As with all “cost-benefit” analyses, there is a level of speculation. Is it realistic to expect that in a world where a $50 guitar will cost more than a $200 guitar to make, one will use more gear? If so, will the price of gear, along with the equipment that goes into making it, rise? How will this affect the “included” purchases – whether that be books, bookshelves, instruments or equipment? We don’t know, so this analysis is not meant to provide definitive answers. It is simply meant to inform you of which guitar or model to invest your money in.
What is the guitar business?
Most people know what a guitar is, but what about the business that it operates? Guitar production and selling are pretty hard to measure, but the best way to get a handle on how it’s done is to see how much profit it generates per unit sold, and how much it costs to make or manufacture it.
Estimated Cost of Production
It’s important to remember that a guitar doesn’t have to be a complicated machine – the production of a regular guitar is relatively straightforward – it’s just about figuring out the right way to do it, and ensuring proper production equipment and controls.
Cost-Per-unit (in US dollars) Cost per unit = cost per part (1) (2) The basic question that a music buyer needs to ask is, “How does the guitar manufacturer get the price so high?” There are two broad approaches: first, there is the market approach, in which a retailer decides how much they want to pay, and then compares the list prices in the various stores with the prices they’ll pay for a similar set of parts. Second, there is the manufacturing approach, in which the producer has to set up a facility on their premises and find the best available raw materials, assemble the parts and sell them at a profit. Both are fairly common in the industry.
Estimated Profit per unit Cost-per-unit = profit per unit Profit = (cost / unit) * cost
You could say that $10 in value is worth $12 in cost, but that doesn’t tell the whole story – it says that the $1 of profit and $12 in cost is $3 of net profit – $3 * 12 = $9.56 . The actual market price won’t tell us how much profit a product will turn out to pay, but it’s reasonable to expect