price versus cost This is a topic that many people are looking for. newyorkcityvoices.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, newyorkcityvoices.org would like to introduce to you cost vs price. Following along are instructions in the video below:
“Have you ever wandered into a shop as i m sure you have and asked. Asked. The question how much does this cost specifically. This pen yeah.
I m sure have and i m sure you ve probably got the wrong answer. And what i m going to talk to you very quickly that is the difference between this word and this other word and it becomes very important when we talk about procurement. So the cost of something is purely the cost incurred in producing that that asset so if it s this pen. It would be the cost of all the materials that went into the production of this pan and this could vary this could go up and down based on how much plastic is costing or how much the old price is and so on at certain point in time.
So the cost can be volatile because what it cost us one day could be achieved the next day expensive exchange rates and so on lot of factors go into that the price. However is what i m going to charge the buyer and this is what you re going to pay the consumer that s the price. So when you walk into a shop..
Again. And you ask the cost of something flipped around set up what s the price of this item. And the price should cover your cost and then some because most people going to business to make money so from this point of view. We must say look very early on we identified the cost to be a hundred dollars and then we thought look we need two prices if you ll buy it and we ll say that will price at 110 dollars.
And this becomes the price that we ve said when the black line. The cost is below the green line. We re kind of happy so in these times are making money. We re pretty swayed.
What happens if we lock ourselves into a price and we ll talk about next with the fixed price or life in some country versus. A cost plus is when this happens. It s actually costing us more to produce it s called this 200 then we re actually charging the buyer..
So we re actually making a loss profit. Because it costs go down the loss and so on now when we look at how we actually charge people especially from a contracts point of view. There s there s lots. But there s two main types of contracts from a cost perspective.
There s a cost plus. And there s a fixed price or lump sum contract both of these contracts tend to try and offset risk from one to the other so with a cost plus contract basically our price is a function of the cost. So we come with a margin lsa. 10.
And what it costs us we add on that markup which then becomes our imagine and the price becomes a function of that so the price is the cost and this is good because it reduces the risk to us as a business. However from a client perspective. They may not agree because it makes it hard for them to budget..
Because one day you charge them 110 dollars. The next day you charging them 220 dollars. And so on the fixed price model. However is basically that initial green line.
I drew we come up with a price that we re going to charge the client over iteration from a project management point of view make sure that your scope is very specific at this point. Because you re not getting anything extra and we come with that price and regardless of our fluctuations and our in our cost. The client still charge that price advantages and disadvantages to both the fundamental thing is to transfer of risk. So cost plus contract usually the buyer bears.
The risk because of the price. If the cost goes up the price also goes up in a fixed price contract usually. The contractor bears that degree of the risk because if the cost of doing the service goes up..
Generally the price will remain static cool. However. That s explained. Very quickly the differences between cost and price have an awesome day.
And what i ll do is i ll do another link video on how we lose money in businesses. Because this is just the ” ..
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