ZALT@aol.com on tue 1 apr 97
"the moving finger writes; and, having writ,
moves on: nor all thy piety nor wit
shall lure it back to cancel half a line,
nor all thy tears wash out a word of it"
Omar Khayyam
Well, I am back, full of vigor and well rested. I have also been thinking ,
now that we have done all the hard work figuring out how much we should not
charge for our work , we could have some fun, by playing with the figures
that we have generated . We could rethink our options, methodology, and
maybe squeeze more dollars out, for our efforts..
With this in mind, I would like to take on the challenge and analyze the cost
effectiveness of mixing our own clay. This question is often asked and
seldom answered. Some potters think that buying a clay mixer, will allow
them quickly lower the costs of their clay. Some believe that commercial
clay is adequate for the job and costs just a few pennies more. Others
feel the importance of a clay mixer/pugger is that they can mix clay to
satisfy their needs. Then, there are those who feel the time and effort
saved by pugging clay was the important selling point for such a machine. We
cannot forget that there are potters who feel that purchasing commercial
clay, is the same as spending money for water. I know one potter that does
not recycle his commercial clay. He simply trims his pots and throws out the
scrap. He feels the time saved is worth more, than the time spent recycling
.. Finally, we read in one major ceramic magazine about a famous potter's
claim that his machine will make mixing, scrap clay, easy. We all have
reasons for our choices and nobody is wrong. So why the discussion?
Simply put, it is an interesting problem and a great opportunity to think a
bit on what we are doing.
I emphasize, that we are working with artificial figures. Those of you
who have read ( Pricing my turn pages 1....8) will recognize some of
the terminology. We will simply be inserting the new variables into old
formulas. We will again be trying to determine the FIXED COSTS and VARIABLE
COSTS . Some of us may be asking why we would use the same approach that we
used to determine the production costs of a mug? Are we not just
purchasing a machine? No. What we are doing is creating a new business.
This business will come into competition with our present clay suppliers.
We know that to be financially competitive we must have a solid costing
model and we must know the BREAK-EVEN point of our product. It only after we
pass the break-even point that we will be able to purchase our clay at lower
costs.
An important difference in this post compared to my previous post will be
that we are only making clay periodically thus we will not use our entire
overhead costs in the basic formula. We will be concentrating solely on the
machine. Space , electricity, and other related overhead costs will not be
considered in this analysis but we should be aware that there is a cost
associated with these items. We will assume the machine that we purchase has
wheels and can be stored away in a corner, when not in use, and easily
accessed for daily use should we so decide. If we purchase a larger
machine, we will have to consider the costs related with the space it
requires.
We will also be placing the wages under VARIABLE COSTS as part of this
exercise. The rational here is that we will hiring someone to come in from
time to time to make our clay. Our salary is to great to waste on this
task. We will also assume that we want to produce clay that is less
expensive than the available commercial product. We must therecore establish
the break-even point at the selling price of the commercial mixed clay.
It will be at this point that our , roll your own, clay becomes less
expensive than the manufacturers price. We will then be able to carry our a
series of " what ifs ".
Appreciation to Bob Kavanagh for his assistance in putting this posting
together.
Terrance F. Lazaroff
St Hubert, Quebec, Canada !!!!!
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