Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

And, not to knock the guy's chopsticks, but, personally, I've eaten
with chopsticks, quite a bit actually, and if I wanted a pair, I'd just
go to an Oriental store and buy some of their nice plastic ones. The
wood ones I've seen tend to warp after awhile.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/

"Jack-of-all-trades - JOAT" wrote in message
...
Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

And, not to knock the guy's chopsticks, but, personally, I've eaten
with chopsticks, quite a bit actually, and if I wanted a pair, I'd just
go to an Oriental store and buy some of their nice plastic ones. The
wood ones I've seen tend to warp after awhile.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/

This guy's last name isn't Fastow, by chance? In any self-owned business,
there is the decision that has to be made as to how much of what comes in
that doesn't cover materials and overhead is divided between salaries and
company profits. Keep in mind that if he's paying himself as the sawyer,
that he's going to have to pay income taxes and FICA on that salary as well.
I prefer to keep everything under the table, which simplifies things greatly
(just kidding, IRS...really).

todd

"Jack-of-all-trades - JOAT" wrote in message

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

The goal is to have money left over at the end of the week. How you arrive
at the figure can be varied and none are "wrong" as long as you have money
left over.

In your case, factoring in tools and electricity is a minor thing. For an on
going business, tools have to be maintained and replaced, so it is a
definite allowance should be made. As does insurance, rent. etc. In my
case I use an hourly rate that has all the expenses factored in and run at
85% efficiency. The 15% includes maintenance time, set up, or just sitting
because there is not enough business at some periods of time.

Shop rates vary. Call in any tradesman and $50 to $100 an hour is common.
In my case, I run machines. Dependsin on the size of the macine, I figure
$100 to $300 per hour, plus mateial. That includes the labor of the
operator. Unskilled labor is about $35/hour.

I like it when people look at something that sells for $1 and there are many
being shipped, They say "you must make a fortune" or similar comments. My
usual reply is "yes, I have a hard time spending all the money, but Mass
Electric and others help" Then I show them the electric bill for one month
at $12,000.

In the case of many home shop hobby guys, anything that helps pay for
material and a few beers is a fun thing. If you are trying to make a
living, you must be serious and careful about pricing.
Ed

Greetings,

Over time I have noticed the cost of materials approximately
equals the cost of labor for anything anyone does for me.
Assuming these tradesmen have their act together, computing
the sales price as double the retail price of the materials
would put the sales price at about the right level.

Sincerely,
Bill Thomas

This is how I compute SELLING price. There is *no* profit in making
something for someone if you are making "on the side" or as a hobby. Don't
try to calculate it - it will just depress you.

For me, calculating the selling price is simple:

Family and good friends -- double materials
Acquaintances and cold calls -- triple materials

If it is REALLY complex or figured, I'll add a premium but that is based on
what it is. Haven't done that for a while - the 2x and 3x has worked well
for me in the past.

On Wed, 17 Sep 2003 13:38:05 -0400 (EDT),
(Jack-of-all-trades - JOAT) wrote:

OK, so based on that, what I would call profit, is anything over
materials cost.

Profit is easy. Count up what it cost you, and subtract from the
pricetag.

What's stumping me is how to pick the pricetag. I can any
(theoretical) profit I like, if I just set the price high enough.
OTOH, this may well mean I don't sell any 8-(

I have recently been doing a lot of one of a kind projects. I have adopted
adding up all the materials I will use in wood. This I figure by the square
surface footage and then add between 15-25% waste, depending on the choosen
wood, to come up with the board ft I will need for the project. Waste,
isn't really wasted but by the time you match grains, and pick just the
right pieces from the load of lumber the wholesaler has sent you, it seems
to work. Then add in the expensive hardware, ie full extension drawer
slides, specialty hardware, etc. Then I use 3x that for basic projects and
3.5- 4x for complex projects with awkwark angles, a lot of fluting, spirals,
etc. I then take this figure and add $40-100 to it if I have had to do
drawings and mulitiple consultations with the customer to fine tune the
project. This complex method usually brings me between $25-$40 per hour
when all is said and done.

