Profit

ABC Firm
(Optimum utlisation of Resources)
• 1 Machine (Resources)
• 10 hrs./
day-------------------1000
/ day
2 machine
• Cost per unit (+)
???
• Customers 1200

• Remaining—discount/
 Dumping
• Pen Bangladesh– 1 lakh per month (Demand)
• Avg Market Rs. 5/ Pen (Normal Profit)
• Chic cha Pen 40,000 ---- Rs 3/ pen (?)
• Produce 75000
• 35,000 remaining Rs. 3 yaa
something lass than 3

• Production ++++ (ECONOMIES OF SCALE)

Produce/ Sale Total Profit Marginal Profit Average Profit
(TPn-TPn-1)
10
1 10 -
10
2 20 20-10=10
9.66
3 29 9
12.5
4 50 50-29= 21
11
5 55 5
Accounting Vs. Economic Profit
Account Profit (Recording of Profit= Sales -
transaction) Cost

Cost
Revenue
• Rent- 20,000 (goes out) Sales=1,00,000 (Comes in)
• Staff (2)- 30,000 (goes
out)
• Raw Materials- 15,000 Accounting Profit=
(goes out) 35,000

• Total Cost=65,000
 Economics (Resources should be paid)

• Cost
• Revenue

Sales=1,00,000
• Building- 20,000
• Staff (2) -30,000
• Raw Materials- 15,000
• Owner Salary- 20,000 Economic Profit=
• Interest-10,000
5,000
• Total Cost- 95,000
 Opportunity Cost
12,000

• Resources
• Alternative uses 10,000

8,000

6,000

2000
• Salary-20000 (1 employee) Resource utilised
• Electricity-1000 Resource
• Raw Materials-5000 resource
• Self employed as a resource is
utilised-paid
• Total Cost=26000(Resource utilised)+ salary of
owner10000
• Books of Account
• Reward of Risk
• Sales Revenue=40,000 (Earned) Comes inside
• Profit=40-36=4000 Accounting Profit