How to Calculate Total Revenue with Formula and Solved Examples
The total revenue formula is an important concept in commerce and economics. It allows businesses and students to calculate the total money earned from selling goods or services. Knowing this helps in school exams, competitive tests, and in understanding how real businesses operate.
| Term | Definition | Relevance in Business/Economics |
|---|---|---|
| Total Revenue (TR) | All money received from sales during a period | Measures business performance, guides pricing |
| Price per Unit (P) | Amount charged for each item or service | Used to set or adjust selling strategies |
| Quantity Sold (Q) | Number of units sold in a period | Shows sales volume, crucial for growth analysis |
Total Revenue Formula
The total revenue formula helps calculate the total money a business receives from selling goods or services. Simply multiply the price of each unit by the number of units sold. This is essential for understanding business income and solving exam numericals.
Example: If a shop sells 200 notebooks at Rs. 30 each, the total revenue is Rs. 6,000 (30 × 200).
How to Calculate Total Revenue
To calculate total revenue, identify the selling price per product and count how many are sold. Then, multiply the two values. This simple approach works for any business and is often used in accounting, economics, and finance questions.
Examples of Total Revenue Calculation
- If a bakery sells 100 cakes at Rs. 50 each: TR = 100 × 50 = Rs. 5,000
- Online services offering 50 subscriptions at Rs. 200 each: TR = 50 × 200 = Rs. 10,000
- Monthly tuition collected from 40 students at Rs. 800 each: TR = 40 × 800 = Rs. 32,000
Graphical Representation of Total Revenue
A total revenue graph usually plots total revenue (vertical axis) against quantity sold (horizontal axis). In perfect competition, the line rises steadily as every unit is sold at the same price. With elasticity, changes in price can affect the slope and shape of the curve.
A straight line from the origin shows constant price per unit. If price changes with quantity, the curve bends.
Application of Total Revenue Formula in Economics and Accounting
- Used to prepare income statements in accounting
- Helps set prices and forecast profits in business
- Evaluates market strategies in economics
- Finds relationship with average revenue and marginal cost
- Important for board and entrance exam numericals
- Applied in Excel for quick calculations in business
Total Revenue vs Profit
Total revenue is all the money made from sales. Profit is what remains after subtracting all costs and expenses from total revenue. Students often confuse the two, but knowing the difference is crucial for exams and practical business understanding. For deep clarity, visit Difference Between Revenue and Profit.
Related Formulas and Further Learning
- Find Average Revenue Formula for revenue per unit.
- Learn about Marginal Cost Formula to understand cost impact.
- Explore all revenue concepts together in Concepts of Total Revenue, Average Revenue, and Marginal Revenue.
- See how total revenue shapes Profit Maximisation strategies.
- Connect to financial statements at Income Statement.
- Study price elasticity’s effect on revenue at Price Elasticity of Demand.
- For ratio-based analyses in exams, visit Ratio Analysis.
Practical Use of the Total Revenue Formula
At Vedantu, we recommend regular practice of total revenue calculation for exam success. Knowing this concept helps students tackle commerce numericals and makes real-world business analysis easier. It is also useful in Excel, accounting software, and while analyzing sales data for any venture.
This concept fits in Class 11 & 12 CBSE/ICSE, CA Foundation, and various competitive exams. It is also used daily by business professionals and entrepreneurs. Mastery will help in MCQs, long answers, and numerical problems alike.
For further solutions and board-level examples, refer to resources like TS Grewal Solutions Class 11 Accountancy Chapter 6 and Sandeep Garg Microeconomics Class 12 Solutions - Chapter 6.
In summary, the total revenue formula—TR = Price per Unit × Quantity Sold—is a foundation for economic and business analysis. It is simple to use, important for exams, and guides real-world decision-making in all fields related to commerce and financial management.
FAQs on What is the Total Revenue Formula?
1. What is the total revenue formula?
Total revenue is the total income a business generates from selling its goods or services. It's calculated by multiplying the price per unit by the quantity sold. Total Revenue = Price × Quantity
2. How do you calculate total revenue?
Calculating total revenue is straightforward: multiply the price of a single unit by the total number of units sold. For example, if a company sells 1000 units at Rs. 50 each, the total revenue is Rs. 50,000. This formula is applicable across economics, accounting, and financial management contexts.
3. What is the formula for calculating TR?
The formula for calculating total revenue (TR) is: TR = Price per unit × Quantity sold. This simple formula is fundamental to understanding a business’s sales income and business earnings. It forms a base for advanced concepts like price elasticity of demand and revenue curve analysis.
4. What is our total revenue?
To determine your total revenue, you need to know the price per unit and the number of units sold. Multiply these two figures together. Remember, total revenue is different from profit; profit considers costs and expenses.
5. What is the difference between total revenue and profit?
Total revenue represents the total income from sales, while profit is the revenue remaining after deducting all costs and expenses. Profit calculation requires further analysis beyond just the price and quantity sold.
6. How do you calculate the total revenue?
The calculation of total revenue is simply Price per unit multiplied by Quantity sold. This applies to both goods and services and is used widely in microeconomics and macroeconomics. Remember to account for all revenue streams.
7. What is the Formulae of revenue?
The basic formula for revenue is Total Revenue = Price × Quantity. However, there are related formulas such as average revenue (AR = TR/Q) and marginal revenue (MR = change in TR / change in Q), which are essential for elasticity calculations. These are key concepts for commerce exams.
8. Total revenue formula in economics?
In economics, the total revenue formula remains the same: Total Revenue = Price × Quantity. This formula is crucial for understanding concepts such as price elasticity of demand and the relationship between price and revenue under different market structures like perfect competition.
9. How does price elasticity affect total revenue?
Price elasticity of demand significantly impacts total revenue. If demand is elastic (responsive to price changes), a price decrease increases total revenue. Conversely, if demand is inelastic (unresponsive to price changes), a price increase boosts total revenue. This is a crucial concept in economics.
10. Can I calculate total revenue using Excel?
Yes, you can easily calculate total revenue in Excel. Simply use the formula =Price*Quantity. This allows for quick and efficient calculations, especially when dealing with large datasets or multiple products. The result will be your total revenue. This is useful in accounting and financial modeling.
11. Total revenue formula example?
Let's say a company sells 500 units of a product at Rs. 200 each. The total revenue is calculated as: Total Revenue = 500 units × Rs. 200/unit = Rs. 100,000. This simple example demonstrates the practical application of the total revenue formula.
12. Where does total revenue appear in the income statement?
Total revenue is typically found at the top of the income statement, representing the company's gross sales before deducting any expenses or costs. It’s a key component of financial statement analysis. Understanding its location is vital in accounting.
