what is the difference among price, cost and value?
how to explain it in lucid manner?
look in this article: https://www.researchgate.net/publication/307855722_Understanding_The_Conceptual_Definitions_of_Cost_Price_Worth_and_Value
Definition of Price, Cost and Value
Price is the amount of money paid by the buyer to the seller in exchange for any product and service. For a businessman, price is his original cost + his profit markup, while his cost is the original cost he paid to acquire ownership of the goods and resell it at his own price for a profit. Cost is the amount incurred on the different inputs that you need to use for producing any product. It is the amount of money spent by the company in the manufacturing of a product; in other words, cost is the expense that a business incurs in bringing a product or service to market.
Finally, value is the usefulness of any product to a customer; in other words, the value is what your customer believes the product or service is worth to them.
Some Differences between Price, Cost and Value
1. Price is what you pay for goods or services you acquire; Cost is the amount of inputs incurred in producing a product and Value is what goods or services pay you i.e. worth.
2. Price and costs are calculated in numerical terms. Value can never be calculated in numbers.
3. Price and costs are the same for all the customers. Value varies from customer to customer.
4. Price refers to the money given to the seller for the product while cost involves the seller’s money to produce values. Cost can include labor, capital, materials, bills, salaries and wages of workers, and other transactions like marketing and distribution and shipping.
I agree with the definitions and illustrations of Jorge Morales Pedraza except the 3rd point in the previous comment. The costs, and consequent price deals or offers are highly dependent on the amount of units purchased by a given customer. As the amount increased, the price offer is usually decreased. This belongs to the costs associated with the mass production, which are usually low in comparison with the costs of producing small amounts. Therefore, neither the costs nor the prices are the same for all customers.
Cost is the cost incurred in manufacturing the product.( Cost + Margin) = Price, the amount at which the customer buys the product. Value is the amount of satisfaction the customer derives from the product. For a satisfied customer, Value is always greater than the Price paid.Cost is an estimate and Price is a policy of the company, where as Value is customer's expectation.
What I want to say with point 3 of my comments is that a given product has an associated cost and this is valid for all consumers; exactly happens with the price. A product has no associated different costs. The selling price in a given trade is unique to all customers. But that does not mean that at the time of purchase in a given trade, discounts occur in the price for different reasons, but in principle that discount in valid for all customers.
How to differentiate price, cost and value?
Sharing link,
https://keydifferences.com/difference-between-price-cost-and-value.html
Too I agree with you Dr Jorge Morales Pedraza.
Regards!
Cost is an estimate and Price is a policy of the company, where as Value is customer's expectation.
price is the amount to be paid in order to get something, cost is amount incurred in the production of goods while value implies the utility of worth of the commodity of service for and individual.
Price is what the seller is asking for their product for the buyer the price paid is the cost of buying that product. So in a an exchange where one is buying the other one is selling, it is the cost to the buyer and it`s price for the seller that seller charges. In a chain of transactions the buyer might sell it again, in this case the becomes the seller then he/she charges a price to the buyer. This time for the buyer it is a cost. In accounting terminology cost covers all the expenses incurred until a product is brought into a condition for sale. In that sense its cost includes the price of the product+transportation+insurance+freight+installation/assembly (if necessary) costs included in its cost. Value also equals price. and cost, in accounting terminology however value means beyond the cost and price. Value in accounting means what you create for customer. In order for your product to be of value, you need to create a difference with your product that customers pay for it. Value starts from concept, design, produce, sale, and after sale operations that is called the value-chain. This value chain makes your product visible. I.e.when you buy a Toyota, you think there is value in it, because Toyota has a valuable image. So value is an image. satisfaction that you pay when you buy a product/service.
In the discussion of the relationship between price, cost and value, one point seems to me to be particularly lacking. It is the uncertainty of cost. The cost and result of a calculation resulting from a representation of the economic functioning of the enterprise. There are more than 20 different cost systems. Each one gives of course an exact cost but each time different!
