The main goal of any organization is to obtain the highest possible profit. To this end, the company manufactures products, sells and minimizes costs. When a firm sells the goods it produces with total revenue, this is called gross income. Profit, respectively, is the difference between gross income and production costs.
It is necessary
Determination of variable and fixed costs
Instructions
Step 1
To calculate profit before tax, it is necessary to deduct the amount spent on production from the total amount of total revenue.
Step 2
However, production costs can be explicit or implicit. Subtracting the explicit costs, that is, external costs, from the total revenue, the result is an accounting profit. The accounting profit of an organization characterizes the result of the organization's activities for a certain period of time. But explicit and implicit costs may not always be constant. To obtain the value of economic profit, it is necessary to subtract internal costs and costs of entrepreneurial resources from the accounting profit.
Step 3
The value of economic profit shows the prospects for the organization's activities and future results, this is how profit before tax is calculated. The cost of entrepreneurial resources shows the value of the share of profit that depends on the capabilities of the production manager.
Step 4
At a manufacturing enterprise, the profit generation process goes through 2 stages. In the first stage, money is invested in production, products are manufactured. That is, 2 factors are involved - capital and labor. Thus, a new value of the created goods is created and profit is formed. To calculate the new cost, it is necessary to calculate the difference between the cost of the goods produced and the amount for the purchased raw materials and materials. The cost of the finished product includes the cost of production and the new cost.
Step 5
From the total income, the organization pays rent, interest on loans, etc. As a result, only net profit remains.
Step 6
In the second stage, the profit is realized. The manufacturer's profit is equal to the difference between the price of the product and the cost price. The cost is made up of the total cost of production, and the profit is obtained from the difference between the cost and the price.
Step 7
The cost price can also vary depending on the production costs. To calculate the profit in the short-term production period, you need to determine the variable and fixed costs. When calculating profit in the long run, it must be borne in mind that any costs will be variable.
