In the business sector and daily life, the terms, cost and price, are used a lot. Some people think that they are the same terms but this is not the case. In our day to day conversations, these terms are used interchangeably. However, in actual, they mean different. The Different between Cost and Price is that price is the amount of money that a consumer has to pay in order to get a product. On the other hand, cost is the amount that is used for making a product or service before it is sold in the market.
Price: Origin and Uses.
Price is the amount of money that a consumer needs in order to buy a product or acquire a service. When the consumer pays that money, he or she gets the product or service. It is actually the money you are paying in order to buy something. It will remain the same for all consumers.
There is a policy that helps in determining the price of a product. Every organization or service provider has to determine the price of the service or product they are providing.
The buyers or consumers are willing to pay that price for the product. This is the amount of money that the company has put in making that product along with the profit they are going to make from it.
Price is determined after all the cost has been determined. The price can be classified into buying price, selling price, bid price, and transaction price.
Cost: Origin and Use.
Cost is different from price even though many people are under the influence that it is the same thing. Cost refers to the expenses that a company had to pay in order to manufacture a product.
This includes the amount of money that went into raw material, paying the labor and other things. When all of these are added, the final cost is determined.
Cost affects the price too. The cost of manufacturing differs from one company to another even if they are making the same product. This is because each organization is using different labor, raw material, and facilities.
As a result of this, the price of products made by each company is different too. Just like price, the cost can also be further divided into fixed cost, opportunity cost, and variable cost. Even though cost and price are both associated with money, they refer to different things.
Summary of Different between Cost and Price:
- The Different between Cost and Price is that price is the final amount of money consumer has to pay to buy a product or avail any service while the cost is the amount that went into manufacturing that product.
- Another Different between Cost and Price is that price is ascertained from the consumer’s perspective while the cost is ascertained from the manufacturer’s perspective,
- Firstly, the cost is determined and then the final price for any product or service is calculated.
- Both of these are financial terms and are associated with money. They have a different meaning in a commerce or business setting.