what are the different kinds of cost? what is their relationship with revenue?
Answers
Cost may be broadly classified as Fixed Cost and Variable Cost, Direct Cost and Indirect Cost. There are also other types of cost such as opportunity cost, sunk cost etc.
Cost of goods is the actual cost as well as expenses of securing the goods. Whereas Revenue is the total income made by an organisation during a particular period.
The difference between Cost and Revenue is generally called Profit, made by the organisation. In economic terms, Profit is the Net Income, which is shown by formula (Total Revenue – Total Cost).
There are basically 8 kinds of costs. Here are they-
a) fixed cost
b) average and marginal cost
c) real cost
d) money cost
e) production cost
f) variable cost
g) opportunity cost
h) selling cost
Revenue is calculated by adding variable cost and fixed cost, which leads to average total cost. Profit per unit is then calculated by subtracting average total cost from average revenue. Profit per unit is multiplied by total production to achieve revenue.