The first year, that would be the profit rate. God knows what the profit rate should be the second year. What is the depreciation rate? How is it affected by the business cycle?
On Mon, Dec 10, 2001 at 07:18:45PM -0600, William S. Lear wrote: > On Monday, December 10, 2001 at 16:03:05 (-0800) Devine, James writes: > >> How does one calculate the profit rate for a given unit cost? I'm > >> assuming it is: > >> > >> 100% * ((profit - unit cost) / unit cost) > >> > >> Is this correct? > > > >If you replace "profit" with "price per unit," that's more like a profit > >margin. > > Yes, stupid typo for a stupid question. The formula should be: > > 100% * ((price per unit - unit cost) / unit cost) > > >a profit _rate_ would measure total profit [(price - unit cost) times the > >number of units sold] as a percentage of capital invested. > > OK, so "profit margin" is, as above: > > 100% * ((price per unit - unit cost) / unit cost) > > and "profit rate" is: > > 100% * ((price per unit - unit cost) * units sold) / invested capital > > ? So, if I sell 100 widgets that cost 2 cents to make at 1 dollar a > piece, and if I had to spend ten thousand dollars to set up the plant > to do the work, the profit rate would be: > > 100% * ((1.00 - .02) * 100) / 10000 > > or .98 percent, while the profit margin would be (again), 4,900%? > > > Bill > -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
