Cost Price

Cost price is defined as the original price of a product and the cost is defined as the total price which is required to manufacture the product. Cost price helps to establish profit in the organisation by detecting the original making cost of the products. Less cost and high selling prices help the organisation to get more profit in the business. This study discusses different types of cost prices and the formula which is used to calculate the cost price of a product. There is also a brief description of the use of the cost price and the meaning of this cost price. 

Main body 

4.1 Cost price

Cost price is described as “the total amount of the money which is the cost for manufacturing or producing a product or to provide a service”.  In mathematics the definition of the cost price is “The price at which goods are or have been bought by a merchant or retailer is known as cost price.” Cost price of the products is a piece of sensitive information so the manufacturer tries to protect the information from competitors and customers. Differences between cost price and selling price help the manufacturer to calculate the total profit. Less cost and high selling price resulted in profit to the manufacturer. The cost price of the products includes the cost required for the manufacturing, property cost, power, materials, development and research, and workers’ wages. The cost price of the products with the profit margin is determined by the wholesale price of the product. 

The difference between the suggested price and wholesale price of the products helps to get the profit to the manufacturer. The cost price of the products helps to detect the wholesale price and profit rate of the products. The lower price of selling then costing is resulting in less profit or loss for the manufacturer. The costing or cost price of the product is also described as the expense which is required to create or manufacture a product or to give a service to the industry.

4.2 Types of cost price and use of cost price 

There are different types or forms of cost price found which are “Actual cost”, “Average cost”, “last cost”, “net realizable value”. Those different forms of cost price are discussed below; 

Actual cost:

The actual cost is calculated by calculating the cost of all expenses which are required to acquire a product and including the cost which is originally needed to establish the products. The actual cost of the products is also included in the price which is required in the duty and freight and transport. 

Average cost:

The combination of new and old products and the combination of the cozying value of the new and old products are known as the average cost. The method is used to combine the cost of new and old items which are presented in the stock. This method is very much appropriate for establishing the stock holding of an organisation. 

Last cost:

The last cost of the products is the actual value of the products when the products are last purchased and expressed in the units. 

Net realizable value: 

The net realizable value of the products is replaceable cost and this is defined as the average cost of the products which are set in the marketplace. 

There are ways in which the cost price is used to establish profit in the industry; 

• Less cost and high selling price is resulting in a profit. 
• Net sales and detection of cost price help to calculate the gross profit. 

4.3 Cost Price formula

Cost price stands as CP and there are two formulas that are used to calculate the loss and gain of the CP. Cost price formula for gain is=

“(100*selling price or SP/ 100 + Gain %)”

Cost price or CP for loss is=

“(100 * SP or selling price/ 100 – Loss %)”

The profit or gain and loss percentage of the products is calculated by using the sum formula which is described below; 

Profit = “Selling Price or SP – Cost Price or CP”

Profit percentage of the products = “S.P.−C.P./C.P.  * 100%” or “profit/ C.P * 100%”

Loss = “Cost Price or C.P – Selling Price or S.P.”

Loss percentage of the products = “C.P. – S.P. / C.P. * 100%” or “loss/ C.P. *100%”

Those formulas help to calculate the profit and loss of the products with the help of cost price and selling price of the products. 

Conclusion 

It is concluded, this study is developing a clear idea about the cost price of the products and their use in the industry. The cost price of the products is the original price which is needed for the manufacturing of a product and some other costs which are needed in the manufacturing process. The detection of the cost price helps the manufacturer to identify the actual profit or gain of the products. Differences between the selling price and cost price of the products help to calculate the actual profit of the product and their manufacturer and developer. Therefore it is concluded, the cost price calculation is very much useful and the data of costing is very much confidential to the manufacturer.