is calculated by subtracting the purchase cost (PA HT) from the sale price (PV HT). Here, this gives: €100 – €45 = €55.
2. The overall margin is obtained by multiplying the unit margin by the total number of items sold. We therefore have: €55 x 100 = €5500.
3. The margin rate is calculated using the following formula: ((PV HT – PA HT) ÷ PA HT) x 100. This gives: ((100 € – 45 €) ÷ 45 €) x 100 = 122,22%.
4. The markup rate is calculated using this formula: ((PV HT – PA HT) ÷ PV HT) x 100. This gives: ((100 € – 45 €) ÷ 100 €) x 100 = 55%.
5. To obtain a unit margin of €60, Manon must sell each dress at: €45 (PA excluding VAT) + €60 (desired unit margin) = €105 excluding VAT. With a VAT of 20%, this gives a sales price including VAT of: €105 x (1 + 20/100) = €126.
Summary of Formulas Used:
| Formulas | Meaning |
|---|---|
| VAT rate = 20% | 5,5% | Standard value added tax rate |
| Overall margin = Unit margin x quantity sold | Total profit made on all sales |
| Margin rate = ((PV excluding tax – PA excluding tax) ÷ PA excluding tax) x 100 | Percentage of profit made on purchase cost |
| Brand rate = ((PV excluding tax – PA excluding tax) ÷ PV excluding tax) x 100 | Percentage of profits made compared to the sale price |