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Depreciation Values

Posted: Tue Mar 30, 2004 12:19 pm
by kbarbour
Trying to come up with the best formula for figuring in depreciation values, utility use, etc. into the price of my work. Let's say it costs $4.00 in supplies to make one necklace, do I just double that when figuring it was fired twice, and the wear and tear on the kiln, grinder, etc. Any help would be appreciated. Thanks!


Posted: Tue Mar 30, 2004 1:23 pm
by Susan Moore

Okay you are not talking about depreciation but costs and pricing...check the archives for numerous discussions about pricing formulas. Charge what the market will bear.


Posted: Tue Mar 30, 2004 1:24 pm
by Kitty
i dont think about those things in the way you have described. i think about what's reasonable, what's happening in the marketplace where the store is, and i price accordingly. in my opinion, it's not possible to connect the dots between cost of glass, wear and tear on equipment, and the resulting value of ONE pendant. i once figured out the cost of a pair of earrings, based on purchases of full sheets of BE and dichroic, and the dollar amount is extremely small, because you can get one helluva lot of earrings out of a sheet of glass.

instead, i suggest you look at it this way: over the course of the year, you sell X-thousands of dollars of jewelry, and you have X-dollars worth of business expenses, including tools. for depreciation on expensive kilns (let's say $2000), your CPA or tax preparer can advise you on depreciation, and whether or not that will be necessary for your business. every year, i usually buy one new, important tool or piece of machinery for the business.

there are good business planning programs you can get for your computer, plus other accounting programs, like QuickBooks, that really help you see where you're at with profit and loss. these tools help us see the bigger picture of the business, and force our attention away from the costs of producing "one" of any given style, to the expense of producing a year's work.

you also asked a hypothetical question about a necklace that has $4.00 worth of supplies in it -- you wondered if you should just double the cost of goods. you could, but beware of underpricing your work. you're looking for the most suitable price, as seen by the final customer. so it will depend on whether you're a wholesaler or a retailer. if you're retailing your work at craft fairs, you can make more money, but you have to do all the work of schlepping stuff to and from the fair. if you wholesale, some volume is required to be profitable.

Posted: Tue Mar 30, 2004 2:20 pm
by Geri Comstock
I'm not clear if you're trying to do your taxes and figure out depreciation for that or if you're trying to figure out how to price your work.

For business taxes, there's a schedule for depreciating large items like your kiln, grinder, etc. There is also a line on the long form for business taxes for utility costs, which is where you account for your firing costs. Since my utilities are included in my home utilities, I allocate a certain percentage of the actual electricity cost (depending on how much firing I do in a month).

If you're trying to determine how to price your work and include "overhead" expenses (like grinder bits, cutting oil, etc.), I suggest you get a copy of Wendy Rosen's "Crafting as a Business". It covers this topic. The first edition of this book has a much more detailed explanation of this process, IMHO.

Good luck -


Posted: Tue Mar 30, 2004 2:36 pm
by kbarbour
Thank you for your info. I will check the archives. I thought you were supposed to add all of those formulas into your price such as cost, wear and tear on your equipment, your hourly salary and your profit. I like the idea of trying to figure that out of the course of a year. It makes much more sense because some pieces cost more to make than others.


Posted: Tue Mar 30, 2004 2:45 pm
by Geri Comstock
EEEK! I wasn't clear. You do need to figure these things into the price of what you make, which is why I recommended Wendy's book. When pricing my work, I figure out two things. The first is the cost of the materials consumed only on that piece (the glass, etc) and then I also add something to account for indirect costs, such as electricity, grinder bit wear, kiln depreciation, firing expenses, etc. Keeping track of it for a year helps you actually figure out how much it should be per piece.

Good luck!