Cost of revenue
Okay kiddo, so let's say I'm running a lemonade stand. I have to buy lemons, sugar, cups, and straws to make my lemonade. Those things I have to buy are called "costs".
But if I make a cup of lemonade and sell it for $1, then I've made some money, right? Now, let's say I sold 100 cups of lemonade for $1 each. That means I made $100 in total.
But remember, I had to buy all that stuff to make the lemonade. So let's say it cost me 50 cents to make each cup of lemonade. That means I spent $50 in total on all the ingredients and cups and straws I needed.
So, the cost of revenue is the amount of money that it costs to make the thing you're selling. In my case, the cost of revenue would be $50 because that's how much it cost me to make all the cups of lemonade that I sold.
Does that make sense, kiddo?
But if I make a cup of lemonade and sell it for $1, then I've made some money, right? Now, let's say I sold 100 cups of lemonade for $1 each. That means I made $100 in total.
But remember, I had to buy all that stuff to make the lemonade. So let's say it cost me 50 cents to make each cup of lemonade. That means I spent $50 in total on all the ingredients and cups and straws I needed.
So, the cost of revenue is the amount of money that it costs to make the thing you're selling. In my case, the cost of revenue would be $50 because that's how much it cost me to make all the cups of lemonade that I sold.
Does that make sense, kiddo?