If you are saying double retail price for materials to determine
manufactured price, I don't think so. I multiply materials times 5 to come
up with manufactured price and that is CHEAP.

Now if you are talking about installing an already manufactured price item,
I could better agree that double the manufactured price would be a
reasonable assumption of the installed price in some markets.

"Bill Thomas" wrote in message
...
Greetings,

Over time I have noticed the cost of materials approximately
equals the cost of labor for anything anyone does for me.
Assuming these tradesmen have their act together, computing
the sales price as double the retail price of the materials
would put the sales price at about the right level.

Sincerely,
Bill Thomas

"Robert Wein" wrote in message ...
This is how I compute SELLING price. There is *no* profit in making
something for someone if you are making "on the side" or as a hobby. Don't
try to calculate it - it will just depress you.

For me, calculating the selling price is simple:

Family and good friends -- double materials
Acquaintances and cold calls -- triple materials

If it is REALLY complex or figured, I'll add a premium but that is based on
what it is. Haven't done that for a while - the 2x and 3x has worked well
for me in the past.


I agree with Robert. I have used this same 2X/3X formula, and it has
served me well in the past. My old cabinet maker boss passed it along
to me, and it seems to work pretty well.

Matt
SLC

Try Google,

Some examples,

http://bridgewooddesign.com/estimator/howto.htm

http://www.nwbuildnet.com/nwbn/mpcg.html

http://www.woodbin.com/docs/reviews/price_est.htm


Couldn't resist

danh



"Jack-of-all-trades - JOAT" wrote in message
...
Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

And, not to knock the guy's chopsticks, but, personally, I've eaten
with chopsticks, quite a bit actually, and if I wanted a pair, I'd just
go to an Oriental store and buy some of their nice plastic ones. The
wood ones I've seen tend to warp after awhile.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/

To quote Thomas J. Watsonon on the subject:

Formula is:

M+L+O+P (Materials plus Labor plus Overhead plus Profit)

MATERIALS COST = Cost plus Tax plus Acquisition Cost (going to get it)
plus carrying costs if financed. Make sure you do your take-offs
cleanly and add for waste.


LABOR COST is a bit more difficult. You need to break the job down
into individual operations and make sure that you charge for all of
them.

Once you have your number of hours figured you need to figure your
shop rate.

Maximum number of hours available for work = 2080 (52 weeks x 40 hours
= 2080 hours).
Minus vacation time = 2000 (2 weeks x 40 hours = 80 hours).
Minus holidays = 1944 (7 days x 8 hours = 56 hours).
Minus non-billable hours = 1555 (20% of 1944 hours = 388.8 hours)
(marketing, selling, bidding, bookkeeping, purchasing, emptying
spittoons, etc.)

So, you now have 1555 billable hours in which to earn your money for
the year.

How much do you want to make a year as your wage (not including
profit, that's a different animal)?

Let's use $50,000.00 a year just for fun.

Labor Cost per billable hour = 32.15 ($50,000 / 1555 billable hours =
$32.15 per hour).

OVERHEAD COST = All the costs of doing business. Some of what I put
here should go into a thing called Labor Burden but screw it, I'm
putting it here, which works if you're a one man shop.

Shop Cost = 3.86 (We'll include heat and electric, etc. in here,
$500.00 per month x 12 months / 1555 billable hours = $3.86 per
hour).
Machinery Cost = 1.29 (Acquisition, repair, maintenance,depreciation,
$2000.00 per year / 1555 billable hours = $1.29 per hour).
Truck Cost = 2.22 (34.5 cents per mile x 10,000 miles per year / 1555
billable hours = $2.22 per hour).
Office Cost = 1.16 (Space, furniture, computer, supplies, etc.$150.00
per month x 12 months / 1555 billable hours per year = $1.16 per
hour).
Insurance = .64 (Contractor's Liability, building, etc., $1000.00 per
year / 1555 billable hours = $.64 per hour).
Health Insurance = 1.93 ($250.00 per month x 12 months / 1555 billable
hours = $1.93 per hour).
Professional Services = .64 (Accountants and lawyers, $1000.00 per
year / 1555 billable hours = $.64 per hour).
Other = .5 (All sorts of consumables and other stuff that can't be
directly billed to a job, $.50 x 1555 per billable hour = $.50
per hour).


