Cost and Revenue Analysis: Introduction

Introduction

Cost and revenue analysis refers to examining the cost of production and sales revenue of a production unit or firm under various conditions. The objective of a firm is to earn profit, and not to make loss. However, a firm’s profit or loss is primarily determined by its costs and revenue. In simple terms, profit / loss is defined as the difference between the total revenue and the total cost i.e., Profit (or) Loss = Total Revenue - Total Cost. As costs and revenue are very important to decide the production behaviour of a firm and its supply behaviour in the market, it is necessary to understand the cost and revenue concepts .