The formula to calculate the incremental profit is:
\[ \text{IP} = (\text{PPU} - \text{CPU}) \times \text{U} \]
Where:
Incremental profit is the additional profit earned from selling one more unit of a product. It is calculated by subtracting the cost per unit from the price per unit and then multiplying by the number of units sold. This metric is useful for businesses to understand the profitability of increasing production or sales.
Let's consider an example:
Using the formula to calculate the incremental profit:
\[ \text{IP} = (50 - 30) \times 100 = 2000 \text{ dollars} \]
This means that the incremental profit for this scenario is $2000.