Marginal cost and marginal revenue: what each extra leu of sales brings

We added a new chapter to the report: marginal cost and marginal revenue analysis. It answers one of the most practical questions an owner asks: each extra leu of sales - how much profit does it actually bring me?

What it means, briefly

From the trial balance we split expenses into fixed (rent, base salaries, depreciation) and variable (raw materials, goods - they rise with sales). Out of this come two figures for every new leu of sales:

• Marginal cost - how much of each leu goes into variable cost.
• Net marginal revenue - what is left, i.e. the contribution margin. It is what you earn extra on each leu sold above break-even.

The economic rule is simple: as long as the marginal cost is below 1 leu, every extra leu of sales brings profit. The real limit is not accounting, but capacity and the market.

How far the edge is, how much room upward

From the same figures we compute operating leverage: how much profit is amplified by a 1% rise in sales. At a leverage of 1.4×, a 10% rise in sales moves profit up by about 14%. But it amplifies both ways, including on the way down.

That is why we also show the safety margin: how far sales can fall before the break-even point. A company with a 70% cushion rests easy; one with 8% must pay attention. And if it is below break-even, we say how much sales must rise to get back to zero, without drama.

Sales scenarios

At the end, a table and a chart with profit under sales variations, from −15% to +20%. Variable costs move with sales, fixed costs stay. You see at a glance how well the company holds up against a drop and how much it gains from a rise.

Honest all the way

The trial balance has no quantities, so the analysis is per leu of turnover, not per physical unit. And the fixed/variable split is derived from the nature of the accounts, so it is a good approximation, not a measurement to the gram. We say so clearly in the report.

You can see it now, on real data, in the example report.