Is There A Difference Between Cost And Price?

Have you ever ask yourself that question? Have you ever considered the differences? Let’s say the cost of Widget A is $1000 and the cost of Widget B is $500. Up front there is a price difference between the two Widgets of $500. Which of the two Widgets actually cost more? Widget A or Widget B?

Well, let’s examine the scenario a little closer. Widget A comes from a local provider, while Widget B would be supplied by a provider an hour away. Widget A is made in North America. Widget B is made somewhere in the Far East. The provider of Widget A handles the entire process in house. The provider of Widget B subcontracts all of the process out to third party vendors. Widget A has monthly expenses of $30. Widget B has monthly expenses of $37.

Expense example over 36 months of ownership between Widget A and Widget B

WIDGET A                                                                           WIDGET B

Original Price $ 1000                                                        Original Price $ 700

Operating Expenses $ 1080.00                                        Operating Expenses $ 1332.00

Repair/Service Charges $74.00                                                Repair/Service Charges $350.00

Total Cost Of Ownership $2154.00                                  Total Cost Of Ownership $2382.00

As you can see the cost of ownership for Widget B is $228.00 more than Widget A over a 36 month period of time, even though Widget A was originally priced $300 more than Widget B.

It is important to always weigh all of the costs associated with ownership. Higher quality equipment, greater skilled installers and geographic proximity of your vendor all are important factors you need to take into consideration before you purchase a product or service.

Until next time, take care and be safe.

Ron Anderson, President

Anderson Systems Integration