Profit in business is a financial gain earned when marginal revenue exceeds marginal cost to produce a particular product or provide a service. Basically profit is the amount of money left after a business has paid all cost associated with doing business for a certain period of time from the total revenue taken in during that same period of time. All for profit business want to maximize their profits. Without making a profit a business cannot stay open without additional investment by the business
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MARGINAL COSTING Introduction Even a school-going student knows that profit is a balancing figure of sales over costs‚ i.e. Sales - Cost = Profit. This knowledge is not sufficient for management for discharging the functions of planning and control‚ etc. The cost is further divided according to its behavior‚ i.e.‚ fixed cost and variable cost. The age-old equation can be written as: Sales - Cost = Profit or Sales - (Fixed cost + Variable Cost) = Profit. The relevance of segregating costs
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Marginal Analysis A. Marginal Revenue: The increase in revenue generated from the sale of one additional unit of output 1. If there is a positive value associated with the marginal revenue there is an increase in the total revenue. Once the marginal revenue reaches or arrives at 0 then the total revenue is maximized. A decrease or negative in marginal revenue will cause the total revenue to go down. B. Marginal Cost: The additional‚ extra cost involved
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foods: Rice Krispies‚ cottage cheese‚ and popcorn. The marginal utilities for each food are tabulated below. Bill is allowed only 167 grams of carbohydrates daily. Rice Krispies‚ cottage cheese‚ and popcorn provide 25‚ 6‚ and 10 grams of carbohydrates per cup‚ respectively. Referring to the accompanying table‚ respond to the following questions: Unit of food(cups/day) Marginal Utility of Rice KrispiesMarginal Utility of Cottage Cheese Marginal Utility of Popcorn 1 175 72 90 2 150 66 80 3 125 60
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What is Productivity? “A measure of the efficiency of a person‚ machine‚ factory‚ system‚ etc.‚ in converting inputs into useful outputs.” How to increase business productivity? Management can take following steps to increase business productivity. Reduce cost of production: By reducing cost of production we can increase productivity of our business. We can sell our goods at low price that will increase our sales that leads to high profitability. Increase production: Increase production will
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Marginal Costing Introduction The Cost of a product of comprises of materials‚ labour‚ and over heads. On the basis of variability they can be broadly classified as fixed and variable costs. Fixed costs are those costs which remain constant at all levels of production within a given period of time. In other words‚ a cost that does not change in total but become. Progressively smaller per unit when the volume of production increases is known as fixed cost. it is also called period cost eg. Rent
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MARGINAL COSTING Introduction This paper explores the use of cost accounting information for decision-making purposes. DEFINITION OF KEY TERMS Marginal cost: This is the cost of a unit of a product or service‚ which would be avoided if that unit or service was not produced or provided Break-even point: This is the volume of sales where there is neither profit nor loss. 1 9 6 COST ACCOUNTING S T U D Y T E X T Margin of safety: This is the excess of sales over the break-even volume in
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P=MC level of output. Price is a signal from buyers to sellers‚ and the price seen by fi rms signals the marginal benefi t of consumers in the market. If the price consumers pay for a product is greater than the marginal cost to fi rms of producing it‚ then the message being sent to producers is that more output is demanded. In the pursuit of profi ts‚ more resources will be allocated towards the production of the product until the marginal cost and the price are equal. At the P=MC point
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Communication is important in business. Exceptional communication skills among employees lie at the core of a productive workplace. These communication skills help to persuade‚ motivate‚ and influence customers and coworkers alike. In this paper‚ we will discuss why communication is important and the skills an effective worker uses to communicate effectively. What makes a person a good coworker within business? His or her ability to communicate; which is one of the most basic job requirements in
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SD – MBA 2 Personal Report Name: Thuy Anh Nguyen November 6‚2012 1. Conditions for profit maximization are: a) Difference between total revenue (TR) and total cost (TC) is maximized; b) Marginal revenue (MR) should be equal to marginal cost (MC) Explanations: If we assume that the company is facing a downward – sloping curve and it produces just one single product a) Profit = TR – TC. Profit will increase if TR increases and TC decreases. If company wants profit maximization‚ it
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