How much does audio equipment really cost

Usually the retail price of an item is determined by the ratio of 5 times what it cost for parts. This usually covers the cost of operation including labor and whatever else like advertising. In general manufacturers give the dealer 40% off and some give 50%. Most allow the employee to purchase at cost and some manufacturers give accomodations to employees and other manufacturers that range from 40 to 50% off. Dealers will sometimes get additional costs cuts for demo gear.

The rough "rule of thumb" for the ratio between manufacturing costs vs. retail price usually falls in the 1:5 or 1:6 range. This, however, is normally based on manufacturing enough of the product to reach so-called "economies of scale". This, however, does not always apply to low volume speciality products, such as high-end audio gear. The manufacturing cost to retail price ratio for these sort of "luxury" goods may be in the 1:10 to 1:15 range. And then there are the markup ratios that make no rational sense at all, such as diamonds and high-end audio cables....

Speakers are 40-50%

Electronics are 28-40%

Televisions can be as low as 5%

I've seen vcr's with 3-5%

Cables 50-70%

I do a little work with a couple of local High End shops. I'm always asking what the dealer cost is on things. Just because they tell me the cost doesn't mean I get to purchase it at cost. I get the standard 5-10% discount like everybody else.

BTW - they sell tv's and vcr's just as a convience and then they can charge you for the install. Sony has some of the thinest margins in the industry.

Yes depending on the mfg, the dealer mark up is 40-50%.

Happy Listening.

I had read before that there is a standard business formula. 20% for manufacturing, 20% for R&D, 20% for sales and marketing, and 40% for the dealer's costs. I think this formula extends beyond audio, pretty much common practice.

Generally speaking, I would guess at least 1:5 from manufacturer to MSRP. Dealer cost would be about 40% less than MSRP. Keep in mind that there are spiffs and other incentives/accomodations (free shipping, bulk purchase, etc.) that manufacturers offer to their dealers. So even though a dealer may show you their price list it isn't always what they pay for it. Cables are another story.