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Profit can be calculated as:
(A) Revenue less marginal cost
(B) Revenue less marginal cost plus fixed production costs
(C) Revenue less marginal cost less fixed production costs
(D) Revenue less total absorption costs less fixed costsSir this is a question fetched from the MA1 notes. Sir the answer is ‘C’. It is although best of these but my question is that where do we charge fixed non-production costs. Like Revenue – MC (Variable Production + Non Production) – Fixed production costs.
If you just want to calculate a final product figure then
Profit = revenue less variable cost less fixed costs
Or it can be done in two steps:
Contribution = revenue less variable costs
Profit = contribution less fixed costs
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