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Cost Calculation

corecode edited this page Sep 18, 2012 · 5 revisions

Cost Calculation

This calculation is based on quotes from Taiwanese and Shangainese fabs.

The quotes were for a 10k unit order for the current BOM.

As customary in the far east, the manufacturer will ask for the target price and will then come back with a "can do"/"no can do" answer. We asked for a $2.8 target price.

So far we got:

  • PCB Assembly Taiwan: $2.80 "too cheap, but will do it anyways because they want to keep us as customers". Price is without testing.
  • Brosen: $3.15 "because we have to build expensive testing equipment"

Sales price

Commonly startups are advised to set the final sales price at at least 2.5-3 times the total cost of production. This number comes for the assumption that there are 1-2 intermediaries and retailers, which each want to take about 50% profit, at least. 1.51.5 = 2.25, 1.51.5*1.5 = 3.4. Because retailers do not like to be underpriced, even direct sales can not be cheaper.

There needs to be some profit to buffer unexpected problems and losses (shipping, manufacturing defects, etc.). Additionally, markets do not forgive price hikes; raising the price later, in response to actual manufacturing price, is essentially impossible. We therefore target a single item sales price of 2.5 * total cost of production.

At a (hypothetical) $2.80, this would be $7 in the store, and about $5 in bulk (100+) for hackerspaces or schools.

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