Cost-Price

Also known as “cost of production”. The price made up by constant and variable capital advanced actually consumed in the production of a commodity, or the equivalent for the capital consumed.

The cost-price of a commodity is measured in terms of the consumption of capital, while the actual consumption of a commodity is measured in terms of the consumption of labor. So what the commodity costs the capitalist and what the production of the commodity itself costs are undoubtedly two completely different quantities. The former is the cost-price of the commodity and the latter is the value of the commodity, the former being less than the latter. So it costs the capitalist nothing to gain surplus-value m and, of course, it is not included in the cost-price of the commodity.

Under the capitalist system, the value of a commodity (W) is represented by the formula W = c + v + m. If the cost-price is represented by k, then the value of the commodity is W = k + m. It can be seen that the cost-price is less than the value of the commodity. The category of cost-price obliterates the different parts played by constant and variable capital in the production of surplus-value, as if surplus-value was not acquired from variable capital but was brought about by the aggregate capital advanced. In this way, cost-price has concealed the capitalist relations of exploitation.

The cost-price is very important for the capitalist. It is an important indication of whether the capitalist is making or losing money in running a business. The minimum limit of the price at which a commodity can be sold is determined by the cost-price of the commodity.

If the price at which a commodity is sold is higher than the cost-price of the commodity, the capitalist can make a profit and his business is profitable. If the commodity is sold below its cost-price, the capitalist loses money because he is not fully compensated for the capital consumed in production. Therefore, the cost-price is the minimum limit of the price at which a commodity can be sold. It appears to the capitalist as if the cost-price is the inherent or intrinsic value of the commodity; as if the surplus-value is not the excess of the value of the commodity over its cost-price, but the excess of the price at which the commodity is sold, and thus surplus-value seems to be realized not by the sale of the commodity, but to arise from the sale of the commodity itself.

Another significance of the cost-price is that it determines the size of the power of a capitalist to compete: All other things being equal, the lower the cost-price of a commodity, the greater the power to compete. The decisive condition for lowering the cost-price is the adoption of advanced technology, the improvement of the organization of labor, the saving of the consumption of constant capital and the significant saving of materialized and living labor in production. In order to enhance their power to compete and make more profits, capitalists are also always trying to make new moves to increase the productivity of labor and reduce the cost-price of commodities.