COST PRICE VALUE WHATS THE DIFFERENCE AND HOW TO APPLY IT

WHEN WE CHARGE PEOPLE IT SHOULD ACCOUNT FOR DELAYS IN PRODUCTION, MISTAKES, RISKS, MISHAPS ETC., IT IS VERY IMPORTANT AND CRUCIAL TO UNDERSTAND THE DIFFERENCE IN ORDER TO RUN A SUCCESSFUL BUSINESS AND MAKE PROFIT. OTHERWISE YOU RISK LOOSING TIME, MATERIALS AND MONEY IN A BUSINESS MODEL WITH NO STRUCTURE.

uNderstanding three main principles

For many people who don’t understand business models or structures, it’s very easy to confuse the meanings of these three words. Cost, price and value might seem to refer to the same principal but it does not refer to the same thing. You are more likely to structure your business framework slightly different after understanding these main principles.

What is cost?

The cost of something is measured in time (effort) + materials. It includes the inputs of materials, salaries, business rent, interest, risk plus the materials included to manufacture the product, service, or good.

Through evaluating strategy

What is price?

Price is determined by combining cost and profit. The result amount paid in return for a good or service to the customer.

Through the calculation of consumption.

There is a misconception that the value of something is the equivalent amount of labor it takes to make something. This is incorrect. Profit is arbitrary.

What is value?

Value is different for everyone but primarily pertains to the consumer’s perspective who puts worth on the product (item, service, good).

The estimate is reached through usefulness to the consumer.

Effect of varieties in MARKET

Varieties in Market

The impact on Cost- inputs go up or down

The impact on price - the amount paid Is either more or less

The impact on value - does not change

Created By

ERIK RUIZ

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Credits:

Created with images by pasja1000 - "currency finances the dollar" • mohamed_hassan - "teamwork cooperation brainstorming" • geralt - "entrepreneur idea competence" • Peggy_Marco - "financial equalization help stock exchange"