Category: 6. Concepts of Cost and Revenue

What is Revenue? Revenue is the amount received by an organisation from the sale of a given quantity of a commodity in the market. There are three important terms in Revenue; viz., Total Revenue, Average Revenue, and Marginal Revenue. The total receipts from the sale of a given quantity of a commodity are known as Total…

What is Revenue? Revenue is the amount received by an organisation from the sale of a given quantity of a commodity in the market. Simply put, is the amount of money received by a producer for the sale proceeds. For example, if a firm gets ₹20,000 by selling 100 tables, then ₹20,000 will be the revenue of…

What is Cost? Cost refers to the total expenditure made on inputs or resources that are used for the production of final goods or services. The resources used by a firm are limited in nature and thus require efficient allocation to maximise the firm’s profit. The cost or economic cost of a firm consists of…

What is Variable Cost? Variable costs are expenses that fluctuate in direct proportion to the level of production or sales activity within a business. In other words, variable costs increase as production increases and decrease as production decreases. These costs vary with the volume of goods or services produced and sold. Variable costs are important…

What is Marginal Cost? The additional cost incurred to the total cost when one more unit of output is produced is known as Marginal Cost. Marginal Cost is also known as Incremental Cost. Marginal Cost can be used to determine the optimal production volume and pricing. It includes both variable costs (such as labour, material, etc.) and…

What is Average Cost? Average Costs are the per unit costs which explain the relationship between the cost and output in a realistic manner. These per-unit costs are obtained from Total Fixed Cost, Total Variable Cost, and Total Cost. The three different types of per-unit costs are as follows: 1. Average Fixed Cost (AFC): The per unit fixed…

What is Total Cost? In the short run, some of the factors are fixed, while other factors are variable. In the same way, the short-run costs are also categorised into two different kinds of cost; viz., Fixed Costs and Variable Costs. The sum total of these costs is equal to the Total Cost. 1. Total Fixed Cost (TFC) or Fixed…

What is Cost? Cost refers to the total expenditure made on inputs or resources that are used for the production of final goods or services. The resources used by a firm are limited in nature and thus require efficient allocation to maximise the firm’s profit. The cost or economic cost of a firm consists of…

What is Cost? Cost refers to the total expenditure made on inputs that are used for the production of final goods or services. The cost is the sum of the Explicit Cost and Implicit Cost. What is Explicit Cost? The actual expenditure made on the inputs or the payments made to the outsiders to hire their factor services…

What is Cost Function? Cost Function refers to the relationship between input costs and output. In simple terms, the functional relationship between cost and output is referred to as the cost function. It is written as: C = f(q) Where,  C = Cost of Production;  q = Quantity of Production; and f = Functional Relationship Geeky…