Question

Cost borne by manufacturer or consumer

Answer 1

Packaging cost is a very important factor in today's business as the producer/manufacturer tries to make it eye-catching and durable. Hence, it sometimes turns out to be quite expensive. This erodes the profit margin of the producer/manufacturer, if it were to absorb the extra cost. On the other hand, the price gets inflated if the producer/manufacturer passes this cost on to the consumer by building it into the selling price. Therefore, a fine balance has to be struck in selecting the packaging and in the accounting treatment of the cost.