If you work in manufacturing or sales, you may sometimes hear phrases like:
"How much is the cost price of this product?"
"Please check the selling price"
"We won't turn a profit at this selling price"
If you've just started your job, you might wonder:
"What's the difference between cost price and selling price?"
Both terms relate to a product's "amount," but their meanings are quite different.
In this article, we'll explain "cost price" and "selling price", terms commonly used in manufacturing and sales management, in a way that's easy for beginners to understand.
What Is Cost Price?
Put simply, cost price is:
The money it took to prepare a product or item
That's what it means.
For example, suppose there's a company that buys in and sells product A.
It bought product A from a supplier for 700 yen.
商品Aの仕入金額：700円
This 700 yen becomes the basis for thinking about cost price.
On the other hand, in manufacturing, a company makes its own products.
For example, to make product A,
材料：500円
加工：200円
suppose this much was spent.
Put simply,
500円 + 200円 = 700円
it cost 700 yen to make product A.
In this way, the expense it took to make a product or prepare an item is called cost price.
What Is Selling Price?
Put simply, selling price is:
The price at which a product or item is sold to a customer
That's what it means.
For example, say product A, which cost 700 yen to make, is sold for 1,000 yen.
原価：700円
売価：1,000円
This 1,000 yen is the selling price.
In other words:
Cost price = the amount it took to prepare the product
Selling price = the amount it's sold to the customer for
Thinking of it this way makes it easy to understand.
The Difference Between Cost Price and Selling Price
For example, say product A had the following amounts:
原価：700円
売価：1,000円
The company spends 700 yen to prepare the product.
And it sells that product to the customer for 1,000 yen.
As a flow, that looks like:
700円かけて製品を用意
↓
1,000円で販売
This is how it plays out.
The gap between cost price and selling price is 300 yen.
1,000円 - 700円 = 300円
This difference becomes important when thinking about profit.
What Is Profit?
Put simply, profit is:
What's left when you subtract the amount spent from the amount earned by selling
That's what it means.
In a very simple example,
Profit = selling price − cost price
can be thought of this way.
For example,
売価：1,000円
原価：700円
In this case,
1,000円 - 700円 = 300円
the profit is 300 yen.
If it were
売価：700円
原価：700円
then the difference would be 0 yen.
And if it were
売価：600円
原価：700円
then
600円 - 700円 = -100円
would be the result.
That's a loss of 100 yen.
This is why knowing the cost price matters when deciding what price to sell a product at.
Cost Price in Manufacturing Is a Bit More Complex
In the explanation so far, we used a simple example:
材料：500円
加工：200円
原価：700円
But actual manufacturing cost price is a little more complex.
Making a product involves various costs beyond materials.
For example:
- Material cost
- Labor cost
- Outsourced processing cost
- Electricity charges
- Equipment costs
- Factory costs
and so on.
For example, to make product A, suppose:
材料費：500円
作業費：100円
外注加工費：50円
その他：50円
this much was spent.
In this case,
500円 + 100円 + 50円 + 50円
=
700円
the cost price is thought of in this way.
That said, what gets included in cost price differs by company and by how cost is calculated.
So whenever the term "cost price" comes up, it's important to check:
"What expenses are included in this cost price?"
"Cost Price" Isn't Just One Thing
In manufacturing, the term "cost price" isn't limited to just one meaning.
For example, there's:
- Standard cost
- Actual cost
- Planned cost
- Purchase cost
and other types.
For example, say product A can normally be made for around 700 yen.
標準原価：700円
But when it's actually manufactured, material prices rise and it ends up costing 750 yen.
実際原価：750円
In this case, you'd have:
標準原価：700円
実際原価：750円
This is the result.
Even for the same product, the amount can differ depending on which type of cost price you're looking at.
That's why, if you're asked "how much is the cost price?" at work, you may need to check:
"Which cost price do you mean?"
Sometimes that clarification is necessary.
Selling Price Can Also Differ by Customer
Selling price isn't necessarily just one thing either.
For example, say the regular price of product A is 1,000 yen.
But it might be sold to Company A for 1,000 yen and to Company B for 900 yen.
A社への売価：1,000円
B社への売価：900円
Customers who buy in bulk are sometimes sold to at a lower price.
Special prices are sometimes set for long-standing customers as well.
This is why manufacturers and wholesalers need to manage:
"Who is being sold what, at what price"
That's the information that needs tracking.
Selling prices by customer like this are sometimes managed as, for example, a customer-specific unit price.
What Happens When Cost Price Rises?
For example, say you had:
原価：700円
売価：1,000円
The profit is 300 yen.
But material prices rose, and the cost price became 900 yen.
原価：900円
売価：1,000円
In this case,
1,000円 - 900円 = 100円
the profit shrinks to 100 yen.
And if the cost price rises further to 1,100 yen,
売価：1,000円
原価：1,100円
it becomes a loss of 100 yen.
However, if the selling price isn't changed, the amount received from the customer stays at 1,000 yen.
This shows that if you don't keep track of changes in cost price, profit can shrink without you even realizing it.
This is why cost price management matters so much in manufacturing.
How Is Selling Price Decided?
How selling price is decided varies by company and by product.
One simple way of thinking about it is:
原価
+
利益
=
売価
this formula.
For example, if:
原価：700円
欲しい利益：300円
then
700円 + 300円 = 1,000円
you'd set the selling price at 1,000 yen.
In practice, though, it's not usually that simple.
For example, you also need to consider things such as:
- What price other companies are selling at
- What price customers are willing to pay
- How much quantity will be sold
- Contracts with key customers
- Market prices
among other factors.
Just because the cost price is 700 yen doesn't mean it will necessarily sell for 1,000 yen.
In short:
Cost price is "the maker's side of the story"
Selling price is "a matter of the market and the customer relationship"
Thinking of it this way makes it easier to understand — there's a part of it that's determined by these outside factors.
Watch the "Unit" When Looking at Cost Price and Selling Price
One thing to watch out for when looking at cost price or selling price is the unit.
For example, even if it says:
原価：10,000円
it might be 10,000 yen per unit.
It might be 10,000 yen for a batch of 100 units.
It might be 10,000 yen per kilogram.
In manufacturing, various units are used, such as:
- Pieces
- kg
- m
- Sheets
- Cases
- Lots
and so on.
That's why it's important to check:
"What unit is this amount based on?"
Confirming this makes it much easier to understand what the figures actually mean.
Summary
Cost price is:
The money it took to prepare a product or item
That's what it means.
Selling price is:
The price at which a product or item is sold to a customer
That's what it means.
For example, if:
原価：700円
売価：1,000円
then
1,000円 - 700円 = 300円
simply put, that's a profit of 300 yen.
In other words:
Cost price = how much it cost to make
Selling price = how much it's sold for
Thinking of it this way makes it easy to understand.
That said, there are various types of cost price in manufacturing.
Selling price, too, can differ depending on the customer or the terms of the deal.
If the terms "cost price" or "selling price" come up in your manufacturing job, try checking:
"Which cost price does this refer to?"
"Whose selling price is this?"
"What unit — per piece, per kg — is this amount based on?"
Doing so will make the meaning of the numbers much easier to grasp.