It's a simple fact that there is next to no demand for these parts. Why should a company sell it if there is no money in it for them?

It's the exact same outcome at the end. Trust me, I'm a cost analyst for a pharmaceutical company, lol

Oh? Then you may enjoy reading the following passage, especially the second example ;)

"A common example of a sunk cost for a business is the promotion of a brand name. This type of marketing incurs costs that cannot normally be recovered. It is not typically possible to later "demote" one's brand names in exchange for cash. A second example is R&D costs. Once spent, such costs are sunk and should have no effect on future pricing decisions. So a pharmaceutical company’s attempt to justify high prices because of the need to recoup R&D expenses is fallacious. The company will charge market prices whether R&D had cost one dollar or one million dollars.[8] However, R&D costs, and the ability to recoup those costs, are a factor in deciding whether to spend the money on R&D." -Klein and Bauman (2010) The Cartoon Introduction to Economics Volume One: Microeconomics 24-26.

This was my point from earier this afternoon I briefly made during my lunch. Brand promotion i.e. a car sponsorship and R&D costs are sunk costs! Despite what your gut may tell you it's a common fallacy for managers to attempt to reclaim these costs by passing them on to the consumer.

R&D is seen as an investment in the firm, or a means to obtain competitive advantage. It's not something to pass on as a tax or to be recouped by higher consumer costs. A perfect example in the automotive world is the Lexus LFA, R&D costs on that project were truly "astonomical" yet the company sold each and every model at a LOSS- The company still benefited from having developed new technologies and manufacturing processes in-house.

Same as what I pointed out to DE.50-

The R&D is already done and paid for, as in a sunk. How does the company benefit for selling zero kits at a price of $4370??

Answer- they don't. It's actually in the company's best interest to ignore those costs from the sponsorship and the R&D. Figure out the costs to run the machines + labor+ overhead ect. and actually price the kit accordingly or relative to the market/demand. Then the company will actually turn a profit.

If you are so incensed at the cost of these parts, then how about you do your own R&D and make them from scratch yourself.

If you are unwilling to do this, then don't demand that others do exactly the thing that you personally are not prepared to do.

Your choices are simple ... pay the asking price because you want the parts, OR do the R&D yourself and seek to recover your R&D costs over what you believe to be a reasonable volume. There is clearly an element of investment risk here.

Just because you "believe" you should not have to pay the ask does not make your view any more "right" than Voodoo when they set the price. If you don;t like the price, the consequence is you don't purchase and you can seek an alternative solution.

Nice false dilemma you set up there :ugh2:

Just because I don't choose one alternative does not make the other one correct- In fact there are other solutions I or somebody else in my position could take. One of them if you haven't discovered it yet is to make a topic for discussion like I've done and bring attention to the issue. As far as R&D costs go... please read the rest of this thread. It's not my personal belief that they are a sunk cost that shouldn't be passed on to consumers. R&D by definition is a sunk cost! There's no debate- it's not a theory I'm working on. It's an established fact.

As for those that have given this some thought, and shared their personal CNC experiences, offered up other parts for cost comparison, or simply kept an open mind and thought critically, I truly thank you! :tiphat:

I'm aware that discussions on the internet are not always held in the realm of logic, and often boil down to just popular opinions or group thinking. Everyone is entitled to their opinion regardless. What I'm asking here if for a real discussion. If you feel a certain way that's great but how about backing it up with something else yeah? Use some citations, a link, an alternative. I'm not one to just go with the flow because it's popular, if I was I wouldn't be setting up my 370Z to drift with haha!

Brother, you want the price to be cheaper, call them and state your claim... See what they say.

Or if you think there's a market at a lower price, ask them for 10 sets at $1500, or something you feel like is reasonable. Then you can pass that risk on to the other 9 guys. Hell, I'll buy a set if you get it cheap enough.

I understand exactly these circumstances ............ and I run my own business and I have been in competitive motorsport for nearly 50 years and have made and offered for sale various components over the journey. I have put my money right where my mouth is.

From an accounting viewpoint, R&D as a sunk cost is not an accurate statement as it is "sunk" only if epxensed to Profit and Loss. It can (in Australia at least, subject to Accounting Board standards) also be capitalised and then the CAPEX amount amortised against subsequent unit production.

In either case, someone has still outlaid the hard-$'s (the investment).

You seem to be advancing the case that the cost has to be expensed (sunk) and therefore the price should only reflect the marginal cost of unit production plus margin and I respectfully disagree. The choice - in the case of capitalised R&D is the unit volume over which amortisation occurs.

Asserting that the only R&D treatment is to expense it is analogous to having your cake and eating it too.

I invite you to consider the point from the investors perspective.