Total Overhead per billable hour = $12.24.

Labor Cost plus Overhead Cost = $44.39 (Labor @ $32.15 plus Overhead @
$12.24 = $44.39)

PROFIT is not how much you make as wages, it's how much the business
makes.

A rough split on the cost of jobs is 1/4 material and 3/4 labor (Labor
Cost plus Overhead Cost).

If your yearly billing for labor plus overhead is $69,026.00 ( $44.39
per billable hour x 1555 billable hours = $69,026.00). Then your
yearly materials cost should be about $23,009.00 ($69,026.00 / 3 =
$23,009.00).

Annual Sales = $92,035.00 (Does not include profit, yet, Labor @
$69,026.00 plus Materials @ $23,009 = $92,035.00 per year).

Profit = 8.88 (15% of gross annual sales, $92,035.00 x 15% =
$13805.00 / 1555 billable hours = $8.88 per hour).

SHOP RATE = 53.27 (Labor Cost plus Overhead Cost @ $44.39 plus Profit
@ $8.88 = $53.27 per hour).

ANNUAL SALES = $105,840.00 (Labor Cost plus Overhead Cost plus
Materials Cost plus Profit).

QUARTERLY SALES = $26,460.00.

MONTHLY SALES = $8820.00.

WEEKLY SALES = $2035.00

Every time I start thinking like this it makes me want to go back to
working for somebody else.

I'll probably catch hell for this because no accountant would ever
group things together the way I have. Also, they don't, as a rule,
make as much use of the WAG method as I have for cost estimating.
They like GAP, I like WAG (they be rich - I be poor). I guess my
point is: If I'd had someone present things to me in this way when I
started, I probably wouldn't have started at all but, at some point
you have to start thinking this way, preferably with the aid of a real
accountant, or you won't really be in business, you'll just have a
very expensive, very time consuming hobby. And, for you guys who
think that 15% is a gaudy figure, yeah, so do I.

Good Luck






Regards,

Tom.

Thomas J. Watson-Cabinetmaker
278 Balligomingo Road
Gulph Mills, Pennsylvania
19428
www.tjwcabinetmaker.com

Pretty much the best piece I've ever read on the topic was posted here
this past February by (who else?) Tom Watson. It was a keeper, so I
did.

Here's his post in it's entirety.
-------------------------------------------

Formula [for how much to charge] is:

M+L+O+P (Materials plus Labor plus Overhead plus Profit)

MATERIALS COST = Cost plus Tax plus Acquisition Cost (going to get it)
plus carrying costs if financed. Make sure you do your take-offs
cleanly and add for waste.

LABOR COST is a bit more difficult. You need to break the job down
into individual operations and make sure that you charge for all of
them.

Once you have your number of hours figured you need to figure your
shop rate.

Maximum number of hours available for work = 2080 (52 weeks x 40 hours
= 2080 hours).
Minus vacation time = 2000 (2 weeks x 40 hours = 80 hours).
Minus holidays = 1944 (7 days x 8 hours = 56 hours).
Minus non-billable hours = 1555 (20% of 1944 hours = 388.8 hours)
(marketing, selling, bidding, bookkeeping, purchasing, emptying
spittoons, etc.)

So, you now have 1555 billable hours in which to earn your money for
the year.

How much do you want to make a year as your wage (not including
profit, that's a different animal)?

Let's use $50,000.00 a year just for fun.

Labor Cost per billable hour = 32.15 ($50,000 / 1555 billable hours =
$32.15 per hour).

OVERHEAD COST = All the costs of doing business. Some of what I put
here should go into a thing called Labor Burden but screw it, I'm
putting it here, which works if you're a one man shop.

