How To Balance Cost Vs. Profit Or ROI, Return On Investment
EGT1 – Task 1
Western Governors University
Economics and Global Applications In business you have to have measurements and balances that aid you in understanding if you are being successful or not, in short are you making a profit. To understand these measurements is imperative to understanding how to make a profit and plan for your future growth and development. That is where you have to understand how to balance cost vs. profit or ROI, Return on Investment. ROI is not so difficult if you understand some basic business concepts can help you maximize your Operating Contribution or total profit.
Marginal Revenue is the sales garnered when the company sales one extra more unit of a product where Total Revenue is the sum of sales for …show more content…
You can get a CPU (cost per unit) by dividing your total coat by units sold and you can do the same for revenue then subtract your cost per unit from your revenue per unit to get an average profit per unit as well. A corporation can use this information to determine its course of action to best maximize ROI (return on investment). Profit Maximization is what every corporation and small business owner strive for to insure they are making as much money as possible. To maximize profit each company must determine how to reduce the cost while increasing sales and revenue. This is done by determining at what level of production you utilize your resources to their fullest and produce the most for the least …show more content…
If you do this you see that the Marginal Revenue is decreasing as Company A manufactures more products while the Marginal Cost increases as they produce more products. You find the maximum point of profit at the quantity of 8 where the Marginal Revenue and the Marginal cost are equal hitting the MR=MC or Maximum Profit as figured utilizing Marginal Revenue and Marginal
Western Governors University
Economics and Global Applications In business you have to have measurements and balances that aid you in understanding if you are being successful or not, in short are you making a profit. To understand these measurements is imperative to understanding how to make a profit and plan for your future growth and development. That is where you have to understand how to balance cost vs. profit or ROI, Return on Investment. ROI is not so difficult if you understand some basic business concepts can help you maximize your Operating Contribution or total profit.
Marginal Revenue is the sales garnered when the company sales one extra more unit of a product where Total Revenue is the sum of sales for …show more content…
You can get a CPU (cost per unit) by dividing your total coat by units sold and you can do the same for revenue then subtract your cost per unit from your revenue per unit to get an average profit per unit as well. A corporation can use this information to determine its course of action to best maximize ROI (return on investment). Profit Maximization is what every corporation and small business owner strive for to insure they are making as much money as possible. To maximize profit each company must determine how to reduce the cost while increasing sales and revenue. This is done by determining at what level of production you utilize your resources to their fullest and produce the most for the least …show more content…
If you do this you see that the Marginal Revenue is decreasing as Company A manufactures more products while the Marginal Cost increases as they produce more products. You find the maximum point of profit at the quantity of 8 where the Marginal Revenue and the Marginal cost are equal hitting the MR=MC or Maximum Profit as figured utilizing Marginal Revenue and Marginal