What is incremental revenue?

Incremental revenue refers to the additional revenue generated by selling additional units of a product or service. It is calculated by subtracting the revenue generated from existing sales from the total revenue generated after selling additional units.

Incremental revenue is important for businesses to understand as it helps in evaluating the financial impact of introducing new products or services, expanding into new markets, or implementing marketing strategies. It also helps in making informed decisions about pricing, promotions, and production levels.

Incremental revenue is often used in conjunction with incremental costs to determine the profitability of a particular course of action. By comparing the incremental revenue with the incremental costs, businesses can assess the potential return on investment and make strategic decisions to drive growth and increase profits.