Turnkey Cost

Posted in Finance, Accounting and Economics Terms, Total Reads: 597
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Definition: Turnkey Cost

Turnkey cost is the total cost incurred before the product (or service) is ready to be sold and used.


Turnkey is an item that is finished and ready to be used by the consumer. So turnkey costs would include all the costs before that, i.e. to get the product to this finished position. It would include all the direct cost such as material cost, labor cost and indirect costs like administrative expenses, advertising expenses, wages and salaries, taxes and interest. To determine the price of the product or service, manufacturers use the turnkey cost. The advantage of the turnkey cost is that it makes the accounting easier.


Turnkey costs are popular in the real estate field and in the retail market. But they are also used extensively in other fields like technology, motor sports. In real estate, turnkey home refers to a home built on the developer’s property through the developer’s financing and is ready for the consumer to move in. In technology industry, turnkey refers to the pre built computer packages and ready to be sold in the market. The main disadvantage of the turnkey products/services is that they cannot be customized as per the requirements of the consumers as they are manufactured on a standard basis. It is here that it differs from the build to order product, which is built exactly as per the customer’s specifications.

 

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