The question of the relationship between cost and price must therefore be addressed differently. If the cost is to be useful for margin analysis, there must be a relationship between that price and the reported cost. The price a buyer is willing to pay depends on the value he attributes to the object (good or service). For cost to be useful, therefore, the terms and conditions of its calculation must provide information on how the organization responds to or anticipates this value. In other words, the cost system must provide information on the consumption of resources that has been necessary to offer the buyer the different attributes of value that he or she is looking for. This is, of course, a difficult ideal to achieve, but if we do not aim for it, it is a waste of resources to calculate costs that have nothing to do with the price and that lead to margin calculations that are meaningless for the action.
Cost is the result of a calculation process from consuming resources depending of the cost system choised (see the answer of Pierre Mévellec).
The value is a personal judgment founded on the report "expected need's satisfaction on expenses to engage". Higher the report is and more the perceiving value is high.
The price is the value proposed to exchange goods or services with money. That means it's need a buyer and a saler agree on the value exchanged.
Hello ; I have not read all here yet but, spontaneously, I'm making an association between ‘value’ and ‘liquidity’, the capacity to be exchanged ; perfect liquidity means no transaction cost or no loss - something with a value is something that can be exchanged (for ex. ‘Mona Lisa’ doesn’t have any ‘value’, as it is not a commodity) ; 'value' is not the price itself, but an asset with no liquidity does not have any value (and the price is zero).
So, if this is right, can anyone write about : 'Exchangeablility, transactability = liquidity and value’ ; right or wrong ?
Thanks, Jean-Pierre.
Following Luca Parisi's link, I can read : value... 'is not calculated in terms of money' ; LOL ! Tell this to a banker Luca...
Cost-The cost is the price actually paid for goods and services.It represents the actual expenditure to create or manufacture.The price paid for particular goods and services is considered as cost to the purchaser becomes historical fact
Price -Price is a term used for selling or purchasing a commodity or service.Price can be amount of money a purchaser actually pays or a seller receives. It is what asked to be paid whereas cost is primarily intended to be covered by price
Value-Value is an estimation that forms the owner’s decision to exercise his right with regard to the transaction. It is owner’s measurement of the anticipated sum of future services that a thing will procure. Thus the value reflects a market’s anticipation of future benefit.
Prize is what manufacturer tags on the product.
Cost is that which consumer pay from his pocket with all taxes and overheads .
Value is floating term which is different from different perspectives like government, mechant, investor,end user, consumer etc.
Value : is value for money, in that view than volume consist of quality, quantity, time and location.. and cost is price X volume.
ref. value for money article. unkonown.
Price is the monetary expression of value, the components of the price are two, which are the cost of the product and the net profit/net loss.
Cost is the major part of the price that including all direct and indirect cost elements.
Value: there are two types of values, which are exchangeable value, and usage value
The modern relationship between both price and cost was established recently on a targeted basis so based on the target price will build the target cost.
With best regards
Associate Professor of Accounting -Dr. Kamal Al-Nakib
I would like to offer you a little mathematical exercise to illustrate the relation between price, cost and value.
10-8 = 2 is the kind of calculation everyone does to determine the margin on the product.
But for this operation to be valid and for the result to have a meaning it is implicitly necessary that 10 and 8 are numbers belonging to the same basis. Otherwise, the operation makes no sense.
Let's transfer this exercise to the field of management and cost calculation 10 is the price that the customer has paid, so the latter depends on the value of the product or service purchased. This value is based on multiple attributes that each customer weights to arrive at the purchase decision.
8 is the cost that the company has determined for its offer. If this cost is based on a reading that completely ignores the notion of value attributes, we relate two quantities elaborated in totally different bases and the difference makes no sense. When everyone started criticizing the allocation of indirect costs to the hour of labor, it was not because the calculation was inaccurate but because direct labor was no longer a value attribute valued by customers. They wanted time and quality, two major attributes totally ignored by the cost system. To these two attributes must now be added other variables according to the sectors and customer segments.
If a cost system is based solely on internal information it misses its target and is only a marginal aid to strategic management.
Price - what you pay
Cost - what you expend
Value - what you get
Price= cost+margin
Cost=price+other costs of transportation, verification, negotiation
Value=measure of the benefits
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