The True Cost Of A Driver

[ChetlovesMer]

 

It always makes me laugh when people who do not understand manufacturing talk about "cost" of a product. They do not include any of the true costs of manufacturing. They just include material costs. Who cares that they must pay 21% employment tax? Who cares that a forging plant will use more than a million dollars of electricity per year? Who cares that Callaway's payroll is over half a billion dollars per year? Who cares that the golf companies literally pay billions a year to charitable organizations? People always talk about the variable costs and think that tells the story. Nobody talks about the fixed costs associated with manufacturing.

[JxQx]

3 minutes ago, ChetlovesMer said:

 

It always makes me laugh when people who do not understand manufacturing talk about "cost" of a product. They do not include any of the true costs of manufacturing. They just include material costs. Who cares that they must pay 21% employment tax? Who cares that a forging plant will use more than a million dollars of electricity per year? Who cares that Callaway's payroll is over half a billion dollars per year? Who cares that the golf companies literally pay billions a year to charitable organizations? People always talk about the variable costs and think that tells the story. Nobody talks about the fixed costs associated with manufacturing.

I think some of that is brought up in their conversation (from what I recall). 

[GolfLug]

24 minutes ago, ChetlovesMer said:

Nobody talks about the fixed costs associated with manufacturing.

QFT.

You would surprised how even manf insiders omit/ignore/are ignorant of it completely.

[Double Mocha Man]

I remember a Yelp review from a woman who ordered a cobb salad at a nice restaurant in Seattle.  She complained at long length about how expensive it was ($15.00) and that she could make it at home for a lot less.  She totally forgot to factor in that at the restaurant she got to sit back, relax and someone else made her salad.  She experienced great ambiance, a seaside view and people waiting on her.  She didn't have to clean her table nor wash her dishes.

I was compelled to write my own review and let her know what she was overlooking.

[mcanadiens]

1 hour ago, ChetlovesMer said:

Who cares that they must pay 21% employment tax?

21%? Damn. That's vicious. 

 

25 minutes ago, Double Mocha Man said:

I remember a Yelp review from a woman who ordered a cobb salad at a nice restaurant in Seattle.  She complained at long length about how expensive it was ($15.00) and that she could make it at home for a lot less.  She totally forgot to factor in that at the restaurant she got to sit back, relax and someone else made her salad.  She experienced great ambiance, a seaside view and people waiting on her.  She didn't have to clean her table nor wash her dishes.

I was compelled to write my own review and let her know what she was overlooking.

I always complain bitterly when I have to clean up after myself at home.

"This is the last time I eat at this creep joint."

Somehow the proprietor never listens to me and I come back anyway.

[Double Mocha Man]

2 minutes ago, mcanadiens said:

21%? Damn. That's vicious. 

 

I always complain bitterly when I have to clean up after myself at home.

"This is the last time I eat at this creep joint."

Somehow the proprietor never listens to me and I come back anyway.

... but I have heard that you leave substantial tips...

[ChetlovesMer]

57 minutes ago, JxQx said:

I think some of that is brought up in their conversation (from what I recall). 

Yeah, briefly as an afterthought. Like "Oh, I know that there are other costs involved...." But it was never really taken seriously.

[mcanadiens]

1 minute ago, Double Mocha Man said:

... but I have heard that you leave substantial tips...

Way beyond that.

I pay the damn bills.

You'd have thought I'd own the place.

[Double Mocha Man]

Just now, mcanadiens said:

Way beyond that.

I pay the damn bills.

You'd have thought I'd own the place.

I have also heard that your substantial tips are as follows:

1.  Keep your head down.

2.  Keep your eye on the ball.

3.  Keep your right elbow tucked in.

4.  Don't shank.

[Bonvivant]

7 minutes ago, mcanadiens said:

21%? Damn. That's vicious. 

If there's one thing I've learned about working for larger companies, it's that having employees costs WAAAAY more than their salaries. Between UE and health benefits, it's surprising businesses actually exist.

[ChetlovesMer]

7 minutes ago, mcanadiens said:

21%? Damn. That's vicious. 

I don't want this to get off topic or political but it was 33% under the previous administration and the next administration (if they get in) has already published 41% as their goal. 

(I mention it only because it does relate to the topic as it changes the profit structure as it relates to drivers as well as other golf equipment.) 

1 minute ago, Bonvivant said:

If there's one thing I've learned about working for larger companies, it's that having employees costs WAAAAY more than their salaries. Between UE and health benefits, it's surprising businesses actually exist.

You're right, brother. For every dollar of salary a company pays you they also pay an equal dollar's worth of benefits and taxes.

[boogielicious]

13 hours ago, Bonvivant said:

If there's one thing I've learned about working for larger companies, it's that having employees costs WAAAAY more than their salaries. Between UE and health benefits, it's surprising businesses actually exist.