Shop Cost = 3.86 (We'll include heat and electric, etc. in here,
$500.00 per month x 12 months / 1555 billable hours = $3.86 per
hour).
Machinery Cost = 1.29 (Acquisition, repair, maintenance,depreciation,
$2000.00 per year / 1555 billable hours = $1.29 per hour).
Truck Cost = 2.22 (34.5 cents per mile x 10,000 miles per year / 1555
billable hours = $2.22 per hour).
Office Cost = 1.16 (Space, furniture, computer, supplies, etc.$150.00
per month x 12 months / 1555 billable hours per year = $1.16 per
hour).
Insurance = .64 (Contractor's Liability, building, etc., $1000.00 per
year / 1555 billable hours = $.64 per hour).
Health Insurance = 1.93 ($250.00 per month x 12 months / 1555 billable
hours = $1.93 per hour).
Professional Services = .64 (Accountants and lawyers, $1000.00 per
year / 1555 billable hours = $.64 per hour).
Other = .5 (All sorts of consumables and other stuff that can't be
directly billed to a job, $.50 x 1555 per billable hour = $.50
per hour).

Total Overhead per billable hour = $12.24.

Labor Cost plus Overhead Cost = $44.39 (Labor @ $32.15 plus Overhead @
$12.24 = $44.39)

PROFIT is not how much you make as wages, it's how much the business
makes.

A rough split on the cost of jobs is 1/4 material and 3/4 labor (Labor
Cost plus Overhead Cost).

If your yearly billing for labor plus overhead is $69,026.00 ( $44.39
per billable hour x 1555 billable hours = $69,026.00). Then your
yearly materials cost should be about $23,009.00 ($69,026.00 / 3 =
$23,009.00).

Annual Sales = $92,035.00 (Does not include profit, yet, Labor @
$69,026.00 plus Materials @ $23,009 = $92,035.00 per year).

Profit = 8.88 (15% of gross annual sales, $92,035.00 x 15% =
$13805.00 / 1555 billable hours = $8.88 per hour).

SHOP RATE = 53.27 (Labor Cost plus Overhead Cost @ $44.39 plus Profit
@ $8.88 = $53.27 per hour).

ANNUAL SALES = $105,840.00 (Labor Cost plus Overhead Cost plus
Materials Cost plus Profit).

QUARTERLY SALES = $26,460.00.

MONTHLY SALES = $8820.00.

WEEKLY SALES = $2035.00

Every time I start thinking like this it makes me want to go back to
working for somebody else.

I'll probably catch hell for this because no accountant would ever
group things together the way I have. Also, they don't, as a rule,
make as much use of the WAG method as I have for cost estimating.
They like GAP, I like WAG (they be rich - I be poor). I guess my
point is: If I'd had someone present things to me in this way when I
started, I probably wouldn't have started at all but, at some point
you have to start thinking this way, preferably with the aid of a real
accountant, or you won't really be in business, you'll just have a
very expensive, very time consuming hobby. And, for you guys who
think that 15% is a gaudy figure, yeah, so do I.

Good Luck

Regards,

Tom.

www.tjwcabinetmaker.com

Jack-of-all-trades - JOAT wrote:

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

He's just proving why I'm happy not to be in business.

If you _don't_ figure every little thing, you never know whether or not
you're actually making any money, but if you do, you're too busy doing math
and melting the hair off your head to make stuff, so you're not making any
money.

Me, I just use the 3X rule. 3X materials = retail price.

Of course, in order to actually _sell_ anything, I've had to mark it down to
cost-of-materials + $5.

--
Michael McIntyre ---- Silvan
Linux fanatic, and certified Geek; registered Linux user #243621
Confirmed post number: 17804 Approximate word count: 534120
http://www.geocities.com/Paris/Rue/5407/

slowalker wrote:

WEEKLY SALES = $2035.00

Every time I start thinking like this it makes me want to go back to
working for somebody else.

