No rush Legyoyo. 
Done!
Should we include labor cost?
I’ll have to leave that up to you guys to figure out.
I hope we can wrap up today. I have things to do tomorrow.
I sent mine!
And Legyoyo is left. He had something so.
No rush :). (Well… ::))
Ok, starting my answer now. Should be sent in a few minutes (5-10)
Yeahhhhh!
So is leg the last entry?
Nope, I sent it in
I can’t wait for the entries now yay!
Hypothetical Question #4 (Costs & Profits)
You own Addy’s yo-yo jewelry making service. A customer, Lisa, requested a bracelet made to her specifications. She wants you to quote her the price to be paid, for the bracelet and shipping. Markup (profit) in the jewelry business is 100%.
Materials for making the bracelet will cost you $8.00. It takes you one hour to make a bracelet. Shipping to Lisa costs $3.00. What price will you quote Lisa (total), for the bracelet shipped? Explain to me why you chose that price.
Answers to Hypothetical #4 in the order in which they were received;
Bcmaddog:
Here is my answer.
My total price is $29.
I’m charging 5.00 and hour.
8.00 for the materials
3.00 for shipping.
100% markup, 5.00+8.00=$13x2=$26+$3=$29
I chose 5.00 an hour, minimum wage is 7.50 an hour.
I feel 5.00 an hour is perfectly fine.
I am making 5.00 profit a bracket.
Abby1371:
Alright since the materials cost $8 and shipping is $3 that means I would have to charge no less then $11 however this is not counting the time it takes to make it which is 1 hour so this means this is the place where I pay for myself and make the profit since its my time so I would charge and extra $5 at most $6 and at least $4 depending on the detail. So I have to make a profit so I chose $5 because its right in the middle at around the price that’s fair so that gives about a reasonable price of $16 which this price pays for shipping materials and time also known as the profit where you make your profit. So this gives me a $5 profit to spend or save as I please Because It’s my labor.
SlimJoe:
If the materials cost 8 and the shipping is 3, that means with every bracelet I make, i’ll need to make sure its at least over 11 dollars in order to have 100% profit.
Therefore, I think I would price the bracelets at 20 dollars a piece, considering that 11 dollars is the production cost. That way, ill make 9 dollars per bracelet per hour. 20 dollars per bracelet is especially fair to both Lisa and I. Lisa gets what she wants for a practical price while I still retain 100% profit. 9 dollar profit per bracelet is feasible for something that takes an hour to make. As such, both parties are satisfied with the price.
So, in short, ill charge 20 shipped.
StringKing:
All right, here is how I’d price my bracelet.
I’d charge $8 for materials, plus another $8 due to the 100% markup. There are also labor costs to consider; minimum wage is $7.25 per hour, and I feel that is a fair hourly wage for my services. Since the bracelet takes an hour to make, I’ll add $7.25 to the price. I also need to add $3 for shipping.
So the total price I’d quote Lisa is $26.25
Legyoyo:
Ok, for this question I’ll format it like the last. Not because it did well, but because these are really good things to think about. They not only question my way of thinking, but they also can help me improve how I do business, in any way needed.
So, before deciding a number to quote her, you have to take some things into consideration.
- The eleven dollars you’re charging her for supplies and shipping.
- Plus a %100 profit.
- Labor fees
The total comes to a fee of $22, before labor fees. Minimum wage happens to be $7.25 an hour. This added, comes to $29.25. This to me seems like a hefty price for a bracelet, even with an hour of making time. Even if you cut $7.25 in half, $25.63 still seems a lot.
I understand it took you an hour, but charging anything after you’re already making $11 seems unfair.
I personally, would charge no more than $22. Not only are you making more than $10 a bracelet, but this is also very honest charge. And giving people good products for as cheap as possible (while still making some profit) is what I think is the best.
Another reason is: if you’re honest with the charge, and have a good product, people will come to you. They’ll know you’re charging no more than what’s a fair fee. And with something like making jewelry, you have to love it. Or you wouldn’t do it.
So why I’d charge $22:
- You love what you do, so it’s not actually that much work
- Even though you’re not charging for work, the $11 makes up for it
- You know you’re not a pirate
- If your product is the best, at the best price, people will know and refer your product to other people
TotalArtist Answer:
Materials cost $8, and I have to pay myself something for labor. The current minimum wage is $7.25 (may be more from state to state), so I will work with that number. So, my total cost of doing business (materials plus labor) is about $15. If the business standard in the jewelry industry is to mark up items 100%, I will follow the standard and add 100% of my costs to the price (basically $15.25 x 2), which leaves me with $30.50. I will add $3 for shipping, and quote Lisa $33.50 for the bracelet (shipped). If I want to offer a discount, I can pay myself a few dollars less in labor, but I should make sure I pay myself for the time it took to make the bracelet.
