Cost, Price and the difference between the two

Cost & costing

Cost is the total amount of currency invested in a product Costing is the process of estimating the total resource investment required to merchandise , produce and market a product

Price & Pricing

Price is the amount asked/ received in exchange of a product Pricing is the process of determining the exchange value of goods that are made available for sale. Its based on data produced in costing process, value customers place on a product and competition in the market

Profit & revenue

Profit is the difference between the price of a product and its cost
Total Cost + profit = Selling Price

Profit might be taken as a % of cost Its often referred to as Mark-Ups or margins

 Revenue is the total of all receipts from the sale of a firms products during a stated period of time

Revenue = Selling Price * volume of production

Relationship of Cost, Price and Profit

Manufacturers Price: MP Manufacturing Cost: MC Operating Expenses: OE Profit: P
MC+OE+P=MP

Relationship of Cost, Price and Profit

Manufacturers Price : MP Retailers cost : RC

MP=RC

Relationship of Cost, Price and Profit

Retailers cost: RC Operating Expenses: OE Profit: P Retailers Price :RP
RC+OE+P=RP

Pricing
Pricing is the process of determining what a company will receive in exchange of its products Its based on costing process Its factors are manufacturing cost, Target market, market place, market competition, market condition, quality of product etc.. Its a fundamental aspect of 4 Ps of marketing mix ( Product, price, place and promotion: price is the only revenue generator )

What should a price do..

1. Achieve financial goals of the company 2. Fit realities of market place 3. Support a products positioning and be consistent with other variables of marketing mix

Manufacturers cost + operating Expenses + Profit = manufacturers Price

Manufacturers Price = Retailers cost

Retailers cost + Operating expenses =Retailers Price