Incremental revenue
Incremental revenue is the change in total revenue caused by choosing one course of action rather than another. It can relate to many units or a whole contract, not only the next single unit. Compare it with incremental costs and opportunity costs on the same decision basis, allowing for displaced sales, price reductions on existing sales and relevant timing. More physical sales do not always produce a positive revenue change if a lower price must apply to all units.
Worked example
A business currently sells 1,000 units at $20, earning $20,000. Cutting the price to $18 increases sales to 1,200 units: new revenue is $21,600 and incremental revenue is $1,600, not the $3,600 revenue from the extra 200 units alone.
Common mistake
Counting only new-unit revenue while ignoring a price reduction on existing sales.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |