COST PRICE Meaning and
Definition
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The term "cost price" refers to the original or actual price at which a product or an item is acquired by a business or an individual. It represents the cost incurred by the entity to produce or purchase a specific product before any additional expenses or profit margins are taken into account. Cost price is a critical aspect in determining profitability and evaluating financial performance.
In the context of accounting and business, cost price is commonly used to calculate the cost of goods sold (COGS), which is essential for determining the gross profit margin. It includes the direct costs associated with the production or procurement of goods, such as raw materials, manufacturing expenses, labor costs, and any other direct expenses incurred during the production process.
Cost price is a vital component in pricing decisions, where businesses aim to set a selling price that covers the cost incurred, along with the desired profit margin. It serves as a basis for various financial ratios and analyses, assisting in budgeting, forecasting, and decision-making processes. By comparing the cost price with the selling price, businesses can determine their efficiency, effectiveness, and competitiveness in the market.
Overall, cost price plays a pivotal role in financial management, inventory valuation, and strategic planning, enabling businesses to determine accurate pricing strategies, monitor profitability, and make informed financial decisions.
Common Misspellings for COST PRICE
- xost price
- vost price
- fost price
- dost price
- cist price
- ckst price
- clst price
- cpst price
- c0st price
- c9st price
- coat price
- cozt price
- coxt price
- codt price
- coet price
- cowt price
- cosr price
- cosf price
- cosg price
- cosy price
Etymology of COST PRICE
The word "cost" originated from the Latin word "constare", which means "to stand together" or "to be fixed". The term "price" has its root in the Latin word "pretium", which means "value" or "worth". The combination of these two words eventually led to the term "cost price", which refers to the original cost or purchase price of a product or service.
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