Larson Juhl Retail Charge Schedule

[doylestownboy]

Are any of you using Larson's suggested retail charge schedule for pricing glass, mounting, etc. and if so do you find it to keep your operation profitable enough?

[Susan May]

We don't use their suggested prices, but we DO look at them for ideas. I don't know how they come up with their prices... it seems too high for some things and too low for others.

Check your own use and waste, and correct your prices accordingly.

[Cliff Wilson]

dtboy,

You'll find lots in the archives about pricing. The bulk of it suggests you look at YOUR costs including COGS and cost of operations, then price accordingly. In the LJ case, I will point out that they suggest you charge less for Non-glare TruVue than for conservation clear TruVue, yet, they charge you more for the non-glare than for the CC! Does that make sense to you? (It might.)

The chart may be a reasonable place to start, but no matter what you do, you have to study YOUR customers, YOUR market and YOUR costs.

Cliff

[Bob Carter]

Cliff-I couldn't have said it better, myself

[MAX]

Not to be picky, but . . .

I think you'd be better served referring to CoGS as Cost of Materials Sold, since there still has to be a labor component added in to get the goods to market . . .

[Bob Carter]

Hi Max-In a tightly controlled environment, you might be correct. I think a Nike-style sweat shop would be a great example.

But for most of us, the more traditional approach probably is better suited. If you look at most Generally Accepted Statements of Income, you will notice that the top line is Gross Sales. From that you traditionally subtract Freight Costs and Cost of Goods (from invoices or checks written). The difference between those values equals your Gross Profit Dollars (Margin).If you have Returns or Allowances they would be listed in this Top portion, also

The next section is Expenses, where traditionally you find Salaries.

I only bring that up because there is a small contingency that always wants to include labor in this computation and I think sending mixed messages serves no useful purpose.

In practice, It's safe to say that a labor component should be considered when establishing pricing parameters. But for Generally Accepted Accounting Principles, we ought to stick with the existing.

For anyone that disagrees, would you be so kind as to post the format of your Statement of Income where a labor value is deducted prior to Gross Profit Dollars. I've never seen one before.

If you do, please explain how the time measurement and attending benefit costs for this value are deducted from typical expenses.

I know we can talk this thing, in theory, to death, but I would love to see a real world example of this used in actual practice.

[Walt C]

Although Bob is right regarding the cost of goods/gross margin section being exclusive of labor charges. In my previous life as an auditor and controller, I've seen many income statements that distinquish direct labor (meaning labor used in direct production of the finished product) and non-direct labor (sales staff, administrative staff etc). This allows you to determine a ratio of direct labor cost as a percentage of sales to assist in determining your pricing.

Being as I'm a one person shop I only use a total labor figure in my income statements. If I were to have a larger staff consisting of framers and non-framers I would probably break it out in order to determine my direct cost of goods.

This would be used for analysis/price development only and as Bob said, would not be used as part of cost of goods in my income statments. That sort of thing just confuses the bankers, accountants and the IRS.

[MAX]

Right Bob, right Walt.

I’m saying that (in my opinion) it is better to refer to the second line on the Income Statement (in our biz) as Cost Of Materials (including freight). The first three lines on my Income Statement are: Sales, Cost of Materials, and Gross Margin.

Yes, I expense labor under my Operating Expenses. The employees gotta be here whether we’re stacked to the rafters with framing orders or just standing around picking our noses.

Over the years I have found that it is easier to talk with accountants and compare notes with those (everybody?) who are unfamiliar with our business when I refer to the second line on My Income Statement as “Cost of Materials”.

ie: “Your gross margins run seventy-two percent ?!?!” “ But geez! look at your labor costs, man! Thaey’re outta control!”