If the R&D has been expensed, then the business is down $xK and it is legitimately entitled to set a price that recovers its cost over projected production volumes, failing which the business runs at a loss and that has only one end point. If a business gets its costing wrong, the consumer benefits on price and the manufacturer goes bust so the consumer bears the risk of no follow-on service or warranty.

If the R&D cost has been capitalized and carried as an asset on the balance sheet, and subject to amortization over likely sales volumes, then the business is similarly entitled to set a price that reflects the unit cost of production over likely volume plus unit amortization.

The R&D money has been spent .... and in either case, revenue needs to cover it.

Revenue is unit sales value times number of sales ..... and both require a conscious decisions to establish. In one case, pricing needs to take account of the product line starting with a negative cost base (includes sunk cost) to which is added unit cost of production for projected sales and in the other case, the pricing inputs are marginal cost of unit production plus amortisation of capitalized R&D over projected production volumes.

Sunk cost is still a cost and cannot be ignored which seems to be the argument you are advancing.

All I can see is that you are disagreeing with VooDoo's pricing because you view it as "excessively expensive".

I'm very happy for you be say it is too expensive, in which case the consequence is don't pay the price and do something else (like purchase another product or invest in your own R&D and prototype(s)) but to drive an argument that it should be cheaper because sunk cost should be ignored for pricing purposes is wrong.

Good suggestion, a group buy might be a real world solution for everyone. At what price do you think you would be a buyer at personally? I won't hold you to it or anything unless we get closer and make an official list and all. Just want to get a ballpark on what you or others think is reasonable. Then I'll probably follow up with a pole and then make a case to them using that and the other info. gathered.

I was also thinking of asking Voodoo13 if they would consider making a redesign, like a street version. Maybe there's a way they can incorporate our stock spindles like others have done with the 350Z in the past. As most of the price in the CFR kit appears to be in the spindle. What are you thoughts? Or any other suggestions?

You should also consider the cost/benefit to the consumer. At what price point do they think they can sell it to their average consumer? Without competition, the average person (average in regards to needing/wanting an angle kit) would be at the mercy of whatever price voodoo wants.

What's the real alternative? The average person to go sink their own money into development of their own kit. How much is that going to cost? Is it more or less than voodoo's kit and what is the risk involved? At that point your average person might realize that it's easier, more reliable, and cheaper to simply go with the $4000 cost that voodoo is suggesting is fair. Don't like it? Change platforms. Get a corvette, maybe.

You're the "Econ expert" you give me the price where the company will be happy selling them and they won't worry about their "sunk" cost.

And I don't think the price is turning people off. The uselessness does, lol


But hey, call up Voodoo, see what pricing you can get when you give them your logic. See what price they give you for 1, then see what pricing they give you for 5, I doubt there's more than 5 guys that want the whole kit.

If you think the price of these parts are high. You should see the prices for some industrial/commercial parts. :eek: :eek: :eek: :eek: :eek: Long ago, I was involved with making nickel/graphite seals. One 6" diameter, 1/4" wide seal for a compressor sold for $12,000. You needed 6 of that size, and 6 more of that are 14" ($19,000 ea.) in diameter and one for the balance piston ($26,000 ea.) for a rebuild.

When buying parts from GE. We have a saying. "You might find better, but you won't pay more." :mad:

In my eyes, the prices for the VooDoo13 parts are in line for the volume that they sell of them. ;)

I like and respect your argument much better with this presentation. I also applaud you for being a small business owner and being involved in motorsports for so long. Two things I really like to support!

Although I'm not familiar with the business practices in Australia or accounting laws. I can tell you that I'm fresh from studying my MBA overseas with Bradford University (UK) and spent time taking courses in Singapore as well. So I do have some expose to the other former colonies' business practices ; ) R&D funds typically come from profits or is equity financed. Imagine the early 90's when Honda Japan started pumping their money and investing in their new robotics division, and instead of scaling back their profits and dividends paid they instead simple tired to pass this new R&D "expense" off on their customers- Do you think Honda would still be in business today if they tried to sell its Accords and Civic for twice as much during the 90's??

R&D is an investment in the future of the company- not a project cost assigned to a batch to be paid for by a customer. The company benefits from R&D and thus it weighs the upfront costs and makes a decision to proceed and then it must later live with it, good or bad. That management decision has no bearing on the price of the products the company is selling. Although I will share with you many managers tried to argue otherwise during my studies, as it's a common misconception but it was covered in multiple areas among them I remember strategic management and corporate accounting. But again take the LFA, or Honda examples I've just cited, both are well documented cases.

Hahaha absolutely love the saying you and co. have come up with! My father is retired from Hughes Aircraft/ Raythoen I've heard similar tales from him over my lifetime.

I also see eye to eye with you on the corresponding Voodoo13 pricing :tiphat:

Valid point-
I'm aware they have the market corned for this platform/ application. I'd like to believe they are misguided with trying to cover R&D rather than just malicious price gouging. But, you may be right : /