Explain incremental revenues and incremental costs. Provide a business example for each of these terms.

Explain incremental revenues and incremental costs. Provide a business example for each of these terms.

Expert Solution

Incremental revenue means earn additional revenue from producing additional quantity. In simple terms incremental revenue means the increased revenue from a specified increase in sales. It can also be used to the additional return from one investment decision compared with another.example of Incremental revenue is the additional revenues from the next 200 units.

A Company sells $20,000 worth of trainers per month without running any advertising campaigns. Throughout March the company spends $5,000 on a Amazon campaign and sells $32,000 worth of trainers in total.

Incremental revenue = $32,000 — $20,000

Incremental revenue = $12,000

Incremental cost refers to the the cost added by producing one additional unit of a product or service. it refered as total change of company's balance sheet and income statement due to production or sale of additional unit of product. Incremental cost also known as differential cost. Incremental costs may include more than the change in variable costs.

Incremental costs are also useful for deciding whether to manufacture a good or purchase it from elsewhere. Only the additional costs associated with the manufacturing of the good should be considered and compared to the retail price.

Example

If a company responds to greater demand for its unit by increasing production from 90,000 units to 1,00,000 units, it will incur additional costs to make the extra 10,000 unit. If the total production cost for 90,000 widgets was $4,50,000, and the total cost after adding the additional 10,000 units increased to $5,00,000, the cost for the additional 10,000 units is $50,000. The incremental cost, or cost of adding one unit, would be $5.

2nd example :-

Suppose now after adding the new product line it is able to produce 200 units at ₹ 3500, so here the incremental cost is ₹ 1,500

Per unit cost of manufacturing the products has actually decreased from ₹ 20 to ₹ 17.5 by introducing the new product line.

ekkarill92 answered 2 months ago

Explain sunk costs and opportunity costs. Provide a business example for each of these terms.

Explain the following terms and give at least one example for each. 6- Unavoidable costs 7-...

Explain the following terms and give at least one example for each. 6- Unavoidable costs 7- Common costs 8- Book Value 9- Sunk Costs 10- Inventory Turnover

Write a detailed definition of each of the following terms and provide an example of the...

Write a detailed definition of each of the following terms and provide an example of the term or how it would be used. Your example should demonstrate an understanding of the term and/or the role it plays in quality control/assurance. MQSA FDA JCAHO Line par resolution Star test pattern Pinhole camera Half value layer Wire mesh test AEC PACS RIS Erasure thoroughness Plate uniformity Grayscale Luminance Spatia

Part 2: Explain the following managerial accounting terms and provide a real-life example for each accounting...

Part 2: Explain the following managerial accounting terms and provide a real-life example for each accounting term: administrative expenses and selling expenses . Explain why each accounting term is either classified as a product cost or period cost.  Part 3: Explain the following inventory account and provide a real-life example from three (3) different manufacturing companies: raw materials inventory .  Part 4: Explain the following inventory account and provide a real-life example from three (3) different manufacturing companies:...

Agree/Disagree and Why? Operational budgets are the highlight of a business/company’s income/revenues and costs/expenses in terms...

Agree/Disagree and Why? Operational budgets are the highlight of a business/company’s income/revenues and costs/expenses in terms of what their detailed projections are. Their income statement is affected by the anticipated cash flows resulting from buying and selling activities and recorded on their budget. Capital budgets are expenses used for equipment or asset purchases based on the projected need for a particular asset/equipment. Businesses/companies factor these long-term capital expenses into their budgets and subsequent balance sheets. Their differences between the two...

Please provide a short definition of the following terms along with an example of each. a....

Please provide a short definition of the following terms along with an example of each. a. GAAP: b. P&L Statement c. EBITDA d. COGS

For each of the following terms, provide a brief classroom example that illustrates the term.: a....

For each of the following terms, provide a brief classroom example that illustrates the term.: a. Positive reinforcer b. Primary reinforcer c. Secondary reinforcer e. Negative reinforcement f. A variable reinforcement schedule g. An interval schedule of reinforcement Please answer with a minimum of 3 paragraphs.

In this post, describe the three different types of costs and provide an example of each...

In this post, describe the three different types of costs and provide an example of each of the cost types.

Explain the terms ecological fallacy and reductionism and provide examples of each.

provide and explain in 1 to 2 sentences each an example of each of the following:...

provide and explain in 1 to 2 sentences each an example of each of the following: For Organizational Culture - 1) Artifact, 2) Value/Belief, & 3) Assumption For Organizational Environment - 1) Political/Legal, 2) Sociodemographic, 3) Technology, 4) Economic, & 5 Natural Environment (e.g., the globe and nature). Remember - culture is internal to the organization, shaped by shared experience. And, the environment is external, providing opportunities and threats.

Question