Price vs Cost Differences
The key difference between cost and price is that cost is the amount of expenditure incurred by the business on material, labor, sales, and utilities and on other business activities, whereas, price refers to the amount that is charged by the business from its customers for providing their goods and services to the costumer and costumer has to pay such agreed amount to get the goods or services.
Price and Cost are the terms that are frequently used and mentioned in the context of revenue i.e. sales. They are used interchangeably in our day to day normal conversation, but when it comes to economics or business each term takes on a separate meaning and must not be perplexed with one another.
What is Price?
Technically speaking, a price can be termed as the actual amount of money, that a consumer or client must waive to acquire certain services or products. It also involves the future acquisition of the service or product if the client or consumer pays the said amount of money.
What is Cost?
A cost can be called as the amount which is paid to produce a service or product before it is sold or marketed to its intended clients or consumers. Looking at it in this way, the cost would imply the amount of money involved in marketing, production, and distribution. The term could also be referred to as the amount of money needed to maintain service or product.
Price vs Cost Infographics
Key Differences Between Price and Cost
- Price is what you have paid for services or goods that you acquire; Cost is the number of inputs that are incurred in producing the product of the firm.
- The price will remain the same for all the consumers or customers; Cost is also the same for all the consumers or customers but that differs only for the firm that prepares it.
- Price is estimated through a policy that is set up for the price; Cost can be assessed on the actual expenditure that is incurred on manufacturing that product.
- The ups and downs that happen in the market will affect both the cost and the price of any product. The only difference is that changes happening in cost is outside the scope of the company and it cannot do anything for the same whereas the impact for the same could be reduced by changing the price of the product which does remain in the hands of the company.
- The ascertainment of price as mentioned earlier above is done with the view of the client or the consumer; the cost is ascertained from the company’s or the producer’s view
- If you purchase a brand-new vehicle like Car, then the amount that you will pay for that car to the car seller for its acquisition will be its price while the amount that is invested in the manufacturing of that same car is its cost. Normally, the price of any services or goods will be more than its cost the reason being the price includes the profit margin and the cost of preparing the product.
|Basic Definition||It can be defined as the amount a client or customer is willing to pay for a service or product.||It can be termed as the expense which is incurred for a service or product being sold by an organization. The costs that are involved in manufacturing can include the raw materials that are used in making that product.|
|Nature||Every Organization should determine the price that the customers are willing to pay for their service or product, while they also must be mindful of the cost of bringing that service or product to the market.||For certain companies, the sum costs of making a product are listed under the cost of goods sold (COGS), which is the total sum of the direct costs that are involved in a production. These costs can include the direct materials cost, such as raw materials, and direct labor costs for the manufacturing plant.|
|Ranking (at business Level)||Price comes after all the costs have been determined.||The cost comes first that is before Price.|
|Ascertainment||It can be ascertained from the client’s or consumer’s perspective.||It can be ascertained from the manufacturer’s or producer’s perspective.|
|Classification||It can also be further classified as the bid price, selling price, buying price or transaction price.||It can be also be further classified as a variable cost, fixed cost or opportunity cost, etc.|
|In terms of Value||It is a combination of cost which is mostly production||These are lowered when they are compared with the cost in terms of value.|
Price and Cost are often used interchangeably in our daily normal conversation. However, the two terms as mentioned at the beginning of the article that they both have completely different meanings when applied in economics or business.
- Cost refers to the amount of money spent over different activities to make or maintain service or product whereas Price as told earlier, implies future acquisitions of the service or product.
- Both refer to the element of the money. In price, the money will be used to gain something. Whereas, the cost will be referred to the money in the production or manufacturing process like wages, labor, materials, capital, bills, and other transaction costs.
- Price can be ascertained by adding all the production costs and the seller’s profits. In this context, a cost can be said as the subset or the component of the price. In addition to that, the value of the cost will be lower than the value of the price.
- Price is generally demanded by the client or the consumer. Cost on another hand is demanded by the seller. The price is a future income for the seller. On contrary to that, cost represents all the past expenses.
This has been a guide to the Price vs Cost. Here we discuss the top differences between price and cost along with infographics and comparison table. You may also have a look at the following articles –