Final answer:
Revenues are the amount of money earned by a company through its business activities and are relevant in assessing the financial performance of Centennial Brewery. By comparing revenues to expenses and costs, the profitability and sustainability of the brewery can be determined. In this case, the brewery should continue in business since its revenues exceed its variable costs.
Step-by-step explanation:
Revenues are the amount of money earned by a company through its business activities. In the case of Centennial Brewery, the revenues amount to $20,000.
Revenues are relevant in assessing the financial performance of the brewery because they indicate the success of the company in generating income. Revenues are compared to the expenses and costs incurred by the brewery to determine profitability.
In this case, the variable costs, which include costs directly related to production or sales, are $15,000. By subtracting the variable costs from the revenues, we can calculate the contribution margin, which represents the portion of revenue available to cover fixed costs and contribute to profit. In this scenario, the contribution margin would be $5,000 ($20,000 - $15,000).
Assessing the financial performance of the brewery involves analyzing the profitability and sustainability of its operations. By comparing the revenues and costs, we can determine if the business is generating enough income to cover expenses and make a profit. In this case, with revenues exceeding variable costs, it suggests that the brewery is generating a positive contribution margin and should continue in business.