Free

Revenues and Costs - Coursework Example

Summary

This coursework "Revenues and Costs" discusses marginal revenue as the increase in revenue with a unitary increase in sales of a product. Marginal revenue refers to the amount by which the revenue increases when one more unit of a product is sold by a firm…

Download full paper File format: .doc, available for editing

GRAB THE BEST PAPER98.1% of users find it useful

Read Text Preview

Subject: Business
Type: Coursework
Level: Undergraduate
Pages: 2 (500 words)
Downloads: 3
Author: hahndelphia

Extract of sample "Revenues and Costs"

If the marginal revenue is a negative number, it means that selling an additional unit reduces the total revenue, if the marginal revenue is positive, selling an additional unit increases total revenue, and if marginal revenue is zero, selling an additional unit has no effect on total revenue.

Marginal cost refers to the additional cost that a firm incurs when it produces an additional unit of a product (Laidler and Estrin, 2004). Marginal cost refers to the increase in cost when an additional unit of a product is produced by the firm.
1. Marginal cost is also the slope of the total cost curve (Laidler and Estrin, 2004). This means that the marginal cost defines the behavior of the total costs incurred by the firm. Since the marginal cost is the slope of the total cost curve, a negative marginal cost means that an increase in unitary production reduces costs while a positive marginal cost means that an increase in unitary production increases total costs.
Profit refers to the difference between the total costs incurred and the total revenue earned by a firm from operations (Laidler and Estrin, 2004). The profit earned by a firm is positive if the total revenues are more than the total operating costs incurred, and the incomes are negative if the total costs are more than total revenues.
1. Profit maximization in a firm is the process by which the firm decides the total output or unit sales that provide the highest profit possible (Laidler and Estrin, 2004). One of the main concepts of profit maximization is that total profit equals total revenues less total costs, and the firm tries to maximize this equation.
The marginal cost and marginal revenue functions are used by a firm to determine the optimal level of output. From the definition of marginal profits, the profit is maximized when marginal costs equal marginal revenues, therefore, the firm finds the optimal level of output where marginal costs equal marginal revenues (Chiang and Wainwright, 2005).
Profit maximization can also be determined if marginal costs are not equal to marginal revenues. For example, when marginal revenues are bigger than marginal costs, the firm can maximize revenues by increasing production, which in turn increases the revenues more than the increase in costs (Chiang and Wainwright, 2005). This means that revenues will increase at a higher rate than costs, so the firm will increase profits.
When the marginal costs are higher than marginal revenues, the firm can maximize profits by reducing the level of production (Chiang and Wainwright, 2005). When the production is reduced, it means that the revenues will reduce at a lower rate than costs, so profits are maximized.

CHECK THESE SAMPLES OF Revenues and Costs

Why Should Multinational Corporations Work Effectively to Meet Customer Requirements

The firm has developed strategies to help deal with various issues related to prices in its Revenues and Costs in terms of currency denominations.... In terms of currency denomination, there are schemes that have been implemented by GM Company to work on its prices of Revenues and Costs.... The company lowers the price rates of its Revenues and Costs to nations that have been considered as developing....

6 Pages (1500 words) Case Study

Existing Option Pricing Methods

Thus, the development of the property will take place when the value of the completed project exceeds the costs by a premium determined by a combination of uncertainty of asset value, irreversibility of the development, and the choice of waiting.... This case study "Existing Option Pricing Methods" is about standard financial options like puts and calls on stocks and financial indices real options to have similar characteristics, but actual options that involve choices that become available upon undertaking certain business activities....

14 Pages (3500 words) Case Study

Cash Budget for the Months of January to March

Rising prices and rising costs of different materials for a manufacturing business, for example, has one of the greatest effects on the business, it has to make the company cut its expenses and therefore has a direct effect on the forecasted financial statement.... In this problem, Sales is divided into two categories; Cash Sales and Credit sales....

3 Pages (750 words) Essay

The Business Aspect of The Firm

On the same note, Revenues and Costs determine profitability.... Profit maximization depends on costs of operation and revenues generated (Moyer, et al.... costs of operation should be minimized and revenues maximized.... The goals of the form therefore include: expound business aspect, minimize cost of operation and improve sales of electronic components in order to maximize revenues.... revenues are generated from sales volume, and it is therefore essential to boost sales in the pursuit of profits....

1 Pages (250 words) Essay

A New Philosophy of Project Management

Cash flows give a clue about the expected Revenues and Costs for project completion.... The following essay 'A New Philosophy of Project Management' looks at a discipline that deals with the overall management of a project.... It involves project planning, organizing, leading, managing and controlling resources to complete the desired project....

2 Pages (500 words) Essay

Financial Acconting exercises: Flexible Budgets

is able to control its Revenues and Costs.... It can be clearly noted that the company has not able to been to control its revenues as the actual results are unfavorable.... Despite increase in jobs the company did.... ... ...

2 Pages (500 words) Assignment

Key Performance Indicators

The simulation results detail many different KPIs that can potentially capture the most important data that serve the purpose of optimizing both Revenues and Costs as discussed above, and given the kinds of data collected for the different shifts, the choices were made based on what kind of metrics will yield the most in terms of optimizing both customer service levels and staffing levels (Simul8 Corporation 2015).... Customer service affects the top-line revenues, in that the greatest number of people served results in the greatest amount of revenues for the firm, while efficiency metrics relating to the most efficient use of staff to serve the greatest amount of customers impact costs....

2 Pages (500 words) Essay

Social Entrepreneurism Questions

The author of the paper answers the questions about social entrepreneurism.... The author gives a detailed information about effective entrepreneurial leadership, cooperative strategies, financial profitability in an entrepreneurial venture and effective leadership skills.... ... ... An entrepreneur should also possess effective communication skills....

6 Pages (1500 words) Coursework