Sunday, 5 July 2009

How to Work out Cost Price

The figures given here are just examples, I'm not giving away my raw data.

So i need to know how much it cost to make an item
2, I want to know my Wholesale Price
3, I need my lowest retail price for a Gallery (they want 50% commission)
4, I need my selling price for a craft fair

So lets look at Number 1, my cost price

Start with a very simple sum, this is my only job, how much do I want to earn in a year (Being realistic say it's our first year), Now I want to earn £30,000 a year, that's £2500 per month, or £577 per month or if your like me (7 days a week) £82 per day, say £10 per hour.
so our first fixed price is £10 per hour.
Next look at my overheads my studio cost me £155 per month or over a year £5 per day.
My Equipment cost me £4,000, Allowing depreciation's thats about £1000 a year, or £2.70 a day
Consumables such as sandpaper, danish oil, saw blades, jewellery findings, miscellanea cost such as light bulbs, Petrol, Liability insurance, MOT on the car, tea, milk, Sugar, cleaning cloths, brushes, mop heads, bin bags, basically every single thing i use in the workshop/studio
add the above to the hourly rate and my cost per hour come out at about £23.50

Next we add in my materials cost, say one block of king wood at £25, and say i get 25 items out of it that a £1 per item,

or look at it another way, i can use one piece of king wood in an hour, so £25 for materials, and £23.50 for my time, and i produce 25 items that means each item cost £1.94 to produce.

Do i have my cost price, possibly, but for safety sake allowing for inflation etc, lets round it up and say £2.10 per item.

Now for my wholesale price, giving me negotiation room to give discounts, I double my cost price
that means i sell wholesale at £4.20

Now my list or recommended retail price is based on the formula of £2.10 x 3.16 = £6.63 1/2, so when a gallery want a 50/50 split we get £3.31 each (or there abouts).

So how much do i sell for at a craft fair. it would be about £6. as i hate loads of change


  1. I think you mean £577 per WEEK instead of , "or £577 per month "

  2. I tell everyone who is willing to listen about your x 3.16
    I read it in a forum and did not know it was you.
    Thank you, I use that formula now and it seems to please me and all my customers. Well, I say all....