Cost, Revenue and Profit

Thursday, February 23, 2017


Cost 
Cost refers to the amount of money paid out by the firm in obtaining resources required to carryout production. 

Revenue 
Revenue refers to the money received by the firm for its goods and services. Total Revenue is the total amount of money received by the firm. Average Revenue refers to the revenue received per unit of output sold. 

Profit 
Profit is that part of revenue which remains after deducting all costs. 

Profit = Revenue – Cost 

Break-Even Point 

Output Total Cost Selling Price Total Revenue Total Profit Profit/Loss
0 100 ---- ---- -100 Loss
1 300 200 200 -100 Loss
2 450 200 400 -50 Loss
3 600 200 600 0 Break Even
4 700 200 800 100 Profit
5 775 200 1000 225 Profit
6 800 200 1200 400 Profit

It is the point where total revenue equals total cost. At Break-Even Point there will neither be a profit nor a loss.
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