How to Use Total Revenue Calculator
Enter the price of the good. (Example $15 dollars for a book)
Enter the quantity of goods sold(With the above it would be the amount of books sold)
How to calculate total revenue
To increase total revenue, we return to the importance of marginal cost, which helps us understand the relationship between the number of units sold and the total revenue. It is not always the best strategy to raise the price of units to increase revenue. Economists plot data graphs to determine the highest price point and demand to yield the highest revenue, describing price elasticity. Price elasticity measures the response of consumers and their demand in relation to changes in price for a product.
You can notice the maximum price for a product resulting in the highest total revenue based on the following chart.
Total Revenue formula: Price X Quantity
The total revenue is maximized when the company sells 9 units at $60 per unit. In dropping their product price to $50 for the tenth unit, the company actually generated $40 less in total revenue.
Revenue Percent Change
Measuring your revenue by comparing data from two separate periods helps determine how successful you are in moving product or selling services. Determine which two periods you are comparing; whether this year to last year, this month or last month or this quarter versus the last quarter get a comparable length. If you are say looking at Q4 of last year in comparison to Q1 of this year, you can determine the revenue percentage change by taking the current period’s revenue, subtracted by the previous period’s revenue, divided by the previous period’s revenue and multiplied by 100 to get the revenue percentage change.
In the above example: (Q1-Q4) ÷ Q4 x100 = revenue percentage change.
Suppose you earned $30,000 in Q4 of last year and $37,000 in Q1 of this year. This year’s $37,000 minus last quarter’s $30,000 equals $7,000 in revenue growth. Now divide $7,000 by last quarter’s $30,000. This equals 0.23, multiplied by 100 to get a 23% in total revenue growth in comparison to last quarter.
Total revenue is the total income made for a business or investment. Revenue can be broken down into gross or net revenue, but when used without the modifier, it is generally assumed to be referencing the gross or total revenue.
Total sales revenue is the accrued income from sales receipt of goods or services sold over a period of time. For businesses that do not extend credit or have investments, it can be assumed that total sales revenue is the total revenue. In other cases, sales revenue can be a subset of total revenue in that total revenue may include income from other investments, licenses and/or interest from debts.
To use the two terms interchangeably, as is typically assumed in basic accounting models, you can calculate the total revenue by multiplying the number of units sold x sales price.
There are two other key terms in the concept of revenue in economics; first is the average revenue (AR) which can be obtained by dividing the total revenue over total units sold. The second term is marginal revenue (MR), which references the difference of additional revenue from the sale of an additional unit to the original AR. For example, if a company sold one additional unit of X and increased their revenue from $2,500 to $2,700, the marginal revenue in this case would be $200.
There are several ways to calculate revenue, depending on the business accounting method. Accrual accounting will include sales made on credit as revenue, in which case it is important to check the cash flow statement of the business to determine how efficient the company collects the money owed. Cash accounting on the other hand will only count revenue when money has been paid, and is distinguished from revenue by being known as a ‘receipt’. The former is determined as revenue so long as the goods or services have been delivered to the customer, whereas in the latter, a ‘receipt’ can be made upfront with a payment before the goods or services have been rendered.
Companies are often evaluated on both their revenue and net income for investors to determine the health of the business and risk of investment. Revenue is known as the top line, displayed first on a company’s income, where expenses are then deducted to calculate the net income or profit, also known as the bottom line. Net income may grow independent of growth in revenue as a result of cost cutting solutions. Public companies are judged typically by revenue and earnings per share (“earnings” also known as net income) with subsequent stock price movement in response to their measurement against an analyst’s expectations for revenue and earnings per share.