an important role in support of their managerial decisions in various types of business plays a marginal analysis.His second name - the ultimate analysis.
Methods of marginal analysis is based on a comparison of the three groups of important economic indicators, "the cost - income - income."According to the results of this study predicted critical and the optimum size of each of these indicators in the set values of others.In this method of calculation of administrative decisions and has a second name - break-even analysis or assistance income.
Margin analysis can serve as finding a more favorable combination between fixed costs, variable costs per unit of output, sales volume and price.That is why all the costs should be divided into fixed and variable.
Margin Analysis is conducted in profits compared with the marginal income, which is calculated as sales revenue minus variable costs, which account for this implementation.Based on the definition, it is safe to say that the marginal income includes fixed costs and profit.
To study the factors changes the amount of profit and forecasting its optimum value of marginal analysis provides the following formula:
Pr = RR * (C - PHC) - PP where PR - the volume of sales of certain products;C - the unit price;PHC - variable costs per unit of output;PP - the fixed costs of the total sales volume of the same type of product.
This formula can be used in the analysis of the profit received from the sale of certain products.Allows you to appreciate its changes by the total number of implementation, the level of variable and fixed costs, as well as price.This calculation takes into account, in addition to direct effects on the profit of sales, also indirectly.Due to such characteristics of the application of these calculations it is possible to accurately determine the influence of factors on changes in the amount of profit.
people to build your business, they want a permanent maximize net income, ie,reduce the difference between revenues and costs.To achieve their goal, they can change a certain parameter of activity, which is quite important and is called "control variable".
So, if the company is engaged in production, the manager can adjust the volume or product, or the amount of purchased resources.In the case of trading activities as a control variable can serve as a selection of the priority in the procurement of goods (either food or clothes).
That marginal analysis can answer the pressing question of any businessman about whether to get maximum results with an increase in the control variable has at least one unit.
basic principles of marginal analysis are:
- selection of control variable;
- calculation of the income limit, which provides the degree of increase of the gross revenue while increasing the control variable per unit;
- calculation of marginal costs, showing the rate of change of total costs while increasing control variable by one;
- a comparison of these two indicators.
In excess of marginal revenue over marginal cost to increase the control variable is expedient, otherwise - no.
Based on the foregoing, we can conclude that the marginal analysis helps business entity to reliably estimate the results of business activities and to predict their optimal value for the future.
