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Marginal Analysis
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Once all of the costs are identified and estimated, these amounts are compared to the estimated
increase in sales attributed to the additional production. This analysis takes the estimated increase
in income and subtracts the estimated increase in costs. If the increase in income outweighs the
increase in cost, the expansion may be a wise investment.
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and reexamine the results. These small shi s, and the associated changes, can help a production
facility determine an optimal production rate.
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Marginal Profit
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Marginal profit is the profit earned by a firm or individual when one additional unit is produced and
sold. It is the di erence betweenmarginal
betweenmarginal costand
costand marginal product (also known asmarginal
asmarginal
revenue),
revenue ), and is o en used to determine whether to expand or contract production, or to stop
production altogether. Under mainstream economic theory, a company will maximize its overall
profits when marginal cost equals marginal product, or when marginal profit is exactly zero.
..............
Marginal profit is di erent from average profit, net profit, or other measures of profitability in that it
looks at the money to be made on producing one additional unit. It accounts for scale of production
because as a firm gets larger, its cost structure changes and, depending oneconomies
oneconomies of scale,
scale,
profitability can either increase or decrease as production ramps up.
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Marginal Cost Of
Production
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The marginal cost of production is the change in total cost that comes from making or producing one
additional item. The purpose of analyzing marginal cost is to determine at what point an
organization can achieve economies of scale.
scale. The calculation is most o en used among
manufacturers as a means of isolating an optimum production level.
Manufacturing concerns o en examine the cost of adding one more unit to their production
schedules. This is because at some point, the benefit of producing one additional unit and
generating revenue from that item will bring the overall cost of producing the product line down.
The key to optimizing manufacturing costs is to find that point or level as quickly as possible.
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Operating Margin
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Operating margin is also o en known as operating profit margin, operating income margin,
return on sales
sales or as net profit margin. However, net profit margin may be misleading in this
case because it is more frequently used to refer to another ratio, net margin.
margin.
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Stock Analysis
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Marginal Analysis
Marginal Profit
Operating Margin
Stock analysis is a term that refers to the evaluation of a particular trading instrument, an
investment sector or the market as a whole. Stock analysts attempt to determine the future activity
Stock Analysis
of an instrument, sector or market. There are two basic types of stock analysis: fundamental analysis
and technical analysis. Fundamental analysis concentrates on data from sources including financial
records,
Profit economic reports, company assets and market share. Technical analysis focuses on the
Margin
study of past market action to predict future price movement.
Cost Accounting
BREAKING DOWN 'Stock Analysis'
Stock analysis is a method for investors and traders to make buying and selling decisions. By
studying and evaluating past and current data, investors and traders attempts to gain an edge in the
Margin
markets by making informed decisions. Many people who subscribe to fundamental analysis don't
hold much faith in technical analysis, and vice versa.
Incremental Cost
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It doesn'tRevenue - MR
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Profit Margin
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While there are a few di erent kinds of profit margins, including gross
gross profit margin,
margin, operating
operating
margin,
margin , (or "operating profit margin") pretax
pretax profit margin
margin and net
net margin
margin (or "net profit
margin") the term profit margin is also o en used simply to refer to net margin. The method of
calculating profit margin when the term is used in this way can be represented with the following
formula:
Other types of profit margins have di erent ways of calculating net income so as to break down a
companys earnings in di erent ways and for di erent purposes.
Profit margin is similar but distinct from the term profit percentage, which divides net profit on
sales by the cost of goods sold to help determine the amount of profit a company makes on selling
its goods, rather than the amount of profit a company is making relative to its total expenditures.
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