Amortization of tool costs immediately reduces production costs. You have the option to make small payments and retain full ownership of the tools. This is the best cost-per-game option. Total Digital Years Financial Program Adopted, the tool bill is $125,000, the program spans three years and you charge 12 percent annual interest to your client. The model, as if paid with monthly payments (36 payments) and your client suggests that it will be 2 million formulas per year for the three years. Suppose the shaped sets are each worth $1.23 for the forecast volume. If you have trouble keeping track of these statements, take your accountant or commercial banker for lunch for a clearer explanation. Each company faces the challenge of offsetting the costs of launching a new manufacturing project, and the toolmaker is a big thinker about costs. We have two problems with that. The first is the possession of tools; the second is how volume divisions are for rent.
Instead of temporarily paying for a product, just to give it away when your project is finished, be depreciated, depreciate the best return. At the end of the production cycle, the tool belongs to you and can be used in future projects. If you have a pledge right to the tools, your client cannot pull the tools until you have been fully compensated for this and for the loss of part of your line of credit. Most importantly, price negotiations are now in your favour, as they are both the exclusive source and owner of the tools. The reason you want this protection from the beginning may not be obvious until the trouble starts. You want to be the exclusive supplier to prevent your customer from finding a source in Taiwan and try to cross-trade offers when you still don`t have the tools. By charging all the interest at the front of the payment plan, you first make the profit on your money, then all the fees/gains you have indicated on the tool. Since the purchaser has asked to depreciate the tools and has probably never specifically requested the interest rate, amortization duration or structure, you are not obliged to send them to him unless he asks directly for it. If they don`t like partial costs with the three-year depreciated tools, you can give them a five-year depreciation and lower its price. As long as you have the protection and courage to play this game, you will have production going on.