Total Revenue vs. Total Cost: What’s the Difference?
The main difference between total revenue and total cost is that total revenue is used to calculate profit whereas total cost is subtracted from total revenue to determine the company’s net profit.
Before we move to more differences, let’s first understand Total Revenue and Total Cost:
- Total Revenue: Total revenue is the total amount of money a company earns from its sales.
- Total Cost: Total cost is the total amount of money a company spends on producing and selling its products or services.
Now, let’s get to Total Revenue vs Total Cost:
Major differences between Total Revenue and Total Cost
| Total Revenue | Total Cost |
|---|---|
| Total revenue is calculated by multiplying the quantity of goods or services sold by the price per unit. | Total cost includes all expenses related to production and sales. |
| Total revenue is the inflow of money. | Total cost is the outflow of money. |
| Total revenue is affected by changes in price and quantity. | Total cost is affected by changes in production and operating expenses. |
| Total revenue can be increased by increasing sales volume or price per unit. | Total cost can be reduced by improving efficiency, lowering costs, or negotiating better prices with suppliers. |
| Total revenue represents the income earned from sales. | Total cost represents the expenses incurred to produce and sell the product. |
So, these are the main differences between the entities.
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