"While not precisely the same ..."
The two examples are not only not precisely the same - they are altogether different. The example in #311 is in fact a good illustration of the MECHANISM of embedded taxes and how they build into costs as a percent of the selling price of an item. You have missed the point that this is not discussing "revenue" or using "profit" as a percent of "revenue". You seem to be put off by the fact that some of he values used are - to your way of thinking - too high.
You may have missed the explanation I gave that this was not about the values themselves (so long as they were reasonably representative), but the mechanism of the cascading.
Also, my comments relating to the example converging related to the salient element of the table which is the value "Tax costs as % of selling price". This is the element of real interest in the example and it DOES converge to a particular value that varies depending on the numbers used for what are called "profit margin" and "tax rate". I have seen other somewhat similar examples that converge fairly similarly but to higher values, while this example converges to a lower value and is even more conservative (which is why I used it). It is also not intended to be a cost accounting breakout or presentation of overhead, etc. but a simplified example to show the effects of cascading tax costs (period).
Since you took the item cost as the factor to project (with or without the drum roll) certainly that value progresses upward (which is illustrative of the effect that cascading taxes has upon item cost). But that is not the point of the example - the "tax costs as % of selling price" is the item of interest. And, also, since you seem to be so picky, "selling price" here is the price to be input to the next level and "profit margin" is the desired or net or target margin hoped for or expected within each single Level.
Level 1 starts with an input cost of $1.00 and the business wishes/expects/hopes for/desires (etc.) to realize the indicated profit margin in forwarding their "thing" to the next level. To do that, they must be able to add the tax cost expected (assumed, guessed at, etc.) for the business (called "tax rate") to the desired target "margin" (or choose your preferred term) to arrive at "sell price" (which as I've said is the input price to Level 2 ($1.44 in the example). This allows the selling of the thing involved to Level 2 while covering both their expected/projected/etc. tax rate and margin. There is no "double counting" of tax (or anything else) despite your assertion. Nor is the "tax cost" removed by L1 paying its business income taxes. The tax cost is embedded within the input and passed on as input to L2.
Once the item enters Level 2 it a distinct known-cost item insofar as Level 2 is concerned and that cost ($1.44) has embedded in it the tax costs from Level 1 which, as they pass through Level 2, cascade and have the L1 tax costs increased by the operation of he L2 parameters).
Now - if the number in the example called "profit margin" (and remember, that's just what it's CALLED in the example) is so high as to drive you into apoplectic fits, then you certainly may use another so long it is nothing like the out-of-context 5-6% of revenue you proffer. We're not talking about revenue but that's something some seem to find hard to grasp. Use a profit margin value of, say, 15% if you like but certainly that is a fairly low number compared to businesses I'm used to. Your mileage may vary.
However many Levels there might be in the inceprion-to-consumption chain, it it the "Tax cost as % of selling price" that the end consumer must pay for the embedded tax costs. And the example applies to a business in general and not to any single form of entity (as one or two posters keep insisting by trying to use Subchapter C Ccorporations - that's where the tax rate figure came from BTW). There are other business entities and they all potentially pay taxes and embed tax costs into the things they sell.
You seem to think the example refers to the VALUE of embedded tax costs. That was never what was said, nor ever the intent of the example. It does show in simplified form how the cascading of business taxes (and remember, we're not including payroll/withholding tax or compliance costs) builds up in just a few Levels. Said another way, it is not the LEVEL of embedded taxes, but the MECHANISM that is illustrated. Many people on these threads do not understand how such a mechanism works. The example may help them grasp the concept.
Silly me for thinking the line labled "Profit Margin" wasn't really "profit margin" as is commonly understood, but is rather "pigdog's term for some number meant to illustrate a mechanism whose value doesn't matter and has nothing to do the term Profit Margin as used in accounting practice."
Silly me.
Silly me for thinking that profit margin was calculated against selling price (selling price becomes "revenue" in the accounting world, once the sale is made;) I should have known you were calculating "profit margin" against cost.
Silly me.
Silly me for suggesting that your example might be a compound interest model (a non-convergent series) even though the formula
FV=P(1 + r)^nEXACTLY reproduced the numbers in your table given you inputs. (BTW the MECHANISM, as you are so fond of shouting, is commonly known as "the magic of compound interest.")
Silly me.
Many people on these threads do not understand how such a mechanism works.
Well, you've certainly proven that!