Accounting

We answer your accounting questions.

Over 500 questions have been answered on our accounting blog.

 accounting blog

April 22, 2009

What is the difference between cost and price?

Some people use cost and price interchangeably. Others use the term cost to mean one component of a product’s selling price. Even the same person might use the terms differently.

For example, in standard costing the price variance of the raw materials refers to the difference between the standard cost and the actual cost of the materials.

In other situations we define a product’s selling price as: product costs + expenses + profit.

As these two examples indicate, there can be different meanings for the terms cost and price.

Related Questions
the accounting coach

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.



 Accounting Exams

Accounting Exams
Printable (PDF) Exams on 16 financial accounting topics and 19 managerial accounting topics. More Info...

     Accounting Bookkeeping Test

Bookkeeping Test
Test your bookkeeping skills. Printable (PDF) Bookkeeping Test with 175 total questions. More Info...

 Accounting Forms

Business Forms
Our Master Set of 80 Business Forms will assist you in preparing financial statements, financial ratios, break-even calculations, depreciation, standard cost variances, and more. More Info...


Comments

13 Responses to “What is the difference between cost and price?”

  1. FATJON BUSHI on April 24th, 2009 9:58 am

    I AM ACCOUNTER AND I WANT TO LEARN ABOUT THIS

  2. michael on May 5th, 2009 7:26 am

    cost price of an article is arrived at after deduction of all direct expense while price is the actual price of an article

  3. shekib on May 6th, 2009 6:17 am

    what’s accounting system?

  4. Kristie on May 7th, 2009 3:49 pm

    Cost is the price that include direct cost realted to the object that your buying like installation, frieght in ex. While price is the acutal price of the object like a contract price.

  5. Kristie on May 7th, 2009 3:51 pm

    Cost is the price of the object including other cost directly related to the object like frieght-in, installation ex.. While the price is the acutal contract price of the object like the contract price.

  6. Kebede Gicho on May 8th, 2009 8:25 am

    Cost is the purchasing amount
    while price is salling amount

  7. Raj on May 8th, 2009 10:54 am

    Price is the final amount that customer has to pay this includes profit of the seller

    Whereas cost is the total amount spent on the final product and it does not include profit of the seller

  8. Bhupendrasinh Thakre on May 10th, 2009 8:31 am

    My View:

    Cost: It is the amount which has been accepted to produce revue or acquire assets.

    Price: It is the amount at which we sell (Credit / Cash) to the customer including the profit margin as told by Mr. Raj.

  9. rhaffy on May 16th, 2009 4:21 am

    I think cost means the overall amount you spent for a certain kind you would sell.

    EX: I am the business owner and the amount I spent to build the business is 1200p.

    Raw: 400p
    Capital: 450p
    Labour: 350

    target PROFIT: 100p

    raw+capital+labour= “COST” from th biz
    raw+capital+labour+profit= “PRICE” for consumers

    customer will buy your product at 1300p because you wana have 100p as your profit.

    Conclusion~~~

    1200 = cost “business”
    1300 = price “consumer”

    god i hope i could make it more clear than this..sorry guys got no time see yahh….

    aruy.20tres@gmail.com

  10. Rhye on August 10th, 2009 8:52 pm

    For a manufacturing company,
    price includes the the cost of manufacturing the product plus mark up..

    Price=cost+markup

    Cost is the resources foregone or
    sacrificed to produce and sell
    finished goods

  11. SEGUN ADERIBIGBE on October 7th, 2009 10:27 am

    cost is generated to make the products or services available.

    while price is the market value of product or services.
    at the end,margin is made on that transactiom

  12. Razzy on October 17th, 2009 5:13 pm

    The cost of a product is all the expenses made to make the product available to the market. Price consist of the actual price and profit on the product sold.

  13. Carol on November 25th, 2009 1:10 am

    Thanks for all your answers

Leave a Reply