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harleynight

Should I buy it?

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I work from home working with glass. I want to offer new products but in order to do this, I need to invest in a kiln, but I'm unsure if I should or not. I found one at a good price. Should I buy it?

 

Thank you so much for the help. I'm really unsure :(

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Basic accounting will get you farther than a psychic will! :lol:

 

Start with a fundamental break even analysis (i.e., how much stuff do I need to sell to recover my cost for the kiln):

 

Profit = Price - Cost of Goods

 

Profit X Items Sold = Kiln Price

 

(that's a simple breakeven; when we look at really large capital investments for large companies we have many other things to consider like tax incentives, variable cost, depreciation, etc, but no need for all of that. This will get you in the ball park.}

 

So, here is an example. You'll need to use your real numbers. Lets say you materials to make a glass product cost $20 and that you can sell the finished product for $30, so, you profit per item is $10. Lets say that the kiln cost $300. So, at $10 profit, you would need to sell 30 items to break even. (when you build your budget, you, of course, have to allow for continuing to buy supplies (cost of goods) and any maintenance costs that may need to be made to the kiln through use).

 

Using our above formula:

 

$10 = $30 - 20

 

$10 X 30 items sold = $300 Kiln Cost

 

That's the simple formula based on fixed costs and fixed sales price and profit.

 

The next issue that I address after knowing this quantity to breakeven is the TIME to breakeven. That is, how long does it take me to sell the number of items that it takes me to get to breakeven.

 

And, does this kiln help me do things faster and cheaper than my previous method. (So, assumed in this is that my costs of goods sold (with time being a costs in most businesses in the form of labor costs) did not go up as a result of buying, in this case, the kiln.

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You also want to take into account other costs associated with the kiln. Electricity usage or other fuel costs. And they seemingly take a lot of maintenance and can be finicky.

 

If this is a new product and you need to test out the success, perhaps you want to try renting kiln space at a pottery place or university's art department if that's an option. All of the schools I've been to have that option for people who don't attend the college and it's more reasonable than the shops that let you fire for a fee.

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Yeah I'll have to look into using a kiln somewhere else as I found out this specific kiln I was going to purchase second hand for cheap is not good for what I wanted to do :(

 

Thanks everyone :)

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Yeah I'll have to look into using a kiln somewhere else as I found out this specific kiln I was going to purchase second hand for cheap is not good for what I wanted to do :(

 

Thanks everyone :)

what are you wanting to do and what does this one do?

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I work from home working with glass. I want to offer new products but in order to do this, I need to invest in a kiln, but I'm unsure if I should or not. I found one at a good price. Should I buy it?

 

Thank you so much for the help. I'm really unsure :(

 

 

PG is right, somethings are best answered with simple accounting. You have free will.

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