But good employees save the company money. In my career at my last company (I’m retired), I had worked on savings projects that totaled well over $40MM. The last big one alone was $12MM and it was mainly my design and execution. I more than paid for myself. I also executed launches of products in many countries which brought in revenue. Companies that set up good organizational structures will more than cover the cost of employees.

Good post @ChetlovesMer. There is a lot that goes into making even the seemly simplest products. 

[mcanadiens]

15 hours ago, ChetlovesMer said:

I don't want this to get off topic or political but it was 33% under the previous administration and the next administration (if they get in) has already published 41% as their goal. 

(I mention it only because it does relate to the topic as it changes the profit structure as it relates to drivers as well as other golf equipment.) 

Definitely no politics out of me, but the costs of employing people are without question a huge factor in what products cost and very much on topic.

I think we are differing on what employment tax constitutes. Employer taxes normally means employer half of Social Security (.062) and Medicare (.0145) and then federal (.006) and state unemployment (which varies). I suppose you could add Workers Comp to that, but you still wouldn't get as high as 21% in most cases.  Remember that the withholding remitted for employees is wage expense and simply a reduction of the net check they receive on pay day.  Of course, the employer costs for employee health insurance are massive as well as @Bonvivant mentioned but again, that's not really employment tax.  

So does all the hard work of that very expensive labor  result in me buying that $500 driver or not? ... Haven't talked myself into yet.

Edited August 20, 2020 by mcanadiens

[Release]

16 hours ago, ChetlovesMer said:

 

It always makes me laugh when people who do not understand manufacturing talk about "cost" of a product. They do not include any of the true costs of manufacturing. They just include material costs. Who cares that they must pay 21% employment tax? Who cares that a forging plant will use more than a million dollars of electricity per year? Who cares that Callaway's payroll is over half a billion dollars per year? Who cares that the golf companies literally pay billions a year to charitable organizations? People always talk about the variable costs and think that tells the story. Nobody talks about the fixed costs associated with manufacturing.

Isn't that true ?

We have plenty of internet smart population these days.  Everyone is an expert because they "Googled it ",   One day standing in line at a local pharmacy, overheard a woman asking the pharmacist to call her M.D. for a certain prescription, because she learned about that online.

Internet information sharing is great, however, most the time the information is not complete and often will cause harm if the naive will follow the internet information completely without consulting an expert or a specialist.

Assumption, quick to determine without understanding of how things work is a sad fact for the internet dependants.  Remember long ago, one of my professor told the class, human beings are basically sheep.  Weak and follow the herd without individual directions.  In some cases, he was correct, looking at what is happening around us.

Just how did people determine the cost of manufacturing a golf driver ?   They roughly figured the material involved in making the driver without thinking of how did the process ever got to the point of manufacturing?  Besides R/D, patterning, locating the proper manufacturer(s), locating the material, trial period, applying for conforming, then come the shipping and import tariff, distribution, and a big chunk of the expenses toward marketing and promoting. 

[ChetlovesMer]

41 minutes ago, mcanadiens said:

So does all the hard work of that very expensive labor  result in me buying that $500 driver or not? ... Haven't talked myself into yet.

This is really the question here isn't it?

I'm definitely the wrong guy to ask.... I like shiny things.

[mcanadiens]

4 minutes ago, ChetlovesMer said:

This is really the question here isn't it?

I'm definitely the wrong guy to ask.... I like shiny things.

I like money.

[ChetlovesMer]

23 minutes ago, mcanadiens said:

I like money.

Me too.

1 hour ago, mcanadiens said:

I think we are differing on what employment tax constitutes. Employer taxes normally means employer half of Social Security (.062) and Medicare (.0145) and then federal (.006) and state unemployment (which varies). I suppose you could add Workers Comp to that, but you still wouldn't get as high as 21% in most cases.  Remember that the withholding remitted for employees is wage expense and simply a reduction of the net check they receive on pay day.  Of course, the employer costs for employee health insurance are massive as well as @Bonvivant mentioned but again, that's not really employment tax.  

BTW - What I was referring to here is in December 2017 The Tax Act was enacted into legislation, which significantly revises how companies compute their U.S. corporate tax liability. Among other provisions, it reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. It was very significant for the fairly small company I work for. We were able to hire 2 more people simply because of this change. 

Interestingly, Callaway also mentions it in their 2018, and 2019 annual reports on page 31 if you are interested.

[mcanadiens]

31 minutes ago, ChetlovesMer said:

BTW - What I was referring to here is in December 2017 The Tax Act was enacted into legislation, which significantly revises how companies compute their U.S. corporate tax liability. Among other provisions, it reduces the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. It was very significant for the fairly small company I work for. We were able to hire 2 more people simply because of this change. 

Yeah. that makes sense.

Corporate income tax as opposed to employment taxes (aka Payroll tax).  Two entirely different types of tax, but expense to a company either way.

Edited August 20, 2020 by mcanadiens