Category: 7. Cost and Revenue Analysis

What is Revenue? Revenue is the total amount of money received by an organisation in return of the goods sold or services provided during a given time period. Table of Content [Show] In other words, revenue of a firm refers to the amount received by the firm from the sale of a given quantity of a commodity…

What are Economies of scale? Economies of scale, As a firm expands its production capacity, the efficiency of production also increases. It is able to draw more output per unit of input, leading to low average total costs. This condition is termed as economies of scale. Economies of scale result in cost-saving for a firm as the…

What is Long Run Cost? Long run cost refers to the time period in which all factors of production are variable. Long-run costs are incurred by a firm when production levels change over time. In the long run, the factors of production may be utilised in changing proportions to produce a higher level of output. In…

What is Short Run Cost? Short Run Cost refers to a certain period of time where at least one input is fixed while others are variable. In the short-run period, an organisation cannot change the fixed factors of production, such as capital, factory buildings, plant and equipment, etc. However, the variable costs, such as raw material,…

While computing the total cost of production, there are several types of costs that an organisation needs to consider apart from those involved in the procurement of raw material, labour and capital. Different circumstances give way to different types of costs. For effective decision making, it is essential to distinguish between and interpret the various…