Question

Company A sells paper coffee cups to all Costa Coffee locations in the UK. Company B sells dinner plates to Nando’s in the UK. Company A charges 1 pound for a pack of 100 cups and Company B charges 3 pounds 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

Answer: Number of Units Sold

Explanation:

To calculate Revenue there are two details needed at the most basic level. These are the price per unit of the good being sold and the number of units sold.

Revenue = Price * Number of units sold

The question provides us with the price per good to be sold which is £1 per pack of 100 cups for Company A and £3 for 1 dinner plate for Company B.

To know who has the higher revenue, we would need the number of units sold of each.

For instance, assuming Company A sold 10 packs of 100 cups and Company B sold 10 dinner plates, the company revenues would be;

Company A = 10 packs * £1

= £10

Company B = 10 dinner plates * £3

= £30.

Company B would have a higher revenue which are able to know due to the number of units sold being known.