Revenue is defined as the aggregate amount of cash obtained by the
organization by selling goods and providing services for the duration of a
particular time span. The total revenue is also known as turnover.
Average Revenue (AR) Average revenue can be calculated by dividing the
total revenue by number of units sold.
AR = TR/Q Where, AR=Average Revenue; TR=Total
Revenue; Q=Quantity sold
Total Revenue (TR)
Total
Revenue signifies the total amount a company obtains by carrying out product
sales and offering services.
TR
can be calculated by any of the two ways mentioned below:
First method;
First method;
TR = Q x AR (Price) or Q x P
Where, TR
= Total Revenue; Q = Units of Quantity; AR = Average Revenue
Second
method; TR = ∑MR
Where,
TR = Total Revenue; MR = Marginal Revenue
Marginal Revenue (MR) Marginal revenue is the net addition to the total
revenue by selling one more unit of commodity. It is the revenue of an
additional unit sold.
Marginal Revenue is defined as the change in TR resulting from per unit augment in the sales.
Marginal Revenue is defined as the change in TR resulting from per unit augment in the sales.
MR = TRn-1
Where, MR
= Marginal Revenue; TR = Total Revenue; Average Revenue (AR)
Another
important aspect of a business is to calculate the Profit (or loss). This is calculated using Total
revenue. Profit (or Loss) = Total Revenue (TR)
− Total costs (TC)
Another
valuable concept in production process is Break-even Point of production. This is the level of output
where the total cost curve intersect
the total revenue curve (TR = TC) [When the total cost
curve is above the total revenue curve (TC
>TR) the area in between them represents loss , when the total cost
curve lies below the total revenue curve (TR>TC) the area in between represents profit.]
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