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Categories: Instruction and information; Commerce and business

Word count/read time: 450 words; 2 minutes

Part two of this three-part series deals with the cost of materials.

Materials are everything used in an item's production including expendables like paper towels and electricity. All manufacturing must account for depreciation and it's more accurately categorized in materials as opposed to labor.

Most chainmakers buy pre-made jump rings and pre-made findings to make manufacturing easier and quicker. A few sets of pliers will get the job done. The cost is the price paid for the various findings and jump rings with no further math required. Though some pliers are expensive, depreciation is minimal as they last a long time.

Going a step further would be buying wire or raw metal and making the jump rings and/or findings, which will use electricity and other supplies. More tools would be added to the fray (mandrels, cutting implements, coil winding mechanism, etc.) so depreciation would increase proportionately.

Neither situation fully describes my methods. I make everything from scrap metals mined from the internet or yard sales. To those prices I add electricity and supplies associated with refining them to 0.999 purity.

Depreciation is a bit more complicated. It includes the refiner (power source, electrodes, filters, handling equipment, etc.), furnace (crucibles, tongs, scoopers, ingot molds, torches, etc.), hammer forging equipment, rolling mill, wire drawing equipment, torches, coiling machine, jump ring cutter, and myriad hand tools. I weld or solder basically every jump ring so that adds additional costs: gas and/or electricity for the torch(es), solder or filler metal, flux, sandpaper.

There are many calculations to reach the bottom line.
With a completed piece come additional steps that some people skip or minimize. I tumble my items for many hours over several sessions. Each session uses distilled water, soap, and perhaps a burnishing agent. Supplies and electricity, in other words, and more time. Hallmarking stamps last a very long time but they must be depreciated; custom stamps can be several hundred dollars apiece!

Packaging costs are a line item. I make custom wooden presentation cases. I need to know their cost start to finish: case, paint, anti-tarnish fabric, adhesives, literature, etc. I re-use peanuts and bubble wrap along with other shipping materials to reduce costs and waste.

General business expenses include advertising, website, literature, licenses, rent, booth space, travel, freebies, swag, and more. Being a one-person operation means understanding basic accounting to wrangle all the figures. There are many calculations to reach the bottom line. Plus, whatever number pops out of the equation needs to be competitive.

You can stick to the "twice material cost" formula and treat it like a hobby or approach it like a business and figure out all the costs. Hobby or profession, don't undercut or undervalue your talents and products because it does favors to no one.

Posted by M: May 9, 2019

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