Cost price is the amount a business pays to acquire a product before selling it. It includes the purchase price from suppliers and may also incorporate additional expenses such as shipping, duties or handling costs.
Why Cost Price Matters
Profitability foundation: Determines the baseline against which selling price and margins are calculated.
Pricing strategy: Guides decisions on mark‑up and competitive positioning.
Financial control: Helps businesses understand their true expenditure per unit.
Transparency: Ensures accurate reporting and compliance in financial statements.
Common Use Cases
– Retailers setting selling prices and promotions.
– Finance teams calculating intake margin and gross margin.
– Merchandising teams comparing supplier offers.
– Ecommerce platforms determining profitability per SKU.
Related Terms
Selling Price
Gross Margin
Procurement
