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Difference Between Price and Cost

Price vs Cost

Price and Cost are two words that appear alike due to the similarity in their connotations. Strictly speaking there is difference between the two words.

Price is the amount of money or goods for which a thing is bought or sold. In other words it can be said that price is the value or worth of a product or a service. Look at the usage of the word ‘price’ in the following sentence,

A pearl of great price was given as a gift to her by me.’

Here the word ‘price’ is understood to mean the value or the worth of the product, namely the pearl.

In some cases the word ‘price’ is used to indicate what is or must be given, done, sacrificed to obtain or achieve something. Look at the use of the word ‘price’ in the sentence

‘He had to pay the price for coming late to the class.’

The word ‘price’ is used in auctions too as ‘The starting price of the book was hundred dollars.’ The word is often used in betting too.

Cost on the other hand is the expenditure involved in the manufacture of a thing or a product. Thus cost determines the price of a product or a service. Price does not determine the cost. Hence price can be said to be the subset of cost.

Depending upon the factors such as expenditure involved in manufacturing, electricity bills, salaries paid to the staff in production and the like the price of a product is determined. The various factors mentioned above are all various costs involved in the production of a particular product.

There are two main types of costs, namely permanent costs (fixed cost) and varied costs. Permanent costs refer to the definite expenditure involved in the production of a product whereas varied costs refer to the indefinite expenditure involved in the manufacture of a product.


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  • Sampath Vicky

    Price = Cost + Profit

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