Price refers to the amount of money buyers pay in order to acquire desired products or services. It is the sum of money business firms receive by selling their products. On the other hand, cost refers to the expense incurred by a firm while making or producing the products. It is the total expenditure required to manufacture and sell products or services.
Difference Between Price And Cost
The major dissimilarities or difference between price and cost can be highlighted as follows:
1. Introduction
Price: Amount of money expended by buyers to acquire products or services.
Cost: Amount of money expended by manufacturers to produce products.
2. Represents
Price: It represents the money received by producers or sellers.
Cost: It represents the money paid by the producers or sellers.
3. Before/After
Price: Price is determined after the ascertainment of total cost
Cost: It is determined before fixing the price
4. Value
Price: Its value is always higher than the value of cost
Cost: Its value is always lower than the value of price
5. Determination
Price: It is determined by adding desired profit margin in total production cost.
Cost: It is determined by adding all production, distribution and marketing related costs.
Price Vs Cost (Comparison Chart)
Distinction Between Price And Cost In Short
Price Vs Cost (Comparison Chart)
Basis
|
Price
|
Cost
|
Purpose
|
To consume products
|
To produce products
|
Represents
|
Money received by producers
or sellers
|
Money paid or spent by
manufacturers or sellers
|
Before /After
|
Determined after cost
determination
|
Determined before price
|
Value
|
More than cost
|
Less than price
|
Determination
|
Cost + Desired Profit
|
Production cost + marketing
and distribution costs
|
Distinction Between Price And Cost In Short
- Price is the amount of money business firms charge to the customers. Conversely, cost is the amount of money firms expend to produce goods or services.
- Value of price is always higher than the cost because price is determined by adding desired profit in total production cost.
- Price is paid to acquire or consume products or services. Cost is paid to manufacture or produce products.
