Calculating costs, revenue & profit

How to figure out costs revenue & profits with an example

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Cal
cul
ati
ng
C ost
s,
R evenues
& Prof
it
s
I
f
ther
e i
s a
20% i
ncrease
in
outp ut
i
t
is
assume d
that
:
F ixed
costs
do not
change
V ar
iabl
e co st
s change
to
th e
same as
the
ri
se i
n out
put
(
in
thi
s
case 20%)
Fixed costs Variable costs
Ma chi
n er y R aw ma t
eri
al
Re nt
and r
a t
es Wa ges
Sa l
ari
es P ower
Ad mini
str at ion
Ve hi
cles
Ma rket
ing
Light
ing a n d he at
ing
Total units of Fixed costs Variable costs Total costs
outputs
0 80 0 80
10 80 40 120
20 80 80 160
30 80 12 0 200
40 80 16 0 240
50 80 20 0 280
60 80 24 0 320
I
n many i
n dust
ri
es an
incr
ease i
n cost
is
passed down
to
the
cust
ome r
i n
the
for
m of hi
gher
prices.
Alt
h ough
in
theory
thi
s shoul
d
cause
a de crease
in
dema nd f
or
the pr
od uct
,
if
every
comp any
is
i
ncreasi
ng pri
ces
it
i
s l
ikel
y t
o st
ay t
he same .
Th i
s maint
ains
prof
it
margi
ns.
P ROFIT
MA RG I
N
the
dif
fer
ence
bet
w een
the
sel
li
ng
pri
ce
of
the
product
and
the
p r
oduct
ion
pri
ce.

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