Cost of Goods Sold for Non Inclusive Studios

29 Aug 2019 · 3 min

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3:12

A short spoken update by Donna Genie for studio owners on calculating cost of goods sold (COGS) percentages and how to adjust retail pricing when a separate studio fee is charged. She reiterates a target COGS of 15%, shows a sample calculation (item cost $2 with a 7× multiplier → $14 selling price), and explains how to compute and apply an average studio fee per item (studio fees collected ÷ items sold) — subtracting that average from the target selling price (example: $14 − $3 studio fee = $11).

Questions this video answers

15%

7×

$14

Total studio fees collected divided by the number of items sold over a representative time period (week, month, quarter, or year).

Chapters

Hi there, this is Donna Bordeaux. I wanted to update another little piece of what we talked about in the recent webinar of the three numbers for studio owners to know. In that meeting, we talked about the cost of goods sold percentage and where you should be from a key performance indicator standpoint. That magical number was at 15%. You want to have your cost of bisque and clay canvas. All of those cost of goods sold without including the general supplies should be at about 15%. So we talked about the cost being $2 on this particular item. That would be a seven times multiplier. So selling price would be about $14. I received a few questions after that session about what studios should do if they have a studio fee, how they should calculate their pricing if they are not all inclusive. So I wanted to update that piece of our segment. First, if you have a studio fee, you will need to calculate the average studio fee per item. So over here on the left, you'll want to take for a period of time. You could take a year, a month, a quarter, even a week if you had to. We just want to make sure that it's representative of a time frame. Take the amount of studio fees you collected and divide it by the number of items that you sold during that period. What we're trying to derive is how much is the average studio fee per item that you sell. So, for example, if you have an $8 studio fee, you would not want to just deduct that because somebody could paint two or three or more items and you're not going to get the income to get up to your cost of goods sold percentage to have that be in line so that your revenue does not take a dive. So what you want to look at is in that same scenario, if we have a piece that costs $2 and you used a seven times multiplier, you would still come to $14. And let's say that your average studio fee is $3. Then you would reduce your selling price from 14 down to 11 because you're going to subtract the studio fee. So I hope that clarifies for you what you should do or how you should approach it if you are a studio that has a separate studio fee. If you have any other questions about this area, please feel free to let me know. You can visit us at our website@pyopaccounting.com and submit an inquiry there. Or you can always send me an email@donnapyopaccounting.com thank you very much. Have a good day. SA.