Seeing all that just made me again glad I've never gone off the deep end and
gone into business for myself.

I'm *way* too stupid to figure out how to actually earn a living at it.

--
Michael McIntyre ---- Silvan
Linux fanatic, and certified Geek; registered Linux user #243621
Confirmed post number: 17805 Approximate word count: 534150
http://www.geocities.com/Paris/Rue/5407/

On Wed, 17 Sep 2003 13:38:05 -0400 (EDT),
(Jack-of-all-trades - JOAT) scribbled

Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

That's your net cash flow, not profit in the economic or accounting
sense (well, maybe it is, see below). For profit, you need to subtract
your other real costs. Profit is always gross revenues (or sales)
minus costs. The issue is how do you calculate costs.

There is a useful distinction between accounting profit and economic
profit. Accounting profit is what your taxation authority and bank are
interested in. To calculate accounting profit, you take off your other
costs (power, depreciation on machinery, wages paid to others, etc.),
but not the cost of your own labour.

For economic profit, which is what you should be interested in, you
also need to take into account your "opportunity costs". E.g. what is
your time worth and what could you earn in interest if you left your
money in the bank instead of buying equipment. Note that these are not
theoretical costs, they represent actual money out of your pocket. It
is important to consider those as costs if you're trying to set up a
business. You might have a large accounting profit, but if you end up
only earning a dollar or two an hour, it might not be worth doing.
Even if you end up making a decent hourly wage, you want some amount
over that so that you're making more than if you had left your money
in the bank and gone to work for someone else. (Of course, you might
also put a value on the flexibility and satisfaction working for
yourself gives you, but that's another issue.)

In your case, accounting profit is irrelevant (except for your tax
return). You are saying that there is no opportunity cost other than
the cost of materials, since you would be spending that money anyway.
So the opportunity cost of power, machinery, etc. is zero in your
case. You don't want to or can't work for anyone else, and presumably
enjoy making the pine cone turkeys and would be indifferent between
making them for sale or doing other stuff for yourself. So your time
has no opportunity cost. So, for you, the economic profit is as you
would calculate it - Sales minus material costs.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

This guy is looking at it from an economic profit perspective. He is
counting his labour as an opportunity cost, he assumes he is worth
$75 per hour as a sawyer and $35.00 per hour for shaping (?) &
finishing, etc. Another way of looking at opportunity cost is that if
he wanted to hire someone, this is what it would cost. So, if you're
looking at whether it's worth setting up a chopstick-making business,
he is looking at it properly. And it is a profitable business, I
should get into making $25 chopsticks.

He cannot deduct the value of his labour as a cost for accounting
purposes, so there is no tax loophole: he has to pay tax on his
labour. It does not matter whether he pays himself a wage or declares
it as profit (net income). So, his sawyer fees are not part of his
economic profit, but they are certainly part of his accounting profit.
I'm not familiar with the US tax system, but in Canada, an individual
would end up paying the same amount of taxes and Canada Pension Plan
contributions whether he paid himself a salary or not.

All this is my professional opinion, and worth exactly what you're
paying for it.
Luigi
Replace "no" with "yk" twice
in reply address for real email address

your looking not actually for profit but the figure to use. I learned it as
Markup. you markup in hopes to make a profit.
I learned in Carpentry class that contractors make anywhere from 15%-35%
markup (depends on the market and who you do it for)
Most want to make a certain percentage profit (often between 15-25% of the
whole)
The mark up doesn't necessarily mean the profit. If you estimate after the
fact it often does. But if you have to Estimate before hand it usually
doesn't
Anyway to markup. how much you really want to make?
15% is not unreasonable and will at least cover simple overhead.
Cost divided by (1.00 - overhead percentage)
in otherwords
Cost (of materials, labor) divided by .85 = final mark up price.


