Price vs. Cost
Posted in From the point of view of the buyer, there is no real difference between price and cost. From the point of view of the seller, there is a huge difference.
When a buyer asks, “How much does it cost?” or “What is the price?” the expected answer is usually the same to both questions. It is the amount of money the buyer must hand over to the seller to purchase the goods or services.
When the seller asks, “How much does it cost?” the real question is probably “How much did it cost me to make this available to sell?” This could be the price the supplier charged a retailer or even the cost of providing a service.
When the seller asks, “What is the price?” the real question is probably “How much am I going to charge a customer?” or in the case of professional services “How much will I charge the client?”
The difference between price and cost from the seller’s point of view is the profit. In the case of selling a product, profit equals the price charged minus the cost of acquiring the product. In the case of providing a service, profit equals the price charged minus the cost of providing the service. The cost of providing the service is often the “burdened” cost of labor to the service provider. Burdened labor cost would include the cost of any payroll taxes and employee benefits which are on top of the employee’s compensation.
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