Question

Company A sells paper coffee cups to all Caribou Coffee locations in the US. Company B sells dinner plates to Applebee’s. Company A charges $1 for a pack of 100 cups and Company B charges $3 for 1 dinner plate. Tell us exactly what information you would need to determine whether Company A or Company B has higher annual revenue and explain how you would calculate these two figures.

Answer 1

Company A and Company B

Determination of annual revenue:

a) The information needed to determine which company has higher annual revenue include:

i) The annual quantities of packs of paper coffee cups sold to the Caribou Coffee locations in the US for a number of years.

ii) The annual quantities of dinner plates sold to Applebee's for the same years as above.

b) The annual revenues can be calculated by multiplying the price for a pack of 100 cups by the annual quantity sold.

Step-by-step explanation:

Revenue is a function of price and quantity sold. The price is unit selling price and the quantity depends on the period for which revenue is being computed.

Revenue is the earnings from the sale of goods and services. The excess of revenue over cost of sales gives the gross profit, from which expenses would be deducted to arrive at net income after adding other incomes from non-operational activities.