EGT1 TASK 1 30:47
A. Total Cost is the total cost a company has to produce one or more units of a product
Total revenue is the final total of the sales of a specific number of a specific product.
Marginal Cost is how much it will actually cost to produce one more unit of the item at hand
1. Total Revenue (TR) to total cost (TC): TR is price multiplied by quantity
TC is fixed and variable costs
Profit is TR - TC
If the company wants to see where it is making the most money they would look to see where the biggest gap is between TR and TC. That would be where they are getting the most return for their labor.
2. Marginal Revenue (MR) to Marginal Cost (MC): we want MC to equal MC in doing this approach the company compares the amount that each additional item produced would add to the TR and TC
B. Marginal Revenue is the extra revenue that is produced when one additional unit of a product is sold. To get this specific calculation you must figure out the difference between revenue from before and after the increase of the unit. IF you have things aligned and your product cost is constant then your MR and price will be the same. IF MC is greater than MR any more production of the item would end in loss to the company. However if MR is higher than MC you would want to continue production because the company would see more profit.
MR= ^TR/^Q (^=change) (Where TR = PxQ
C. MC is very important when figuring if the production rate is to high, to slow , or right on pace. Usually MC goes down as production increases because of variable such as the ability to get materials at a bulk rate from the supplier, having workers that are specialized in certain areas of the production line, and efficient use of time, machinery and employee time. Overall MC is when you have formulated the lowest price point that you can give an item without subtracting from the overall profit of the company....