1. Lesson 5-3: Cost, Revenue, & Profit Maximization
Mr. Edwards
SAHS

3. Finding Marginal Cost
The costs that an organization incurs even when there is little or no activity are fixed costs, or overhead.

4. Finding Marginal Cost
Variable costs are usually associated with labor and raw materials and change with the business’s rate of operation or output.

5. Total cost is the sum of fixed and variable costs.
Finding Marginal Cost
Total cost is the sum of fixed and variable costs.

6. Finding Marginal Cost
Marginal cost is the extra cost incurred to produce one more unit of output.

7. Average revenue is the average price of every unit of output.
Finding Marginal Revenue
Average revenue is the average price of every unit of output.
Total revenue is all of the revenue a business receives.

8. Marginal revenue is the most important measure of revenue.
Finding Marginal Revenue
Marginal revenue is the extra revenue a business receives from the production and sale of one additional unit of output.
Marginal revenue is the most important measure of revenue.

9. Profitability is affected by both costs and revenue.
Profit Maximization and Break-Even
Profitability is affected by both costs and revenue.
The profit-maximizing quantity of output is the volume of production where marginal cost and marginal revenue are equal.

10. Profit Maximization and Break-Even
The break-even point is the level of production that generates just enough revenue to cover total operating costs.

11. The Internet is one of the fastest- growing areas of business today.
Profit Maximization and Break-Even
The Internet is one of the fastest- growing areas of business today.
E-commerce has much lower overhead and does not require as much inventory as traditional retail stores, so the break-even point of sales is much lower.