--
Young Carpenter

"Violin playing and Woodworking are similar, it takes plenty of money,
plenty of practice, and you usually make way more noise than intended"

"Jack-of-all-trades - JOAT" wrote in message
...
Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

And, not to knock the guy's chopsticks, but, personally, I've eaten
with chopsticks, quite a bit actually, and if I wanted a pair, I'd just
go to an Oriental store and buy some of their nice plastic ones. The
wood ones I've seen tend to warp after awhile.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/





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Bill Thomas wrote:

Greetings,

Over time I have noticed the cost of materials approximately
equals the cost of labor for anything anyone does for me.
Assuming these tradesmen have their act together, computing
the sales price as double the retail price of the materials
would put the sales price at about the right level.

Sincerely,
Bill Thomas


My general impression always was that materials were about 1/3 of the
retail price...

I too am retired and on a fixed income and maybe I just stopped learning
the day I walked out of school and got a job.... But most of mny
"education" was aquired during the summer months working in the
construction and remodeling business... NOT furniture...

That said I still would not retail a "set" of chop stick at 3 times the
cost of the materials...BUT I would do that for a coffee table....
beccause I am not trying to feed myself...

Bob Griffiths

%^&*( My power just blinked, been doing that all day, including
about 2 hour power outage, from the hurricaine, so have to start this
response over.

Well, certainly learned a lot with that question. Most of which I
will never use, but interesting just the same. I decided to keep this
thread a bit shorter, but making my replies in just this one post.
Below are the posts I felt it appropriate to reply to:
++++++++++
Wed, Sep 17, 2003, 6:21pm (EDT+4) From:
(Bill=A0Thomas)
Greetings,
Over time I have noticed the cost of materials approximately equals the
cost of labor for anything anyone does for me. snip

Might be OK for figuring on paying for a new roof, but that would
mean I would be selling some things for maybe $6. My labor is worthmore
than that.
+++++++++
Wed, Sep 17, 2003, 9:32pm (EDT+5) From:
(Andy=A0Dingley)
What's stumping me is how to pick the pricetag. I can any (theoretical)
profit I like, if I just set the price high enough. OTOH, this may well
mean I don't sell any
I've heard a rule of thumb way is by pricing you stuff. If you
sell out right away, you are selling too low, raise prices. Continue
this until no one will buy, then lower prices to where you can keep up
with the demand.

I'm not really sure I would be comfortable with that, and not sure
how it would work.
+++++++++=A0
Wed, Sep 17, 2003, 9:12pm (EDT+4) From:
(Leon)
snip I multiply materials times 5 to come up with manufactured price
and that is CHEAP. snip

Now, that sounds pretty reasonable.
++++++++++
Wed, Sep 17, 2003, 11:25pm (EDT+4) From:
(danh)
Try Google, snip

What's a Google?
++++++++++
Wed, Sep 17, 2003, 9:36pm From: (Silvan)
snip Of course, in order to actually _sell_ anything, I've had to mark
it down to cost-of-materials + $5.

If I had to sell something that low, I would make something else.
My time is certainly worth more than that.
++++++++++
Wed, Sep 17, 2003, 6:47pm (EDT-3) From:
(Luigi=A0Zanasi) who is apparently an accountant, tax
dodger, or both, creeps out into the twilight and says:
snip E.g. what is your time worth and what could you earn in interest
if you left your money in the bank instead of buying equipment. snip

Well, I figure my time is worth whatever I can get paid for it.
But, I don't understand, what do you mean, instead of buying equipment?
The only other valid option would be buying materials.

In your case, accounting profit is irrelevant (except for your tax
return). snip

Actually, not even that. I don't figure I will be making enough to
pay taxes on. One of the few advantages of a disability income - I'm not
making enough to pay taxes.

You don't want to or can't work for anyone else,

Both.

and presumably enjoy making the pine cone turkeys snip

May the Woodworking Gods bless you. I had completely forgotten
about those. My fortune is made, if I can just find enough pinecones.

He cannot deduct the value of his labour as a cost for accounting
purposes, so there is no tax loophole: he has to pay tax on his labour.
snip

So, sounds like the guy was complicating things, for no good
reason.

