Total revenue is what comes into the company as a result of selling, it is just the quantity sold times the respective price.
Costs, on the other hand, is the expenditure that the business must incur to produce the items sold.
The difference between total revenue and the total cost is total profit. Now the problem for management is to ensure that all other items of expenditure are covered by the total profit, and a surplus remains, and we call this surplus the net profit.
Now the decision that managers must make is based on their calculation of the costs necessary to make a single unit of the product, and then add air profit percentage on top of that. The cause of this is the profit margin. In this video, we’ll explore this in more detail.
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