- As a side note, in real life, jewelry can be marked up as much as 300% in some cases. I used 100% as the low end, and it is an easy number to work with to answer this question.
I was looking for you to pay yourself something for labor, add it to the cost of materials, and double it for use as a markup. Shipping would be added after.
BCmaddog:
I like that he paid himself, but he deducted a few dollars from labor to benefit his customer and the overall price. $29 seems more than reasonable for him and his customers.
Abby1371:
Nice job calculating your costs, and you paid yourself labor, but you did not mark it up. You want to take your total costs, including labor and mark it up 100% (or double it). I also like that she charged a little less for her labor to benefit her customers and overall price. $16 is too low, and you are selling yourself short. BC also used about a $5 labor charge. So, with your numbers your equation would look like:
$8 + $5 = $13, then + $13 for markup which = 26 + $3 shipping = $29…similar price as BC.
You chose a price of $16, when it should be closer to the $29 figure. You don’t want to lose out on your profits and go out of business. I like your numbers and your thinking, just those small details make a big difference in your business finances.
Slimjoe:
Knows that he has to cover his costs, and he also paid himself, which is good. He paid himself over minimum wage of $7.25, and gave himself $9.00 per hour for labor. That is fine, but, he didn’t include the total markup of 100%. $20 is also a bit too low. If your time is worth $9 for the hour, which might depend on what kind of work is involved in that hour (okay), yours would look like:
$8 + $9 for labor = $17…double that for the markup (100% of $17 is $17) so add them to get $34…then add $3 for shipping and you get $37 quote for the bracelet shipped.
StringKing:
He did fairly well with his numbers. He charged minimum wage of $7.25 for his labor, and he included a markup…but he marked up the numbers too soon. His total costs are not just $8 for materials, the total cost includes the labor of $7.25. So, total cost is $15.25, and then you double that number and add on $3 for shipping. He only doubled the $8 was the only misstep. As you can see his total price quote of $26.25 is a tad low, but not by a whole lot. What saved him is that his labor cost was not discounted, so he ends up a tad lower than BC’s price.
Scores:
Legyoyo:
Keep in mind that we don’t know what this bracelet is made out of…bits of gold or precious stone of some kind…you never know. It may be worth every bit of that price. While it’s good to save your customers money, you also have to run a business and keep it going. I think anything under $26 is extremely low, and that could create other problems as well. Pricing too low can ruin the market in the industry as a whole. Pricing too low can put other companies out of business in your industry, and if you set prices so low that you cannot maintain them and keep your business going, it could all be a bad decision. In real life, for those who are making a living, it is the difference between staying in business, or being out of business. If it’s just a hobby, it’s no big deal, but if it becomes a living, it’s serious business. $22 is low.
We’ll need to move the math around a bit. You added shipping to the costs, and included that in the markup. You want to take that out, because you can just charge Lisa the $3 it costs to ship out to her at the end. You want to add labor and materials, double that, and then add the shipping charge at the end. I like that you used minimum wage and looked that up. Same kind of thing as StringKing. But, StringKing came out okay because of the numbers he used and not heavily discounting things.
Scores:
Bcmaddog12 - included labor/materials in markup as required, then added shipping cost.
StringKing10 - added a markup but only included materials in computing that
Legyoyo 8 - added a markup but only included materials, and included the shipping cost in the markup. Price is low, and discounted…nice guy to customers, but must tighten up the finances.
Abby 6 - Did not add a 100% markup to the price…as a result the price is very low
SlimJoe 6 - Did not add 100% markup to the price…as a result the price is very low
Yay! I have a happy customer cause I like making prices that I would pay for the stuff I sell cause otherwise it’s
Not fair for the customers with the price.
Yeah, I’m making a comeback!
Dang! At least I am learning :).
Reasonable. I see how $22 could be on the low end. Very cool to see how this is turning out. Glad I was able to take part in this
You have to think of what the markup would be on a paracord holder. You never know…but it’s food for thought. For my stuff, I consider it similar to a belt, because it is made of the same material and used for a similar purpose. But from a manufacturer standpoint, I don’t set the price for customers. This is some stuff to get you thinking. 
Question #4 up by 3PM. Prizes can be mailed out tomorrow.
You mean question 5, right?
well yes and no. One of them was to send a letter not answer a q.
But then again…