All this is my professional opinion, and worth exactly what you're
paying for it.

And, I do thank you for it, and to show my appreciation, my check
is in the e-mail.
++++++++++

Got some helpful hints, and a lot of info I didn't ask for, so all
in all, it's definitely been an interesting read.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/

"Bob G" wrote in message news:vMqab.557

My general impression always was that materials were about 1/3 of the
retail price...


It is common and often mentioned here. It may work often, but it can also
get you into big trouble, or it can cost you business. The 3X thing has
been big in my industry for over 30 years. Some of the most profitable jobs
are 1.5 to 2X material, and I've seen a real loser at 10X material. You
really must be cautious pricing that way.
Ed

Perhaps then someone could give me possible cost breakdowns on how
furniture like a rocking chair for example can sell for as much as
$5,000 or even more.
I suppose in some cases it's the reputation of the maker? Or shoud I
say artist?



(Jack-of-all-trades - JOAT) wrote in message ...
Not, not trolling. This has been nagging me for awhile. As many
of you know, I'm on a fixed income, and I don't do this for a living. I
do sell something once in awhile tho, and I know how I figure profit.

Because I'm not doing this for a living, I don't figure in tool
wear and tear, depreciation, electric, etc,, simply because I'm going to
be using the tools and electricty anyway. I also don't figure in any
R&D time, or R&D materials. Again, because I'm not doing it for a
living. I do count in price of materials - wood, finish, any hinges,
etc. And, try to figure a reasonable price for whatever, based partly
on materials cost, but mostly labor. The labor is based on actual time
spend working on something, and doesn't include glue or finish drying
time.

OK, so based on that, what I would call profit, is anything over
materials cost.

I'm curious, because quite awhile back, I read an article about a
guy who makes wood stuff, for a living, and specializes in stuff like
chopsticks. No prob with that, if people want to pay the $25 for a pair
of chopsticks, up to them. The article covered all the guy's expenses,
and how he figured all this. There was the usual overhead, elec, etc.,
tool depreciation, etc. Then there was materials cost. Even with
expensive exotic wood, the actual wood cost was low,very low. Maybe a
dollar or so, for even the realy expensive woods, but probably an
average of about 25 cents a pair, and apparently he didn't use anything
like poplar, maple, etc., you know, the cheap stuff. Then the guy
figures in the cost of the sawyer, who cuts the pieces, at $75.00 per
hour. He is the sawyer. Then, there was labor, at $35.00 per hour, to
shape the chopsticks. Only took something like a minute or so for a
pair. Again, he did the work. If I recall right, he figured in labor
for finishing them too, and again, his labor. So, after all is said and
don't, this guy only figured something like about $5 or $10 profit on
each pair. He didn't count in the sawyer fees as profit, even tho he
was the sawyer, and pocked the money.

So, am I missing anything on how I figure profit? Or, is this guy
just trying to find every tax loophole he can?

And, not to knock the guy's chopsticks, but, personally, I've eaten
with chopsticks, quite a bit actually, and if I wanted a pair, I'd just
go to an Oriental store and buy some of their nice plastic ones. The
wood ones I've seen tend to warp after awhile.

JOAT
Atheism is a non-prophet organization.

Life just ain't life without good music. - JOAT
Web Page Update 15 Sep 2003. Some tunes I like.
http://community-2.webtv.net/Jakofal...OMETUNESILIKE/

"Bri" wrote in message
om...
Perhaps then someone could give me possible cost breakdowns on how
furniture like a rocking chair for example can sell for as much as
$5,000 or even more.
I suppose in some cases it's the reputation of the maker? Or shoud I
say artist?


I personally don't go with the 3x cost formula unless there is very little
labor involved. I am still cheap and work with 5x cost of materials and
have no problems selling my work. I am sure it al depends on your location.
In Houston I have a very wide variety of customers.

"Edwin Pawlowski" wrote in message
...

"Bob G" wrote in message news:vMqab.557

My general impression always was that materials were about 1/3 of the
retail price...


