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Q:

# What does "net cost" mean?

A:

The net cost of a good or service is the total cost of the product minus any benefits gained by purchasing that product, according to AccountingTools. It differs from the gross cost, which is just the total cost of a product.

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Calculations of net cost or net price are commonly used by universities to help students and parents understand the costs of attendance, according to U.S. News and World Report. In this context, net cost is calculated by subtracting any grants received from the total tuition to determine the actual cost of attendance that the student must pay. The U.S. government also uses net cost calculations to evaluate budgets, according to the Bureau of the Fiscal Services.

## Related Questions

• A:

The fixed charge coverage ratio is the earnings before interest and taxes plus any lease expenses, which is then divided by the sum of the interest expenses and lease expenses, according to AccountingTools. A fixed charge coverage ratio indicates how much of a company's revenue goes toward expenses rather than profits.

• A:

The Value Added Tax can be calculated from the total cost of an item by multiplying the total cost by the VAT fraction, according to HM Revenue & Customs. In the reverse, the formula to calculate the VAT of an item when only given the base price and the VAT rate is the base price times the percentage rate of the VAT.