Woodworker's Journal 1982-6-6, страница 16

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Workshop Income (Cont'd)

And there's more - general supplies, like sandpaper, general expenses like telephone, ana such things as advertising, selling, bookkeeping, plans books, subscriptions, etc. - things that are necessary and cost real dollars but can't easily be allocated to each item produced. Bill figured that if he were operating his shop full time all that might

add up to about $2,400 a year.

Summarizing it all. Bill came up with the following: Operating expenses $1,970.00

Replacement of tools and truck, per year 3,600.00

Miscellaneous 2,400.00

Total $7,970.00

In his original figuring. Bill had allowed $10 per step-

ad <" t ai

cate that $10 per unit for overhead he would have to make 797 step-chairs a year just to break even.

To put it another way, each step-chair is going to take five

chair for what he called profit, remember? He had allowed nothing for overhead. If Bill were to forego profit and allo-

forego p le would

hours of work. Five hours times 797 step-chairs is 3,985 hours of work producing step-chairs in order to break even on overhead, materials ana labor. There are only 2,080 work hours in a year of 40-hour weeks, assuming that /ou're never ill, forego all holidays, and take no vacation. Just to break even Bill has to either produce 15 step-chairs a

you're never ill, forego all holidays, and take no vacation. Just to break even Bill has to either produce 15 step-chairs a week (at five hours per unit that's a 75-hour week) or he has

to get more per step-chair. And no consideration has yet been made for profit. How much must he get per step-chair

if he is to cover all expenses and also make a profit? How much profit should Bill aim to get?

Bill decided to look at profit conservatively. "I have $18,000 invested in tools and truck," he said. "If I were to invest that money some other way I should be able to get 12 percent. Twelve percent of $18,000 is $2,160." He added that number to his $7,970 for overhead expenses and came up with a total of $10,130. Dividing this by 2,000 work hours per year yield $5,065 needed per hour to cover profit and overhead.

Since each step-chair takes five hours to make he needs to get $25.33 per chair (5 times $5,065) in addition to materials and labor costs. Materials and labor were calculated to be $71.45 per step-chair. So Bill called his antiques dealer and said, "I'll make the first eight for $81.45 each, as we agreed, but I'm going to have to get $100.00 for any beyond that in order to cover overhead and profit."

"No problem," said the dealer. "I've already sold two for $150 each just from the Polaroids I took. I can get $175, perhaps $200. No problem at all. Just make 'em.

As we said, Bill is not dependent on his woodshop for his living, and since his first price did cover his materials and labor he was not going to be out of pocket even if he sold for less than his real overall cost. It could be argued that anything one gets from a hobby woodshop beyond the cost of materials is found money, since the shop is already there. It can also be argued that making a few sales even at bare materials cost is simply a means of providing recreation at no expense. There are also tax considerations that can offset the real cost of selling at a loss.

All that is fine, as long as one accepts the fact that he is subsidizing the creation of step-chairs for the enjoyment of others. If you want to make step-chairs for the heck of it, fine. Go to it; you could forget cost entirely and give them away. But if you want income from your woodshop you have to add up all of the costs before you can set the price.

And it is you who has to set the price; you can't let the market do it for you and expect not to sell at a loss. You're the only one who can determine the cost, and from that determination must come the price. If the market won't meet your price then perhaps you're making the wrong item. Some items simply aren't profitable to make. Or the item may be okay, and your costs are out of line.

Next issue we 11 look at ways to get costs down. Trimming costs is often a better way to profits than increasing price. The point is that unless you figure your costs thoroughly and realistically you can't know whether they're out of line, much less figure how to cut them back.

II you own a table or radial arm saw you know what that whirl ing blade could do to your hands. RIPSTRATE " guides the work light against the lence and table while you push it through with a stick, with both hands away from the blade ALSO PREVENTS KICKBACKS Reguires no ad|ustment, RIPSTRATE is not just a safety device Professional shops use it because it gives straighter cuts and speeds the work Money back guarantee $49 50 lies; than S5 per finger) Add S3 shipping Cnec' Visa M;C Free brochure Call or write Fisher Hill Products 3 Fisher Hill Fitzwilliam, NH 03447 603 585 6883

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