Difference between Total Cost and Total Revenue

Difference between Total Cost and Total Revenue-min

The basic difference between Total cost and total revenue is that the total cost includes the total expenditure incurred on the production of a commodity whereas total revenue refers to the money received from selling that commodity.

To know the difference between these two, we must clear the meaning of these terms:

Meaning of Total Cost:-

It refers to the total cost of all the resources used to produce any particular output. For the short term, we can classify the cost into fixed and variable like the factors.

Therefore,

In this period, the total cost can be expressed as:

TC = TFC + TVC

Here,

TC denotes Total Cost

TFC denotes the total fixed costs

TVC denotes the total variable costs

Therefore, it can be written as: 

Total Cost = (Total Fixed Costs) + (Total Variable Costs)

Here, the total fixed costs refer to the expenditure incurred on Fixed factors of production and Total variable costs refers to the total expenditure incurred on variable factors of production.

Meaning of Total Revenue:-

It refers to the total money receipts of a firm from the sale of a given output. TR can be calculated as:

TR = Price × Quantity

or

TR = AR × Q

Here, 

TR represents total revenue

AR represents revenue per unit

Q represents total output

Thus, We can say that TR refers to the money receipts of a firm from the sale of its total output and can be estimated as:

TR = AR × Q

In the words of Dooley,

Total Revenue is the sum of all sales receipts or income of a firm.”

Chart of Difference between Total Cost and Total Revenue :

Basis of Difference

Total Cost

Total Revenue

Meaning It refers to the expenditure incurred by the producer on the production of a commodity. It refers to the money received from selling the produced commodity.

Components

Total cost comprises of fixed cost, the variable cost, marginal cost and average cost in the short run. Total Revenue comprises of Marginal revenue and Average Revenue.
Behaviour It increases with an increase in the production or the output. It increases with an increase in sales.

Represents

It represents the total cost of producing a specific output. Total revenue represents the total money receipts from the sale of the output over a specific period of time.

Nature

TC is regarded as the expenditure for any business enterprise. TR is regarded as the income for any business enterprise.

Calculation

It can be calculated as: 
Total cost = Fixed Cost + Variable Cost
It can be calculated as:
Total revenue = Price × Quantity.


Download the chart:-

If you want to download the chart please download the following image and PDF file:-

Difference between Total Cost and Total Revenue 291x300 - Difference between Total Cost and Total Revenue
Difference between Total Cost and Total Revenue
application pdf 150x150 - Difference between Total Cost and Total Revenue
Difference between Total Cost and Total Revenue

 

Conclusion:

Thus, these both terms stand for every business enterprise. The thing which makes these both distinct is the money flow over a period of time and with the production & sales level. However, the difference between the values of both these terms is termed as profit for a business enterprise.

Thanks Please share with your friends  

Comment if you have any question.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.