Total revenue, which is the total amount of income received from the sales of a certain quantity of goods or services. Total revenue can be calculated by multiplying the price of a product times the quantity sold. For instance, if 160 baseball caps are sold and each baseball cap was priced at $5 each, the total revenue would be (160*5) $180.
Total cost is all of the expenses incurred in the production of a product, to include fixed and variable costs. Fixed costs, are expenses that are constant and do not change from month to month regardless of the amount of products sold. For instance, the rent of the factory is considered a fixed cost, for the reason that, the rent must be paid whether products are produced and sold or not. Variable costs,
…show more content…
For instance, if a business wants to produce 5,000 more t-shirts, yet it will require the purchase of another machine, the marginal cost for the extra t-shirts includes the cost of the new machine. A marginal product describes the additional output that results from adding one more unit of input. It can be calculated by dividing the change in the total product by the change in the variable input. For example, in order to increase the t-shirt productivity by 1000 units, the company may hire two new employees to the production line. In which case, the total change in product is 1000 units. Although, hiring two more employees increases productivity, now the law of diminishing marginal product applies. Diminishing marginal product primarily indicates that increasing one input while retaining other inputs at the same level will initially increase output; however, further increase in the output level will eventually diminish. For example, hiring an extra two employees to increase productivity, will eventually have a limited effect or diminish the average income. Production function is a graph utilized to demonstrate the relationship between physical inputs and outputs, define marginal product, and distinguish allocative …show more content…
Average revenue is one of those trends, which refers to the income generated per unit of output sold. Average revenue can be obtained by diving the total revenue by the quantity sold. For example, if a business sells 160 baseball caps and its total revenue is 320 dollars, then the business average revenue is ($320 divided by 160 baseball caps) two dollars per baseball cap. Another term is marginal revenue, which refers to the additional income generated from the sale of an additional unit of output. For example, using the same baseball caps example, with the exception that one more baseball cap is sold. So total revenue is $320 when 160 baseball caps are sold; however, when one more baseball cap is sold, the total revenue is $322 when 161caps are sold. Therefore, the marginal revenue is $2, which is the additional income received for that additional product sold. In other words, the average revenue assist businesses in determining a firm’s profit per unit, while marginal revenue shines a light on the correlation between the number of units sold and the total
... the total impression, so we got 0.12%. The profit, we used revenue minus the advertising total cost, so we got $18858. Finally, we used the profit to divide by the advertising total cost, which is 339%
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
1) Total Variable Costs are 60% of Total Costs; While the other 40% are from fixed costs.
Revenues come from the sale of Under Armor products. From 2009 to 2012 the company has seen a steady increase in revenue, which can be credited to factors such as, expansions, increased marketing, and product innovation. Under Armor had a 24.6% increase in revenue from 2011 to 2012. This was down from the previous 38.4% increase from 2010 to 2011. Under Armor showed a favorable increase in their operating profit margin, total return on assets and return on stockholder's equity. This helps us to recognize the company as using their resources efficiently and showing an overall profitability for the company.
Variable costs: “Variable costs are costs that vary with the volume of activity”2 and they are: direct labor, Materials, Material spoilage & direct department expenses.
for a product over a period of time. It shows the revenue by a product
Direct fixed costs result from any resource in the practice that is specifically involved in the delivery of the service, but the cost that is not directly related with volume of service delivered. With the pharmacy division of CVS focusing on prescriptions, the most substantial direct fixed cost of dispensing a prescription is personnel cost, especially the cost of the pharmacist. This typically represents about 50% of the cost of dispensing a prescription. Since the pharmacy staff that is scheduled to work on a particular day, this causes the cost of the practice to remain the same regardless of whether an additional prescription is dispensed that day. Their wages and benefits are also considered fixed costs for the corporation.
This chart shows the net revenues and net earnings for the years of 2013-2009. As you observe the net revenues have been consistent in the 18,000 for at least 3 years in a row. This is a good trend for the Kraft Food Group. The trend for the net earnings is sporadic. The net earnings is also called the bottom line. This shows the amount of money that is left over after paying all of the expenses. Kraft Food Group needs to cut down on its expenses.
According to the data above, forecasted sales (in thousands) equals 223.667 + the correlating coefficient depending upon the month of the forecast. Furthermore, this indicates that before the business was opened, they were earning $223.667(thousand). Obviously, did not happen so we can disregard this value due to extrapolation.
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
For example: with the increase of the number of products produced, the cost of operating a machine also increase. Second we have batch level costs which is associated with batches; producing a multiple units of the same product that are processed together is called a batch. The third type is product level costs which arise from any activity in order to support the production of products. The fourth and the last type is facility level costs, this costs cannot be determined with a particular unit, product or batch; this costs are fixed with respect to batches, products and number of units produced. A single measure of volume is used for allocating costs to each service or product in traditional method for example: direct material cost, machine hours, direct labor cost and direct labor hours. A cost driver is an activity that generate costs, it can be generated by two types of costs the first is a particular machine 's running costs where the costs is driven by production volume as machine hours; the second is quality inspection costs where the cost is driven by the number of times the relevant activity occurs as the number of
A production Function in general, without specifying what kind, is related to the output of a production process which starts which starts with the factors of production. The production functions are an integral part for explaining marginal products as well as allocative efficiency. There are different classifications for production functions, and what constitutes them, determined by the type of production. This article of the WIKI aims to focus on the Substitional production function, explaining what it is and means, as well as the limitational, doing the same. (1)
A “Fixed cost” can be defined as “a cost that does not change with an increase or decrease in the amount of goods or services produced or sold”. It is time related.
The Aggregate Demand, described simply according to Wikipedia is, “In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.