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Re: Fun Manufacturer's Cost Questions...

Well, this certainly demonstrates the value of this forum! Where else would you get real answers from real people in the business to your question?

BillC's first response was a little tart, but his evident irritation over what he apparently perceived as a naive question is not entirely unjustified. All too often people make an argument that goes something like: "Wow, I just discovered that Sam's Stereo buys the SuperDuper Excelsior amplifier for $1000, and he sells it for $2000. What a ripoff!!" Or "Gee, I took apart the SuperDuper Excelsior amplifier and priced out all the parts, added a few hours labor @$15/her and, guess what, the total is only $250. Sam's Stereo sells it for $2000. What a ripoff!!" As BillC and other point out, there are a million other costs that must be accounted for; and cost accounting is the subject of endless debate among those in the know on that subject(kind of like toobz vs. chips in audio).

BillC's bigger point, though, is that no one does cost-based pricing. The only exceptions to this are price-regulated public utilities, like the power company, the gas company, the local phone company, etc. Those people get to recover their "costs" plus an allowable rate of return on the company's invested capital. This gives them very little incentive to reduce costs and a very great incentive to over-invest.

So, the answer to a question like what should Mike Dzurko (of ACI) charge for his Sapphire III speakers (that he sells over the internet) with reference to cost and "fair" profit, is, pardon my saying so, kind of silly. The answer to that question is found by asking (1) what are the selling prices of a B&W N805, an SF Concerto, a Totem 1, a Joseph Audio RM7, (2) how does the sound of the Sapphire III compare to those speakers and (3)how much are people willing to pay to be able to walk into a store, make side-by-side comparisons of those speakers and walk out with the one they decided to buy?

Only St. Thomas Aquinas believed in the idea of the "just price." He lived a very long time ago.

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