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Revenue Calculator

Table of contents

How to calculate total revenue?How to use the revenue calculator?What is the total revenue test? Example on how to calculate revenueFAQs

The revenue calculator is a simple tool that helps you to compute the total revenue made by selling a certain quantity of a good or service at a certain price. Besides, if you read further, you can quickly learn how to calculate total revenue and get some insight into the economic concepts connected to revenue. You can, for example, learn how a total revenue test can help increase your revenue.

You may also find our marginal revenue calculator and revenue per employee calculator useful if you want to get more insight into this subject.

How to calculate total revenue?

The revenue calculator applies the simple revenue formula, which is the following:

total revenue = price * quantity

Read on to learn how to calculate revenue with an example and how analyzing the basic components of total revenue in different demand scenarios can help you increase your total revenue.

How to use the revenue calculator?

Now that you know how to calculate revenue, it's time to inspect our revenue calculator.

It's straightforward to use, and, more importantly, it works in different directions. Simply input values into any two of the three available fields and we will calculate the third one for you in the blink of an eye.

What is the total revenue test? Example on how to calculate revenue

Knowing how to calculate total revenue isn't enough! If you've ever wondered how managers decide on which price strategy to use to maximize their revenue, you are in the right place. Businesses all around the world apply the total revenue test to support cash-flow management.

Let's demonstrate the concept behind this practical analysis with a simple example. Suppose you are an excellent programmer and you've just created a handy software. To make some money from it, you set up a small business to sell this software through. After a year of operation, you conduct a revenue analysis to see how to increase revenue in the future. To do that, you ask your smart economist friend, Jack, to help you with it. Jack happily prepares a detailed revenue analysis (the software's possible prices, the respective quantity that will be demanded, and your total revenues) for you, as you already know how to calculate revenue. Jack also calculates the related price elasticities. The below table summarizes these figures:

Price (P)

Quantity (Q)

Total Revenue (P*Q)

Price Elasticity (E)

A

$0

40

$0

0.00

B

$10

35

$350

-0.14

C

$20

30

$600

-0.33

D

$30

25

$750

-0.60

E

$40

20

$800

-1.00

F

$50

15

$750

-1.67

G

$60

10

$600

-3.00

H

$70

5

$350

-7.00

I

$80

0

$0

-∞

Now, let's say you've been selling your software for 30 dollars. How will you maximize your total revenue for the upcoming year? Should you increase the price to boost cash flow, or cut the price to find more costumers?

You may notice that the absolute value of price elasticity increases as the price increases. When the absolute value of price elasticity is lower than 1 (elastic), an increase in price leads to an increase in total revenue, and a value higher than 1 (inelastic) leads to a reduction. So you probably already know the answer: according to the analysis, if you raise the price to 40 dollars, you would reach the highest revenue, 800 dollars. Therefore, the price-quantity combination that maximizes total revenue is point E, where the price elasticity equals -1.

To summarize, the total revenue test tells us that, if demand is elastic, an increase (decrease) in price will lead to a decrease (increase) in total revenue. If demand is inelastic, an increase (decrease) in price will increase (decrease) in total revenue. Finally, total revenue is maximized at the point where demand is unitary elastic (equal to (minus) 1).

🔎 Hiring and firing employees also affects business revenue. Here's a tenure calculator to help you find your employee's average years of service.

FAQs

What is total revenue?

Total revenue is the entire amount of money a company makes from selling its goods or services, before any expenses are subtracted. It can easily be calculated by multiplying the price of the goods or services by the total number of products sold. It's an indicator of a company's financial performance.

How do I calculate total revenue?

To calculate total revenue:

  1. Determine the selling price of the product or service.
  2. Identify how many units were sold.
  3. Multiply the selling price by the total units sold.

The result is the total revenue, indicating the total income from sales before deducting any expenses.

What is the economic profit if the cost is $96,000 and the total revenue is $120,000?

If the cost is $96,000 and the total revenue is $120,000, then the economic profit is $24,000. This means that the company earned $24,000 more than it spent.

What is the difference between marginal revenue and total revenue?

Total revenue is the total amount of income generated from selling a certain quantity of goods or services, while marginal revenue is the additional income gained from selling one more unit of a good or service. Total revenue considers the overall sales, while marginal revenue focuses on the incremental revenue generated by selling one more unit.

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