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Thread: Why are good mandolins more expensive than good guitars?

  1. #51

    Default Re: Why are good mandolins more expensive than good guitars?

    Quote Originally Posted by OldSausage View Post
    Isn't it obvious? It's because mandolins are better than guitars.
    And using the associative property, mandolinists are better than guitarists. We deserve more expensive instruments.

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  3. #52

    Default Re: Why are good mandolins more expensive than good guitars?

    Quote Originally Posted by CarlM View Post
    CNC is not a cure all. The cost is shifted with CNC.
    Some of the costs shifted but much of the costs have been reduced or eliminated, which is one of the primary benefits of automation. Plus, according to GAAP, those equipment and programming costs are to be amortized over the life of the equipment, not taken all at once, which lowers the per unit costs by a considerable amount over hand labor which cannot be amortized. Larger facilities costs are expensed as they occur lowering the company's tax liability which improves profitablity.

    Bottom line is that if automation didn't provide business benefits, like decreased costs and increased revenues, businesses wouldn't adopt them.

    Quote Originally Posted by CarlM View Post
    Acoustic instruments are not Stratocasters, which can be almost totally automated and increase quality rather than reduce it. That is not a good comparison at all.
    You're missing the point, which is that manufacturers are able to achieve economies of scale through out-sourcing, mechanization and cheap labour that isn't being passed on to consumers. I could have just as easily used an acoustic instrument as an example and the joke would be the same.
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  4. #53

    Default Re: Why are good mandolins more expensive than good guitars?

    Without beating this to death, there's also the component outsourcing which factors in big time.

    Over the past 15 years I know of a number of companies that have taken advantage of the rather loose definition of what constitutes "made in America" by getting components made off-shore and only doing the finish, final assembly and packaging in the US - just enough to qualify as MIA. These are companies big and small.

    So whereas, on paper, it can be argued a builder needs to made a significant investment in equipment and facilities to take advantage of CNC, Pleck and other modern tech, the reality is they can sub-contract to any of a number of off-shore entities that will gladly build the basic component parts to-spec which are then imported under different regulations that don't attract the same high taxes, tariffs and duties finished products do. By doing so they take advantage of the latest technology without having to be beholden to bankers or be worried about maintaining an idle factory in times of recession, and etc.

    To the market they are still selling a "MIA hand-carved solid wood" instrument at a premium price and all that implies, whereas their balance sheets and income statements show lower costs with the same or higher selling prices which increases profitability - the whole point of being in business in the first place.

    There are many other examples of "smoke and mirrors" - like companies that sell mandolins advertised as "hand carved solid tops" when the only "hand carving" is what goes on to do the scroll bit, all the rest is either pressed or done by machine. The wizard of oz is not what he appears to be once you've had a look behind the curtain.
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  5. #54

    Default Re: Why are good mandolins more expensive than good guitars?

    Verne, GAAP is only required for public companies, and even then there are exceptions to those depreciation (the IRS allows capital expenditures under Sec 179 of the tax code 100% depreciation in the year of purchase). However, unit costing requires manufacturers allot labor costs, so, you use an hourly rate, as construction and others do, such as auto repair, plumbers, electricians do to calculate labor costs, at $85 per hour (at one time recognized as the standard rate for skilled labor), using 200 hours as the time it takes from raw materials to finished product, labor alone would be $17k. And yes, there is some CNC going on, but someone has to program the machine (generally we use a higher labor rate for that), monitor it, refine, reprogram, etc. While CNC might save money in the long run, it also reduces the wear and tear on a luthier’s physical being.

    Competitive price, market price, discounts, mark ups, we can go on and on, but pricing is a balance and a struggle to cover costs, make instruments affordable, and to survive.

    As for Fender, the idea behind the lower cost models is to use lower grade materials, as well as lower cost labor to make these instruments. They use polyester finishes, cheaper hardware, cheaper pickups, etc. However, these instruments are more affordable and are made in larger numbers, thereby taking advantage of economies of scale. All in theory though. Fender still struggles with its bottom line.
    There's nothing better than first-hand experience.

  6. #55

    Default Re: Why are good mandolins more expensive than good guitars?

    If equipment is leased or rented you can write off 100% of those amounts, otherwise it's considered a capital asset that needs to be depreciated according to a number of factors:

    https://www.irs.gov/pub/irs-regs/dep...on_faqs_v2.pdf

    As for Fender's lower grade materials, nobody can tell the difference between the sound of an alder bodied Strat or one made of basswood and I doubt the bulk materials costs are significantly different. As far as pickups go, the cost of materials between a pickup using alnico magnets and one using ceramic magnets is minimal but the real costs, including tooling and etc to turn the raw materials into component pieces, assembling them and etc, is the same regardless of the materials used.
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  7. #56

    Default Re: Why are good mandolins more expensive than good guitars?

