Limit values can seem something purelytheoretical and not relevant to the actual conduct of business at the enterprise only because of the lack of practice of working with them in the Soviet and perestroika period. In fact, the limit values - this is the most effective way to track the potential for increased profits, which all businesses are striving for without exception. As for their logic and calculation, it is nothing more complicated than elementary algebra.
The marginal income is an additional income,which the company receives from the sale of an additional unit of goods. It is one of the main limits that have a direct relationship with profit and price - the two most important indicators of the company's activities. Marginal revenue is a value that has a different value depending on the sales volume of the company. Thus, in order to carry out analysis using marginal revenue, it is necessary to create a table reflecting the change in this value when sales volumes change.
To be clearer, let's definemarginal revenue. The marginal revenue is the change in the company's total revenue, as a result of growth in sales volumes per one conventional unit. For example, your company sold 20 units of 10 rubles each. Then the sales volumes increased by one, but the price remained the same. In this case, the marginal revenue will be 20 rubles.
It may seem that at a constant pricemarginal revenue will always be equal to the value of this very price, and therefore it makes no sense to further calculate this indicator. However, it is not. As you know, with the growth in sales volumes, the company is forced to reduce the price to attract those customers who at this price the goods will not buy. It turns out that you are benefiting from the increase in volumes, but you lose from the fact that all goods are slightly cheaper. In order to determine what is outweighed - a win or loss - and the marginal revenue is used, also known as marginal revenue.
Let's give an example:as a result of growth in sales from twenty units to twenty-one units of production, the price of one unit fell to 9 rubles and 50 kopecks. In this case, our new aggregate income will be equal to 199.5 rubles, which is 50 kopecks less than the income at old volumes. It turns out that the marginal revenue is -50 kopecks. As it turned out, it is not profitable to increase sales volumes for the enterprise.
The above example showed howlimit values in management. If the revenue limits fall below zero, then the company needs to stop the extensive growth and restrain the growth of production volumes in order to keep prices at an acceptable level. Until the marginal revenue remains positive, there is a prospect for escalating volumes.
However, this analysis is somewhat incomplete.If the marginal revenue is positive, we also need to analyze the marginal costs of the enterprise. The marginal cost shows how much the costs have changed, as a result of the growth in sales volumes. According to elementary logic, this quantity will be positive, since each new unit of production requires the costs for its production. On the other hand, the more units of goods are produced, the less fixed costs are per unit of output until the production capacity is fully loaded.
In any case, if the marginal revenue is greaterthe magnitude of marginal costs, then we get marginal profit, which means that we need to increase sales. As a rule, this happens until new equipment is needed for production or active sales will not lower prices in the market.
