Costs and Profits We are a consumption society, I think we all realize that. Being one we buy a lot of things, but how many of us are curious about how much they cost to make? Maybe not many, but I am one so I decided to check this out and the following are the results of my searches: The first thing I was curious about was the average price it cost to build a house today. We see them going up everywhere and we see how much the builders want for them, but wouldn’t it be nice to know the cost when you are trying to negotiate a purchase? What I found was the average cost of building a home to a buyer is between $125 to $175 per square foot. So, lets settle on about $150. The cost to a builder to build a 2,776 square foot home in 2017 was said to be $237,760 on average. The average cost to the buyer would be $416,400 but could be a little more or less if they paid $125 or $175 per square foot. When it comes to the average car, if one were to build it themselves from parts, it would cost twice as much or more. The reason for this is parts are a big part of the profit scheme for car companies. The price to build a car by a manufacturer is a very closely guarded secret. I can tell you this raw materials account for 57% of the cost, research and development 16%, advertising about $1200, markup by dealers is said to average to about 5%, average sales tax depends on the state where the car is purchased. The advertising rate can be much higher for luxury brands. I did find something which indicated it costs Ford about half the selling price of a Ford Fiesta to build one. Another object most of us have is a television. There are all different types and sizes and what seems like many different companies, both famous and not so much. An engineer stated the main boards in a television are almost all made by one of five companies. The average cost for these boards is between 10 and 40 dollars. The plastic case and any metal is said to cost only a couple of dollars, with a remote costing the manufacturer only between 1 and 5 dollars. Assembly is only a couple of dollars. Everything else such as the manual, cables and any accessories is said to be less than $4. Even at these low prices to build one it is said the profit margin is very thin. The advertising budgets are the things mainly responsible for reducing the profits. One problem with trying to figure out the average cost of building a television is the type and another is the size. One device we all use is a cellphone. Most of us are now using smart phones but some are still using flip tops and other phones which are not too smart. Some of the most expensive cell phones are made by Apple and some think they are the best. It is said to cost Apple about $370 to build one. Depending on the amount of memory in the phone it can cost an average of 999 to 1149 dollars and more. As you can see this is quite a hefty profit margin for the company. Samsung is slightly cheaper to build. On the other hand, a Moto g5+ with 64gb of memory sells for $299. I don’t have figures for how much this phone cost to manufacture, but it must only be a fraction of the cost of an IPhone X. An interesting thing about computers is desktop computers were fairly easy to build and I built quite a few of them in my lifetime. I used to be able to safe money this way and get exactly what I wanted, but that all changed a few years ago when parts became more expensive and the cost to me to built what I wanted became higher than the cost of getting one already assembled. If we look at low end desktops you can get some for as cheap as $100. I saw one powered by a Celeron CPU on Amazon for $129 and it was not refurbished. If you want a high end job you probably won’t save anything by building it yourself or very little. Laptop builds are out of the question as far as I am concerned. We all go to the supermarket from time to time and some of them are quite crowded so they must make a lot of money, right? Well the problem is a supermarket depends on being busy to make money because their profit margin is so low. The average supermarket makes from 1%-2% on a sale. One of the exceptions to this is natural, organic and gourmet foods where they make 3.5% to 6%. The profit on each individual item for sale can be different that is why I list the average of these items sold. I don’t know if this is still true today, but I was told one of the highest profit items years ago was potato chips. Did you ever wonder what the profit margin was on a cup of coffee? I find this hard to believe but it was said in 2014 the profit on a $3.65 Cappuccino Grande at Starbucks was only 60 cents by the time you added in all the costs. One of the reasons I find this hard to believe is that would mean everyone who sells a cup of coffee at $1.00 would be taking a tremendous loss and forget about that second free cup. Here is the way it was figured. The lid, cup and stirrer 32 cents. Overhead $1.31. Labor $1.10. Milk 16 cents. That same year there is an indication Duncan Donuts made a gross profit of over 50% which sort of makes Starbuck’s look wrong. One unknown cost difference could be advertising or the amount the employees are paid. When you go out for dinner there are many restaurants to choose from in your average town or city. Lately I have heard that some of the famous ones which are national chains might close down. I wondered about this since they always seem to have people in them, but they are usually larger than other restaurants meaning more overhead. It is said when all is said and done most restaurants earn a profit of between 3%-5%. A deli is sort of a cross between a supermarket and restaurant. Depending on the type some can be more restaurant orientated than others which are more like small supermarkets also making sandwiches. The good deli is said to be able to make a profit of up to 30%. Remember this, many deli owners put in very long hours.
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