ZALT on sun 14 dec 97
TO BUY OR NOT TO BUY
PART III, the last
Sorry for the delay in this posting as I was very busy with my Christmas Rush.
Maybe I should buy a Mixing/Pugging machine to help out.
REMEMBER FOLKS THIS IS THEORY
In PART II we found that it would take quite a bit of clay in order to realise
a less expensive product than commercially prepared body. This in turn would
suggest buying a good commercially prepared clay was the better way to go. But
what if we don t want to use commercial clay and we feel that our personal
recipe is better? What is the difference if we purchase custom mix? I
called a reliable clay supplier and gave the same recipe that I used for our
discussion in Part II and requested an estimate of the cost to produce the
mix. The cost estimate was a surprise to me. It came to approximately $0.31
per lb . Working these figures into our analysis we would arrive at the same
results that we found in Part II. The major difference is that we do not have
to make the investment of buying, maintaining and storing a machine. We
must, however, remember that when we consider purchasing a custom clay body,
we will need to find a reliable dealer. The company should be able to
guarantee the product and to test the recipe through out the process, to
ensure the quality .
I realise that the figures are a bit gloomy. But all is not bad. We can look
at some spin-off values associated with purchasing a clay mixing/puging
machine. Let us say we are making the famous mug that was discussed in my
Pricing My Turn articles. If you recall we pegged the Fixed costs for the
operation including my salary at $38,350.00 a year. Lets us, for the
discussion, look at this figure as a productive hourly cost. We would divide
$38,350.00 by the productive time that we determined to be 204 days * 6.5
hours of pure production time. We arrive at a fixed cost figure equating to
$28.92 per hour of activity. Now if we look at the time it takes us to weigh
and wedge our balls of clay in order to make our mugs we see that we are
spending close to a minute for each mug. Making the 6662 mugs a year will
require that we weigh and wedge clay for approximately 111 productive hours
or 8% of our productive year. We know that even with a pugger we will be
required to wedge, but what if we could cut the wedging time in half by
pugging the clay first? We could then say that we have economised on 55
productive hours which we could also say equals to increased production
capability of an additional 220 mugs a year. Instead of wedging we can make
more mugs thus increase our production capability. This in turn will decrease
our costs when making a mug and in turn decrease the break-even point to
approximately $6.38 from $6.56 or in simple terms, $0.18 per mug. We can pass
the savings on to the customer or keep the profit for our selves. You
decide. Converting the productive hours to monitory value we arrive at
approximately $1238 per year which is close to 22% of the value of the
machine. We could also just use the 55 hours of activity time to do research
and development for new products or we could also take longer lunch hours. It
is for us to decide.
Those in Canada, can also use the machine for submitting a " Capital Cost
Allowance Claim ", on our business income tax. This piece of equipment is
considered a Class 8 which will allow a 20% business tax deduction on 50% of
the value of the machinery during the first year and a 20% per year on the
depreciated amount each year there after. The first year yields an exemption
of about $560.00 CND. The second will yield $1000 and $800 for the third
year. After all, why give this money to the tax man when we can use it better.
It takes approximately 10 years to depreciate the item. The important point
here is that there must be a sufficient gross profit generated in your pottery
in order to use this deduction and if you sell the device you will have to pay
taxes on any profit after depreciation. What you are doing is avoiding paying
taxes on your profits equal to the amount determined in the Capital Cost
Allowance Claim. I would suggest, however, that before you decide to use
this tactic, that you speak with a tax consultant or an accountant.
We could also look at renting our clay mixer/pugger to other area potters.
When we look at the amount of clay that our pottery will require, we will
undoubtedly find that our machine is sitting idle much of the time. We could
advertise to clay community that we are willing to rent the machine for, lets
say, $75 dollars a day or $200 a week. If you can find 5 customers to rent
your machine three weeks a year you could realise a yearly revenue of up to
$3000. We must take into account that this may cause wear and tear on your
machine and could possibly cause maintenance cost to be incurred, and of
course any revenue generated the operating expensis is considered taxable.
So, there we have it. A clay making machine/pugger will take 9 years with a
2 ton clay requirement , per year, to break-even. More years if we want
cheaper clay. That is providing we use the devise only for making clay. If
we use it for pugging our clay as well, we will economise our time. This
will allow us to be more productive or give us a better quality of life. And
think of the joy of not haveing to heave heavy balls of clay around when
reclaiming clay. The amount saved could help pay the machine down faster.
There could also be a tax break that will allow us to deduct the machine from
our gross profit when we calculate our business taxes. Lastly, we could use
the machine/pugger for rental income, which will allow us to pay down the
machine faster and thus realise our goal for cheaper clay. The final option
is to find a reliable supplier, purchase custom prepared clay, pass the
costs on to the client and forget about saving pennies. It is our decision.
Terrance
Talbott on mon 15 dec 97
Terrance...
If you can get the type of customized clay that you like in deaired
pugged logs 4" in diameter or larger then I say that would be a good deal
for you. However, it is usually best to let the clay sit around for a
while after it is mixed before pugging. The clay ages far quicker if it is
not pugged and deaired. The compression and deairing really slows up the
formation of bacteria and bacterial action in the clay. We normally
pug/deair the clay just before putting it to use. There are many
advantages to having a pugmill close at hand.
....Marshall
101 CLAYART MUGS
2ND ANNUAL CLAYARTERS' GALLERY - NAPLES, MAINE (Summer 1998)
E-MAIL ME FOR AN APPLICATION
http://fmc.utm.edu/~dmcbeth/cag/naples.htm
Celia & Marshall Talbott, Pottery By Celia, Route 114, P O Box 4116,
Naples, Maine 04055-4116,(207)693-6100 voice and fax,(call first)
Clayarters' Live Chat Room, Fri & Sat Nites at 10 PM EDT & Sun at 1 PM EDT
http://webchat12.wbs.net/webchat3.so?Room=PRIVATE_Clayarters
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Kathi LeSueur on mon 15 dec 97
<When we look at the amount of clay that our pottery will require, we will
undoubtedly find that our machine is sitting idle much of the time. We could
advertise to clay community that we are willing to rent the machine for,
lets
say, $75 dollars a day or $200 a week. If you can find 5 customers to rent
your machine three weeks a year you could realise a yearly revenue of up to
$3000. We must take into account that this may cause wear and tear on your
machine and could possibly cause maintenance cost to be incurred, and of
course any revenue generated the operating expensis is considered taxable.>>
Of all the options you are looking at, this is the one I would throw out
first for a number of reasons.
First, pug mills are dangerous machines. Your liability in allowing someone
to use your machine is enormous. Check with your insurance company before
going down that road.
Second, unless you plan to clean out the machine between users, you run the
risk of contaminating your own clay body with someone else's. Cleaning out a
pug mill is a job. Going from one clay to another always results in some
blending. Usually there will be some clay left for quite sometime. The
possibliities for problems with clay or glazes is high unless all users are
using the same clay body.
As for the wear and tear on the machine, any GOOD pugmill is designed to be
used daily. I know both Vencos and Bluebirds can stand up to such use. If the
machine can't take such use and still give you many years of maintenence free
service, don't buy it.
Kathi
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