Q:

How do you calculate marginal revenue?

A:

Quick Answer

To calculate marginal revenue, evaluate the amount that you collect per increase in production of a single unit. Gather invoices and ledgers to get total revenue to match against revenue change.

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Full Answer

  1. Gather data

    Collect invoices, ledgers and receipts pertaining to the sales made in the period for which you want to calculate marginal revenue. From the documents, obtain the total number of goods sold and the respective prices.

  2. Calculate revenue

    Multiply quantities by the unit price, and get the revenues for every transaction. Sum up all the values that you have calculated to take out the total revenue of the business.

  3. Calculate change in revenue

    With the collected data from the first step, evaluate the output of your business against the generated revenue. The output, in this case, is the quantity of units sold. Divide the additional revenue with the change in output to find out the change in revenue. The figure depicts the trends in your business by either varying or remaining constant.

  4. Calculate marginal revenue

    The revenue increase per new unit production is the marginal revenue. For most cases, the revenue change in step three is the marginal revenue. Otherwise, the reduction in price for promotion or cost increase due to inflation usually affects revenue change. Add or subtract the additional figures to obtain marginal revenue.

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