What Is a Marginal Profit?

Marginal profit refers to the profit that is increased by the sales of a unit of product. Marginal profit is a reflection of increasing the sales of products that can increase profits for the company. The unit price of sales minus the marginal cost is the marginal profit, and the marginal profit refers to the profit increased by increasing the unit output. The operating profit of an enterprise minus the accounting cost is the accounting profit. According to China's accounting system, there are concepts such as sales profit, total profit, and after-tax profit. Sales profit is the balance of sales income after deducting costs, expenses and various turnover taxes and surcharges; total profit is the total amount of profits and losses realized by the enterprise within a certain period; profit after tax is the total profit of the enterprise after deducting income tax.

marginal profit

Marginal profit refers to the profit that is increased by the sales of a unit of product. Marginal profit is a reflection of increasing the sales of products that can increase profits for the company. Sales unit price deduction

Marginal profit refers to each additional unit of output

The calculation formula of marginal profit is: marginal profit (M) = marginal income (S)-marginal cost (V)

The marginal profit of a product is the realized profit of the enterprise. Therefore, the concept of profit margin has several uses:

A. Decide whether a certain product produced by the enterprise should be discontinued. As long as the loss product has a marginal profit (that is, its sales revenue is greater than its

The difference between marginal profit and marginal cost

In economics and finance, marginal cost refers to the increase in the total cost of each unit of newly produced product (or purchased product). This concept shows that the cost per unit of product is related to the total product volume. For example, the cost of producing only one car is extremely large, while the cost of producing the 101st car is much lower, and the cost of producing the 10,000th car is even lower (this is because economies of scale and scale production Down). However, considering opportunity costs, marginal costs may increase as production increases. Let's take this example as well. When producing a new car, the materials used may be more useful, so it is necessary to produce the most cars with the least amount of materials, so as to increase the marginal revenue. The marginal cost is different from the average unit cost. The average unit cost considers all products, while the marginal cost ignores the cost of all products before the last product, that is, the first 100 vehicles. For example, the average cost per car includes a large fixed cost of producing the first car (distributed on each car). The marginal cost does not consider fixed costs at all.

The difference between marginal profit and accounting profit

Accounting profit refers to the profit that remains after the owner of an enterprise pays all elements except capital. Accounting profit is calculated by financial accounting, and its basis for recognition, measurement and reporting is enterprise accounting standards and enterprise accounting systems. The recognition of income is strictly in accordance with the accrual principle determined by the accounting system, and the recognition of costs and expenses is strictly in accordance with the principle of matching with income. In order for the company's financial statements to truly reflect the company's financial status at the end of the period and the production and operation results of the period, the company can freely choose the accounting treatment methods permitted by the accounting standards and accounting systems on the premise of conformity and comparability. It is the difference after deducting the cost of expenses. Accounting profit is the result calculated according to accounting standards. The basic method of calculation is to confirm the revenue of an enterprise in a certain accounting period in accordance with the realization principle, determine the cost of expenses in the same period in accordance with the matching principle, and subtract the revenue and related expenses and costs, that is, the enterprise in this accounting period Profit.

The accounting profit is calculated based on the external transactions that actually occur in the company. Every external transaction that a company makes is recorded. Each economic business involves timing and pricing issues during recording. The main problem is how to properly match the costs and costs of a specific period with the relevant income, and calculate the profit in pigeon time. When calculating accounting profits, enterprises should use basic accounting principles such as the accrual principle, the realization principle, and the matching principle. The accounting profit calculated in accordance with these basic principles can reflect a variety of accounting information, such as sales revenue, expenses, cost, sales profit, and operating profit. These information are useful for evaluating the company's operating performance and predicting its future profit and loss. It helps a lot. In view of this, unless faced with large individual or general price level changes, the accounting profit concept is widely used in accounting in various countries, as is China.