    Depreciation rules for GAAP are different than those mandated by the IRS. The IRS rules are used for filing taxes. The GAAP rules are used to create financial statements (and only used for those using accrual accounting). Let’s not confuse any of these with the process of calculating pricing, which is a different ballgame entirely, because as far as cost accounting goes, overhead (equipment, utilities, rent, etc.) is generally not used in these calculations. It has to be paid (static) whether you make one instrument of thirty. We generally leave it out of the decision making when looking at pricing.

    Whether or not the average person can tell the difference sonically if a Stratocaster is made of alder, ash, or basswood has nothing to do with the price of materials. There’s certainly a differentiation in costs, which are passed on to consumers. The same goes for nitro vs polyester finishes.

    Upgrades draw a premium. Varnish and other labor intensive finishes, premium woods, hardware, etc. All of these considerations weigh heavily on final pricing. Brand strength is also a heavy consideration. The logo on the headstock dictates and drives a fair amount of the premium paid for particular brands.
    Last edited by Mandobar; Dec-14-2019 at 8:23pm.

  8. #57

    Default Re: Why are good mandolins more expensive than good guitars?

    Guitars suck.
    Gunga......Gunga.....Gu-Lunga

  9. #58

    Default Re: Why are good mandolins more expensive than good guitars?

    Quote Originally Posted by Mandobar View Post
    The logo on the headstock dictates and drives a fair amount of the premium paid for particular brands.
    Agreed.
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  10. #59
    Registered User mtucker's Avatar
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    Default Re: Why are good mandolins more expensive than good guitars?

    Quote Originally Posted by CarlM View Post
    Especially when you consider the markup at retail, you would be paying Gilchrist prices if they were all hand built.
    Believe that Gilchrist still uses a simple pantograph router on his plates.

  11. #60
    Innocent Bystander JeffD's Avatar
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    Default Re: Why are good mandolins more expensive than good guitars?

    So someone starts out making mandolins. At first perhaps they are not that good mandolins, and he has no reputation yet, and, well, they don't sell. Or not for a lot of money anyway. But maybe after a short while he "gets it" and is making very nice instruments. Reputation for very nice instruments gets around. He can't reasonably make all the orders he gets in a timely fashion, and making a living wage. So he raises his price.

    That works for a while, but what has happened is that in the interval he now really really gets it, and he is now making exquisite instruments. The demand is rising. At some point he has the same problem again, except he cannot raise the price because sales drop off. Nobody wants to pay THAT much. He bumps into the top of the market for the quality he is able to produce. Or he cannot compete with the secondary market that has developed for his previously sold mandolins.

    So now he considers how can he meet his demand profitably at the limit of the market. One way might be to lower his costs and time it takes to make a mandolin. Reducing quality, lets say, is not something this luthier wants to do. Perhaps he gets some CNC machines, perhaps he hires some employees. Perhaps he outsources bookkeeping and shipping, so he can concentrate on building. Perhaps he is able to negotiate some good deals with his materials suppliers, promising exclusivity for a lower price, or what ever. Somehow he has to be able to make the mandolins at the price folks are willing to pay, and not have way long lead times or work 100 hours a week, or sacrifice quality.

    Then some mandolin hero picks up one of his mandolins and loves it. Chooses to tour with it, cuts a few albums with it. All of a sudden our luthier sees his demand go up even more, but this time he is able to raise the price. Not because costs have gone up, but because people are willing to pay more, having seen golden boy hero mandolinner plays one. Bringing attention to the quality of his instruments to a larger audience.

    The raised prices have the effect of reducing the number of people that can just go out and buy one of his instruments. But now he can accommodate the level of production required to meet this new somewhat reduced market, and make a living, and not have excessive lead times, and still make exquisite instruments.

    Of course there will be ad copy and yabba dabba about how it takes more time to make an instrument so good, or that excellent materials are costly, or some such, but the real truth is that the mandolins are so good that he can sell them at high prices, because there are enough people that are willing to pay that higher price and as a result he can cover his costs.

    I know this is over simplified and I probably missed a few steps, and a few other influences, but I think that is how it kind of works.

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  12. #61

    Default Re: Why are good mandolins more expensive than good guitars?

    I'd add in few more options, perhaps the luthier decides to do repair work (plenty of that to go around). He can diversify his business model outside of building, charge an hourly wage for skilled labor, and still continue to build to fulfill orders or on spec. There are lots of ways to build a business, a brand, and a good reputation.

    There are a lot of different business models that work for a lot of different luthiers. Some include becoming part of a luthiers group, such as what Adam Buchwald is doing now at Circle Strings with several other luthiers. They make parts and sell them, do finish work for other builders, do inlay work (just like Tom Ellis does), etc. The more independent one is from relying on the income from the actual builds, the better their ability is to wait for buyers who are willing to pay the price he/she has set for their instruments.
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