How much does it cost?

Gregn, thanks for your comments. Just to confirm the 10-20% retail is COGS right as oppose to adding R&D and other long term assets. Your numbers make sense to me, I looked at Sony's balance sheet and they have gross margin of 28% or cost of goods sold (COGS) of 70%, but sony goes towards mass-market/volume strategy with elastic type consumers...

Uppermidfi, you are correct that every cost has to cover R&D and all expenses, but I'm also curious of how much does it cost to make the products (Operating expenses). Not to complain, but just to understand more about the industry. Obviously, smaller firms with lower bargaining power and volume leads to higher gross margin in order to survive, but still curious how pricing is established. A good comparison would be looking at boutique cloth industry (Prada, Gucci, etc). expensive prices but COGS is not that different than GAP. The customers here are inelastic so if Gucci decided to lower their price 25%, it doesn't mean there would be 25% increase in sales. Same with audio, if a price of WAVAC is 175000, will it get twice the sales? so I wonder that since the high-end industry knows their main consumer aren't that price sensitive, so they exploit it by charging more....

Dizzy -- as you note, SOny (for example) is playing in a different market, while hi-end is small & very fragmented & inelastic...

Retail (dealer) margin is another cost driver that must be factored in; in many cases this is 30-40% of total retail.

In other words, if you had the xover schematics & mechanical drawing for a pair of speakers, the diy version would set you back ~20% of quoted retail. The manufacturer should be looking at ~10% retail: a driver complement that sets you back $2k (that's a VERY expensive speaker!) should cost $~800 to the manufacturer, including "proprietary tweaks" i.e. touching up the drivers' electrical characteristics to simplify the xover).
Cheers

Greg, thanks for your info. I was quite surprised that retail margin is up to 40%, but then again after some thought it does make sense. when you say that a driver complement cost 2000, wouldn't that equal to 200 to the manufacturer ( based on your 10% retail cost)? just wanted to confirm.

thanks,

when you say that a driver complement cost 2000, wouldn't that equal to 200 to the manufacturer

If the drivers used are large production units (i.e. Scan, Vifa, Seas/excell, eminence, etc) there are substantial differences b/ween enterpise and retail purchasing ~1:2,5. When I refer to ~10% of retail, it's for the finished product (including cabinets & xover). This is especially the case as you go upmarket; a $40k speaker would cost you ~5k to diy.