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To: rudedog who wrote (37864)	4/15/1998 1:06:00 AM
From: Chuzzlewit	Respond to of 176387

Rudedog, I think you may be using numbers that include overhead. In other words, most retailers and distributors include various costs such as rent in their gross profit numbers -- its called full absorption pricing. Using those numbers gives very skewed results. I am checking that now, and will get back to you. TTFN, CTC

To: rudedog who wrote (37864)	4/15/1998 1:44:00 AM
From: Chuzzlewit	Respond to of 176387

Rudedog, I'm not sure of the numbers, but wholesalers and retailers general absorb overhead in their profit margins. For example, commissions, advertising, flooring etc. are generally included in COGS, and this has a profound impact, because it obscures the cost of the unit fob the factory. I checked briefly with some of the retailers, but could not quickly figure out exactly how they account for those costs, but I am virtually certain that they are included in COGS. But even if we use your numbers of 12% for the retailer, his cost is $616 from the distributor. Assume $10 shipping and 9% for the distributor, his cost is $551.46. Less $10 for shipping from Compaq leaves 541.46 Ed's estimate of the cost to build was $516. That gives Compaq a profit margin of only 4.7%! To get to that 27% margin Compaq would have to get the units out the door for under $400. TTFN, CTC