1. What is Cost Revenue Ratio?

The Cost Revenue Ratio (CRR) is a financial metric that shows what percentage of revenue is consumed by the cost of generating that revenue. It helps businesses understand their cost efficiency and profitability.

2. How Does the Calculator Work?

The calculator uses the CRR formula:

Where:

• Cost of Revenue — Direct costs associated with producing goods/services
• Total Revenue — Total income from sales before any expenses

Explanation: The ratio expresses costs as a percentage of revenue, showing how efficiently revenue is being converted to profit.

3. Importance of CRR Calculation

Details: CRR helps businesses monitor cost efficiency, compare performance across periods, benchmark against competitors, and make pricing decisions.

4. Using the Calculator

Tips: Enter both cost and revenue in the same currency. Revenue must be greater than zero. Lower CRR indicates better cost efficiency.

5. Frequently Asked Questions (FAQ)

Q1: What is a good CRR?
A: This varies by industry, but generally lower is better. A CRR below 60% is typically considered good for most businesses.

Q2: How is CRR different from profit margin?
A: CRR focuses only on cost of revenue, while profit margin considers all expenses. CRR is more specific to production efficiency.

Q3: Should CRR be tracked over time?
A: Yes, tracking CRR trends helps identify improving or worsening cost efficiency and can signal operational issues.

Q4: What costs are included in Cost of Revenue?
A: Direct costs like raw materials, direct labor, and manufacturing overhead. Excludes indirect costs like marketing or administration.

Q5: Can CRR be more than 100%?
A: Yes, if costs exceed revenue, indicating the business is losing money on each sale before other expenses.