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Pricing from the web


#1

There’s an excellent but simple explanation for pricing when you are
manufacturing (it’s never simple)

http://www.jewelersresource.com/business/studio/pricing.html

If you make items and want to find the cost (as explained at this
link) you need to plan ahead. By that I mean you need just make
colored stone rings all day one day. This way you can average over
the day how many you made. It’s hard to figure your cost to
manufacture an item when you make a mothers ring one moment and a 30
diamond pave ring after that.

David Geller


#2
 If you make items and want to find the cost (as explained at this
link) you need to plan ahead. By that I mean you need just make
colored stone rings all day one day. This way you can average over
the day how many you made. It's hard to figure your cost to
manufacture an item when you make a mothers ring one moment and a
30 diamond pave ring after that. 

The problem I find with using this kind of pricing… Doing
stonesetting all day or assembling parts all day is the following…
Usually, this is just not how the day goes !! First, orders for
stores or even factories now days don’t have the volume of work for
a person to be doing that all day, so part of the pricing dilema is
that you have to account for the time employees or individuals have
to keep changing jobs during the day and the amount of time needed to
set up these different jobs. For example… I might receive an order
for 50 pins to be cast , soldered and polished and 100 pieces that
need to be cast and hand worked, then another group that needs
casting, antiqueing and polishing… Now, all the pieces are cast at
the same time at different temperatures ( which requires some
waiting around of the employee, so he does other things during that
time)… Then, they all get the sprues removed, then those items
that need pins soldered will get soldered… now, after pickling,
all the items will be vibed … then removed … then magnetically
pinpolished… then some items get antiqued…finally, they all go
to the final hand finishing.

Now, Break all the labor down by using a daily basis for one job…
lets assume stone setting… I can set 100 5mm round stones in
bezels in 1 hour… pushed hard, I will do 700 stones in a day… set
up time is roughly 1/2 hour… Assume the empolyee costs you $10
hour ( yeah, I wish) and he cost $80 for the day… Now he set 700
stones so… $80 divided by 700 = roughly 12cents /stone… this, is
true if you are setting the same thing all day long… ( I got news
for you… those type of orders just aren’t that frequent)

So now, lets look at the same scenario at 50 stones… assume 1/2
hour to assemble all the stones, the rings, the tools and the job
tickets that tell you what colors go in each ring…It will take 1/2
hour to set them and 1/2 hour to get organized . So you have 1 hour
total labor… which is $10… Now , divide this by the 50 stones
and you have 20 cents per stone… NOT 12 cents as in the previous
scenario… So, it cost you 8 cents more to set 50 stones… if there
where less stones, but the same job, it could cost 50
cents/stone…etc.etc.etc.

So what does this tell you… Well, the actual best way to get a
true cost is this… when you give the job ticket to the employee (
or to yourself if you are a one person shop) you write the time down
on the job ticket, then you get organized to do the job,find the
stones, get the rings, sort the sizes of rings and the different
colors of stones… then get out the proper tools and get
stonesetting… now , remember, the employee may get interupted by
someone who wishes to ask a few questions, trip to the bathroom( 5
minute news paper read) etc… Some of this may actually happen…
There are always events that mess with your costing, but you have to
account for that also.Now, the person returns the 50 rings with the
50 stones and it’s 1 1/4 hours … So, ideally, you set your "cost in
house " at $12.5 ( for 1 1/4 hours) divide by 50 stones= 25 cents
then add another 15 % ( this is due to the fact that you are better
off being overly cautious with pricing then losing your shirt or
dressfor that matter!) So your cost for this job is 28 cents… far
cry from 12 cents isn’t it ! Now, remember, this is inhouse cost is
without overheads and profits !!! Thats another discussion entirely.

So , going back to the original statementat the top of the page, I
have to disagree with it … The best way is to track the time,
labor and materials on each job and eventually, with proper tracking
, you will be able to setup a pricing sheet for each operation… if
it’s 30 diamonds set in gold or a single stone bezel set in
silver… This same concept goes for every other operation you might
do in your studio or shop. Every person who does a particular job
will do it in a different time frame and thereby incur a different
cost.

The concept of determining a cost of a particular job by doing it
all day only works for those who have the work flow and orders to
use this type of pricing… unfortunately for the majority of
factories in the USA and the jobshop/ studio worker,this is not
reality ! Too many factories had done precisely this type of
costing and when the orders changed to much smaller quantities with
much larger varieties many of them went bankrupt due to the simple
fact that their costing person used costs written in stone instead
of doing an analysis of actual costs per job.

My suggestions to those who really want to get a good handle on cost
analysys is to read all the suggestions that are made by everyone,
underline in red all the facts in each persons suggestions, then make
a list of all the suggestions and implement them. No one has all the
answers to each of our cost problems, so it is important to take your
particular situation and develop a system that works for you. Please
accept my apologies if Some people may be offended by these
suggestions.

Best wishes to all … Merry Christmas and Happy New year. Daniel
Grandi www.racecarjewelry.com check out some of our new
products.

We also offer casting, cnc/cadcam , hand model making , soldering
and finishing services for designers, Jewelers, and people in the
trade. Please contact us off list at sales@racecarjewelry.com