Revenue Is Equal To Cost

If average cost includes all costs as opposed to only variable costs the firm will neither make any money nor record a loss when average cost equals average revenue.

Revenue is equal to cost. C 50 0 0 10 x. X 100 0 add 100 to both sides get. When marginal costs equal marginal revenues a facility is assumed to be operating at its best efficiency which will work to maximize profits. The relationship between marginal costs and marginal revenues helps to determine production levels.

You can either set revenue equal to cost and solve for. If a single output is priced at 5 and you produce 10 000 units the total revenue will be 50 000. For example we could find the break even point for our widget profit function. C base cost unit cost x.

Under such conditions the company will have no earnings left after paying its workers and suppliers and financing other overhead expenses such as rent of its stores research. Total revenue multiples the price by the quantity. X or you can set profit equal to zero and solve for. The cost of revenue is the total cost incurred to obtain a sale and the cost of the goods or services sold.

Just as we did for the revenue function we will need to add terms for additional items that are being manufactured. See full answer below. Marginal revenue is the additional revenue earned by selling an additional unit of output for example if you owned a coffee shop which sold coffees for 5 each the marginal revenue would be 5. This relationship is important to optimizing business.

Thus the cost of revenue is more than the traditional cost of goods sold concept since it includes those specific selling and marketing activities associated with a sale. When the average revenue is equal to the average total cost it follows that the total revenue is also equal to the total cost. When a firm s average revenue is equal to it is average cost it gets a super profit b normal profit c subnormal profit d none of these. Either way will give you the same answer.

Putting together the total cost portion of the equation is the most intensive aspect of the total cost and total revenue method. If it costs 50 to buy what we need to start a lemonade stand and 10 cents of materials for each cup the cost function for that situation is. From the information provided the company s cost of revenue is 31 million for the fiscal period. When a firm s average revenue is equal to it is average cost it gets a super profit b normal profit c subnormal profit d none of these.