How much does it cost?

Discounting R&D (i.e. prototypes, etc) & labour. Looking at materials cost + direct production labour cost...

TT (i.e. rockport etc, expensive): mechanical device, lots of engineering & precision machining, low production runs -> expensive.

Electronics (expensive): low -to medium cost. Tubes are hand assembled -> more expensive than ss that can be smd'd. Some tubes are rare -> cost goes up further. Chassis are expensive. Matching components requires time & large inventory-> extra cost. So it ranges b/ween 10%-20% of retail.

Spkrs: 10-20% of retail price

Digital: I can't say.

These are ballpark figures of course.

Everything built has to cover the cost of R&D, and all the other costs of doing business. If a company that builds in the US and employees our freinds and neighbors doesn't offer insurance, benefits, and paid vacations we will have a bad opinion about that company. If they do offer all the things we want, we complain that their products cost too much. Americans want everyone to be successful and make a good living, but not on their purchases.

I don't know why a Wavac amp system costs $350,000. I can't justify costs like that, but Ferrari, and other companies who 'hand-build' cars have no trouble justifying, and GETTING those prices.

These are different issues though. Some items are priced based on what it costs to build them (including the insurance, benefits, vacation and all that) while other items seem to be priced according to how they compare quality wise to other items and then there are items which appear to be based on what the market will bear. As a consumer it's difficult to know which method of pricing applies to each item. Perception is rarely truth. Audiophiles need to be cautious when trying to determine what a manufacturer has done and why they have done it.

If it was so easy and cheap to build all the items that people think are overpriced, there would not be so many companies falling along the wayside.

You don't know anymore about how or why Wavac determined that price than the president at Wavac knows why you are wearing that shirt.

I toured Krell a number of years ago. The factory was big, there were maybe 100 people working on R&D, building products, answering phones, and shipping the products, etc. How much does it cost to pay about 100 people, so they aren't running off to the next company once they've been properly trained to do the job for which they've been hired? Good employees are hard to get, just like good audio products.

Gregn, thanks for your comments. Just to confirm the 10-20% retail is COGS right as oppose to adding R&D and other long term assets. Your numbers make sense to me, I looked at Sony's balance sheet and they have gross margin of 28% or cost of goods sold (COGS) of 70%, but sony goes towards mass-market/volume strategy with elastic type consumers...

Uppermidfi, you are correct that every cost has to cover R&D and all expenses, but I'm also curious of how much does it cost to make the products (Operating expenses). Not to complain, but just to understand more about the industry. Obviously, smaller firms with lower bargaining power and volume leads to higher gross margin in order to survive, but still curious how pricing is established. A good comparison would be looking at boutique cloth industry (Prada, Gucci, etc). expensive prices but COGS is not that different than GAP. The customers here are inelastic so if Gucci decided to lower their price 25%, it doesn't mean there would be 25% increase in sales. Same with audio, if a price of WAVAC is 175000, will it get twice the sales? so I wonder that since the high-end industry knows their main consumer aren't that price sensitive, so they exploit it by charging more....

Dizzy -- as you note, SOny (for example) is playing in a different market, while hi-end is small & very fragmented & inelastic...

Retail (dealer) margin is another cost driver that must be factored in; in many cases this is 30-40% of total retail.

In other words, if you had the xover schematics & mechanical drawing for a pair of speakers, the diy version would set you back ~20% of quoted retail. The manufacturer should be looking at ~10% retail: a driver complement that sets you back $2k (that's a VERY expensive speaker!) should cost $~800 to the manufacturer, including "proprietary tweaks" i.e. touching up the drivers' electrical characteristics to simplify the xover).
Cheers

Greg, thanks for your info. I was quite surprised that retail margin is up to 40%, but then again after some thought it does make sense. when you say that a driver complement cost 2000, wouldn't that equal to 200 to the manufacturer ( based on your 10% retail cost)? just wanted to confirm.

thanks,

when you say that a driver complement cost 2000, wouldn't that equal to 200 to the manufacturer

If the drivers used are large production units (i.e. Scan, Vifa, Seas/excell, eminence, etc) there are substantial differences b/ween enterpise and retail purchasing ~1:2,5. When I refer to ~10% of retail, it's for the finished product (including cabinets & xover). This is especially the case as you go upmarket; a $40k speaker would cost you ~5k to diy.