Difference Between Cost Analysis & Price Analysis

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Cost analysis is a strategy businesses mostly use: essentially, a company estimates the costs of producing certain goods or services, then analyzes the costs to see if the production cost is feasible, and if the company stands to gain from it. While estimating the cost, the company takes all the production factors into account -- procurement of goods, labor charges, costs of any machinery required, movement of goods from one place to another.


Cost minimization analysis is an approach to cost analysis in which an entity chooses the least expensive approach to production or resolving a problem. Cost utility analysis compares the input with the utility of the outcome -- in monetary units. Cost of illness analysis tries to measure the economic impact of a certain disease or other condition on a country, state or city.

Price Analysis

Price analysis refers to an entity analyzing and comparing bids or projects based on price. The entity could do this by comparing several bids that have been put up for the same project, by comparing the current estimates with that of projects completed previously, by comparing bids with the organization’s own estimates for the project or by using standard quotations and price estimates.

Price Analysis Completion

An entity performs price analysis if it must verify the feasibility of a certain product or service, assuming the product is not the only one of its kind available. If an entity must perform price analysis, then certain requirements must exist: the product must be commercial, and the other products in the same product group must not be identical, but they should be similar, offering some basis for comparison.

Different Approaches for Different Products

An entity can perform price analysis only for those products for which other alternatives or substitutes are available in the market. If only a single product of its kind is in the market, then no scope for a price analysis exists, and an entity must perform cost analysis. An entity performs cost analysis when it must award projects to one among a group of contractors, as various expenses like labor, travel and material must be evaluated. In some cases, the consumer or decision maker is aware of the quality and features of certain products or services, and the decision can be made by comparing prices.


About the Author

Devon Willis started writing in 2002. He has worked for publication houses like Edward Elgar Publishing and Nelson Thornes in Gloucestershire, England. He has a B.A. in journalism and a M.A. in mass communication from the University of Gloucestershire and London Metropolitan University, respectively.

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