Question

How to calculate marginal cost, marginal revenue, marginal profit? Give examples?

Answer 1

Marginal cost means the cost of producing one more unit or additional unit of a product or change.Marginal revenue refers to the revenue generated/obtained from selling one more unit or additional unit of output.Marginal profit is calculated as marginal revenue-marginal cost.

Explanation:

First,marginal cost can be mathematically calculated by taking the derivative of the total cost function.In simple terms,let's say total cost of production for a firm/company to produce 10 units of a product is INR 100 and when it decides to produce to one more unit of the product or 101th unit,its total cost of production becomes INR 105 or increases by INR 5.Hence,the marginal cost in this case is INR 5.

Similarly,suppose that the total revenue obtained by the firm from selling the 100 units of the product is INR 200 and when it sells one more unit or the 101th unit,the additional revenue obtained by the firm is INR 6 and so the total revenue from selling 101 units of output becomes INR 206.Thus,marginal revenue in this case is INR 6.

Finally,as stated,the marginal profit is marginal revenue minus marginal cost.Therefore,marginal profit obtained by the firm from selling 101 units of output=(INR 6-INR 5)=INR 1

Answer 2

Explanation:

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The difference between Gross Profit Margin and Operating Profit Margin is that the gross profit margin accounts for only Cost of Goods sold, but the Operating Profit Margin accounts for both Cost of Goods sold and Administration/Selling expenses.