#### George Hunter

##### Grumbler

I disagree with her method of calculating actual costs for the following reasons.

For a 20% moulding wastage the book states that actual cost should be calculated by taking the cost of moulding for the job and adding 20%.

So according to Vivien Kistler , for a frame which uses $100 worth of moulding you must charge the customer $120. Sounds reasonable. Except if you buy $120 worth of moulding and you know that 20% is wastage then you have $96 of usable moulding not $100.

The error lies in regarding the cost of required moulding as 100% whereas in fact it is the actual cost of moulding purchased including wastage which should be regarded as 100%.

The formula in the book for actual cost = cost + wastage

reads as 120% = 100% + 20%

It should read 100% = 80% + 20%

In practice if you need $80 of moulding for a job

then the formula is 80 X 1.25 = 100

So for 20% wastage you must multiply cost of moulding by 1.25 to get the actual cost of moulding.

If you followed the formula in the book you would multiply 80 by 1.2

80 X 1.2 = 96. You would be undercharging by $4 and if you apply the mark up example of 2.5 then you are undercharging by $10.

If you calculate glass and mat costs using the same method then you are undercharging on these items too and by a considerable amount on every job.

George