It is common and often mentioned here. It may work often, but it can
also
get you into big trouble, or it can cost you business. The 3X thing has
been big in my industry for over 30 years. Some of the most profitable
jobs
are 1.5 to 2X material, and I've seen a real loser at 10X material. You
really must be cautious pricing that way.
Ed

well, some of the glass i use in making things is $150 sqft, and other
glasses are $4 sqft, yet it takes me the same labor to make the objects. if
i used a constant multiplier, my marketplace would be a lot smaller for
similar objects.

regards,
charlie
cave creek, az

I Don't know what you sell but if I were to do that on my current project I
would be charging 1,500 for a cupboard. Wait that is what I have but into it
but not what it is worth.

--
Young Carpenter

"Violin playing and Woodworking are similar, it takes plenty of money,
plenty of practice, and you usually make way more noise than intended"

"Leon" wrote in message
...

"Bri" wrote in message
om...
Perhaps then someone could give me possible cost breakdowns on how
furniture like a rocking chair for example can sell for as much as
$5,000 or even more.
I suppose in some cases it's the reputation of the maker? Or shoud I
say artist?


I personally don't go with the 3x cost formula unless there is very little
labor involved. I am still cheap and work with 5x cost of materials and
have no problems selling my work. I am sure it al depends on your
location.
In Houston I have a very wide variety of customers.






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"Young Carpenter" wrote in message
...
I Don't know what you sell but if I were to do that on my current project
I
would be charging 1,500 for a cupboard. Wait that is what I have but into
it
but not what it is worth.


I build custom designed furniture.. That sounds about right... ;~)

But this was supposed to be low budget (not including the already low budget
tools).
I wouldn't feel right charging that much.
Although right now the Cupboard doors look down right professional (without
a magnifier that is).


--
Young Carpenter

"Violin playing and Woodworking are similar, it takes plenty of money,
plenty of practice, and you usually make way more noise than intended"

"Leon" wrote in message
. ..

"Young Carpenter" wrote in message
...
I Don't know what you sell but if I were to do that on my current
project
I
would be charging 1,500 for a cupboard. Wait that is what I have but
into
it
but not what it is worth.


I build custom designed furniture.. That sounds about right... ;~)






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I use this formula...........materials times 3...plus 10%....I know I can
get more...........but then I'd sell a lot less.
cheers
John

--
Rose Cottage Woodworks
www.rosecottageinn.co.nz/woodworks
"Young Carpenter" wrote in message
...
I Don't know what you sell but if I were to do that on my current project
I
would be charging 1,500 for a cupboard. Wait that is what I have but into
it
but not what it is worth.

--
Young Carpenter

"Violin playing and Woodworking are similar, it takes plenty of money,
plenty of practice, and you usually make way more noise than intended"

"Leon" wrote in message
...

"Bri" wrote in message
om...
Perhaps then someone could give me possible cost breakdowns on how
furniture like a rocking chair for example can sell for as much as
$5,000 or even more.
I suppose in some cases it's the reputation of the maker? Or shoud I
say artist?


I personally don't go with the 3x cost formula unless there is very
little
labor involved. I am still cheap and work with 5x cost of materials and
have no problems selling my work. I am sure it al depends on your
location.
In Houston I have a very wide variety of customers.






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"John Gilham/Patsy Scott" wrote in message
...
I use this formula...........materials times 3...plus 10%....I know I can
get more...........but then I'd sell a lot less.
cheers
John


That's not necessarily a bad thing. Would you like to work 60 hours a week
and make $500 by selling 20 pieces or work 35 hours and make $1000 by
selling 10 pieces?


Figuring selling price by multiplying the material cost is W R O N G ! ! !

If you can make an item from pine and spend $5 for material and two hours
labor, you'd be selling it for $16.50. Make the same item from an exotic
material (cost = $30, take the same amount of time to make it and sell it
for $99. If you can sell the high prices, why not? But if all your
customers want cheaper pine, you won't make much of a living. You have to
get paid for your time.
Ed