Calculate average profit from revenue and cost, plus profit margin, markup, break-even units, and service pricing for target margins.
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Average Profit Formula
The following formula is used to calculate the Average Profit.
Pave = AR - AC
- Where Pave is the Average Profit ($)
- AR is the average revenue ($)
- AC is the average cost ($)
To calculate the average profit, simply subtract the average cost from the average revenue.
How to Calculate Average Profit?
The following example problems outline how to calculate Average Profit.
Example Problem #1:
- First, determine the average revenue ($). In this example, the average revenue ($) is given as 65.
- Next, determine the average cost ($). For this problem, the average cost ($) is given as 5.
- Finally, calculate the Average Profit using the equation above:
Pave = AR – AC
The values given above are inserted into the equation below:
Pave = 65 – 5 = 60.00 ($)
Example Problem #2:
The variables needed for this problem are provided below:
average revenue ($) = 70
average cost ($) = 8
Entering these values and solving gives:
Pave = 70 – 8 = 62.00 ($)
