Cost of Revenue (CoR) is a term used to describe a company’s cost incurred in order to make and deliver their goods and services to the consumer. It is an important part of a business’ income statement, and is usually the largest expense the company will need to cover.

CoR is more comprehensive than the more traditional ‘cost of goods sold’ (COGS) as it takes both internal and external production costs into an account. Not only is the cost of the goods (manufacturing and purchase of raw materials) taken into account, but also the cost of external production such as distribution, marketing, and other related expenses.

An accurate understanding of CoR is important for any business, as any financial decisions made in relation to it affects the profit margin. Companies can use CoR to gain insights into the amount of overhead costs that go into the production of goods or services and how those costs compare to other sectors. This can help businesses make the most of the resources and reduce unnecessary expenditure.

For industries in the service sector, CoR is even more important as it provides a more exact way to calculate the costs associated with selling and delivering a good or service. By understanding CoR, a business can accurately assess the profitability of individual services, or create correlations between the cost of providing a service and its volume.

In conclusion, Cost of Revenue is an important metric that businesses need to consider if they want to elucidate their expenses and costs associated with their goods and services. Having a clear understanding of CoR helps businesses to create more informed financial decisions and ensure cost-effectiveness at all stages of production and delivery.