formulas marketing

Profit Equation

Profit = Total Revenue - Total Cost

Profit Formula

Profit = (P × Q) - [FC + (UVC × Q)]

Total Revenue

TR = P × Q

Average Revenue

AR = TR ÷ Q = P

Marginal Revenue

MR = ΔTR ÷ ΔQ

Total Cost

TC = FC + TVC

Total Variable Cost

TVC = UVC × Q

Marginal Cost

MC = ΔTC ÷ ΔQ

Price Elasticity of Demand

E = %Δ Quantity Demanded ÷ %Δ Price

Elastic Demand

|E| > 1

Inelastic Demand

|E| < 1

Unitary Elastic Demand

|E| = 1

Elasticity Calculation

E = [(Q₂ - Q₁) ÷ Q₁] ÷ [(P₂ - P₁) ÷ P₁]

Unit Margin

Unit Margin = Selling Price - UVC

Percent Margin

Percent Margin = Unit Margin ÷ Selling Price × 100

Percent Margin Formula

Percent Margin = (P - UVC) ÷ P × 100

Selling Price with Markup

Selling Price = Cost + (Cost × Markup %)

Break-Even Quantity

BEPQ = FC ÷ (P - UVC)

Break-Even Quantity Using Unit Margin

BEPQ = FC ÷ Unit Margin

Break-Even Price

P = (FC ÷ Q) + UVC

Target Profit Quantity

Q = (Target Profit + FC) ÷ (P - UVC)

Return on Sales

ROS = Profit ÷ Total Revenue

ROS Formula

ROS = [(P × Q) - FC - (UVC × Q)] ÷ (P × Q)

Profit Maximization

Set MR = MC

Value Equation

Value = Perceived Benefits ÷ Price

Price Equation

Final Price = List Price - (Incentives + Allowances) + Extra Fees

P

Unit Price

Q

Quantity Sold

FC

Fixed Cost

UVC

Unit Variable Cost

TR

Total Revenue

TC

Total Cost

TVC

Total Variable Cost

AR

Average Revenue

MR

Marginal Revenue

MC

Marginal Cost

BEPQ

Break-Even Quantity

ROS

Return on Sales

Δ

Change in

Markup

Amount added to cost to determine selling price

Margin

Difference between selling price and unit variable cost

Break-Even Point

Point where total revenue equals total cost and profit is zero

Target Profit

Desired profit amount used to calculate required sales quantity

Return on Sales

Profit expressed as a percentage of total revenue

Profit Maximization Rule

Profit is maximized where marginal revenue equals marginal cost

Perceived Benefits

Benefits consumers believe they receive from a product

Value

Perceived benefits relative to the price paid

List Price

Starting price before incentives, allowances, or extra fees

Incentives

Price reductions or benefits offered to encourage purchase

Allowances

Price reductions given for specific conditions or activities

Extra Fees

Additional charges added to the final price