Price, cost and prime cost are different economic concepts, which, however, are closely related. Cost is calculated based on cost and price is calculated based on cost.
Cost is one of the main characteristics that is used in economic analysis to assess the efficiency of an enterprise.
Differences between price, cost and cost
The cost price is the cost of the enterprise for the manufacture and sale of one unit of production. Such costs include used materials, consumed electricity, depreciation of fixed assets, remuneration of employees, overhead costs.
The cost consists of the cost of production and the markup, on the value of which the profitability of production and the profit obtained depend. When calculating the surcharge, taxes that must be paid and the amount of profit required by the company for further development are taken into account. The value can be expressed both in physical units and in monetary terms.
The price of a product is the manufacturer's costs in the manufacturing process plus the seller's profit from its sale. The price is a certain amount of money that the buyer must pay to the seller.
Comparing the concepts of cost, cost and price, we can conclude that one follows from the other. The price is calculated on the basis of cost, and the cost cannot be calculated without taking into account the cost of production. Cost is a simple concept, while cost and price are complex.
Comparison of cost and price
Cost is the cost of the enterprise for the production and marketing of products. If you express these costs in monetary terms and add the percentage of profit from product sales, you get the price of the goods. Thus, cost is one of the components of the price of a product, but not vice versa. Therefore, it will be incorrect to ask how much the product costs, because in this case the question is asked only about the costs of the manufacturer without taking into account the estimated profit. The cost of a product in the process of its production does not change when it comes to a short period of time.
The price of a product depends on its value and is expressed only in monetary terms. Price is a variable value, since the amount of the margin may vary depending on external factors. These factors include holiday promotions or seasonal sales, falling demand for goods, the need to urgently sell a large batch of goods.
