Cost is the economic value that has been used to do something or create goods or services. There are many different measures of ‘cost’ in accounting but to non-accountants it generally refers to the full cost of production, including allocated overheads. The term has many applications in procurement. Suppliers incur costs in producing their goods or delivering their services and the supplier may calculate their price by adding on a margin to their cost. The true cost to the buyer includes not only the seller’s price, but also the acquisition cost of buying the goods or services, raising the order and paying the invoice. The total cost of the purchase may include the seller’s price, the acquisition costs of raising an order etc. and the lifetime cost of using the goods or receiving the service, including disposal and close out. See also Total Cost of Ownership.
Cost Management e-Learning courses are available at Academy of Procurement.
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