Revenue Total cost Essay

Total cost is the sum of total fixed cost and total variable cost. The relationship between product and costs is called cost function. Revenue is generally estimated in modern micro economics  theory to explain the equilibrium of the firm. It is not in case of all the firms that it knows its costs before it knows in revenues but for a manufacturing concern in a long run it is quite possible to estimate its costs  before it actually comes across its actual revenue. But to say for a consultancy service firm to estimate its costs before its revenue it is a typical task and sometimes it might not prove to be accurate. It can only reach to a approximate point. In simple words-

 REVENUE  = Cost + Expenditure + Profit

Cost  has a direct effect on Revenue.

Knowledge of Revenue can be derived only when one has the knowledge of cost.

The knowledge of revenue is based on the cost you estimate. But it is not 100 percent accurate. Knowledge of costs is directly effect the knowledge of revenue. Knowledge of cost enables to make decisions of expenditure and helps to set the profit margin. Hence we can say that knowledge of cost is directly proportional and related to knowledge of revenue.

 For example in a consultancy service concern if it estimates the work to be done in 150 hours  but the actual work is done in 170 hours then it results in extra 20 hours labour and use of resources which leads to increase in costs.

The ways in which a concern can have an ideal relation is by doing extensive research in the matters related to cost control and estimating the revenue using such research reports. Research have to be conducted both for inside and outside the firm for long run aspect neglecting the short run perspective to be very accurate. Estimates should be done by researchers who are expert in the concerned field and their report should be properly analysed and the planning department should concentrate on the given scenario. Further efforts should be made to increase the efficiency of the firm by taking effective steps and using cost control and cost effective techniques.