Cost, Revenue & Profit & CVP Analysis
Cost, Revenue & Profit & CVP Analysis
Cost, Revenue & Profit & CVP Analysis
TC = TFC + TVC
Average and Marginal Cost
Average Fixed Cost (AFC) – refers to the fixed cost
per unit at various levels of output.
AFC = TFC/Q
Average Variable Cost (AVC) – the variable cost per
unit at various levels of output.
AVC = TVC/Q
Average Cost (AC) – the overall cost per unit of
output.
AC = TC/Q or AC = AFC + AVC
Marginal Cost
The additional or extra cost brought about by
producing one additional unit of output.
MC = change in TC / change in Q
Profit Concept
Total and Marginal Revenue
Total Revenue (TR) – the payment for the output
produced by the firm.
TR = P x Q
TR = TC
Break-even Quantity
The volume or output where all fixed costs are
covered.
TFC
BEQ = -----------------= 3600 = 240 units
P – VC 40-25
Ex. TFC=3600
Selling price (P)= 40
Variable cost per unit (VC or AVC)= P25