What it means
In everyday business, a quoted price appears on a written quote that lists the quantity, unit price, delivery terms and an expiry date. If the buyer accepts within that window, the quote can form the basis of a binding agreement, though the legal detail depends on the wording and the country.
A quote matters because it sets the buyer's budget and fixes the seller's margin. Pricing mistakes in quotes are among the most common causes of lost profit, because a low figure sent by email is hard to take back.
Many firms therefore require a second person to review any quote above a set value. Sellers usually build a quote from cost plus a target margin.
They add materials, labour and overheads, then apply the margin, and show taxes and delivery separately so the buyer can compare like with like. A quoted price differs from a list price, which is the standard published price.
The quote is tailored to a particular buyer, so it may include volume discounts, and the final invoice can differ if the scope of work changes. In markets, a quote shows a bid (the highest price a buyer will pay) and an ask (the lowest price a seller will accept).
A quoted price on screen may be good only for a small size, so a large order can move the price against the trader. The gap between the two, called the spread, is a real cost of trading.
Quotes in foreign currencies tend to expire quickly because exchange rates move. Many suppliers shorten the validity period or add a clause allowing the price to be adjusted if the rate changes by more than an agreed amount.
In practice
Real-world examples.
Example
A print shop quotes $3,900 for 5,000 brochures, valid for 14 days. The customer replies on day 20, by which time paper prices have risen. The shop issues a new quote at $4,150.
Example
A machinery exporter quotes a customer overseas in US dollars, valid for seven days. This keeps the exporter safe from currency movements while the customer gets board approval. The quote lapses on day eight and the customer must ask for a fresh one.
Example
An investor sees a stock quoted at a bid of $49.90 and an ask of $50.10. A buy order for a small number of shares fills at the ask price of $50.10. The 20 cent gap is the cost of trading immediately.
Formula
Calculation
Quoted unit price = Unit cost / (1 - Target gross margin)
Suppose a manufacturer is asked to supply 2,000 units. Each unit costs $18 to make and the company wants a 25% gross margin. The quoted unit price is 18 / (1 - 0.25) = 18 / 0.75 = $24. The total quote is 24 x 2,000 = $48,000. As a check, total cost is 18 x 2,000 = $36,000, so gross profit is 48,000 - 36,000 = $12,000, which is 25% of the $48,000 quoted.Case study
Seen in the real world.
Pinecrest Fabrication is an illustrative, fictional metal workshop that won a large order with a quote of $120,000. The estimator had priced the steel and the labour but forgot that delivery would cost $9,000.
The customer accepted the quote within its validity period, so Pinecrest was committed to the price. Delivery came straight out of profit, taking the gross margin from a planned 22% to about 15%.
The owner introduced a checklist for every quote that covers materials, labour, overheads, delivery, taxes and the expiry date, plus a second review for orders above $50,000. In this illustrative case, one missing line item cost almost two months of profit from the job. Pinecrest also began to state in each quote that delivery is charged separately unless shown otherwise. The change made quotes slightly longer, but customers said they found the breakdown clearer, and disputes after acceptance became rare.
Watch out
Common mistakes.
- Treating a quote as valid indefinitely, when the price should have an expiry date and clear terms.
- Leaving out delivery, installation or taxes, so the customer is shown a total that is not the final amount.
- Assuming the price on a trading screen is the price you will get for any size of order, when it may apply to a small quantity only.
Questions
People also ask.
How long should a quoted price be valid?
Commonly between a few days and a few weeks, depending on how quickly costs and exchange rates move. Volatile materials such as metals or fuel justify shorter periods.
What is the difference between a quote and an estimate?
A quote is a firm price the seller is prepared to be held to, while an estimate is an approximate figure that may change.
Is a quoted price legally binding?
Often it becomes binding once accepted within its validity period, but the details depend on the wording and on local law, so contracts should be checked.
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