Charging for Prototypes?

Question

I work for a small company that does spray coatings for the automotive racking and packaging industry. I have customers that always design products and want to have us coat it so they can show their customer and generate both of us work.

My boss is a stickler with the money. He feels like he has to charge at least $50-100 for any one size detail. It may cost us $20 in material and labor to do it. I'm starting to get grief from my customers and they told me that they dont get money for these ideas concepts.

I'm thinking to tell my boss that if production lands we just roll the prototype cost into the piece price. If they dont get the program then we just eat it.

Do you know any other systems that work best for the customer and the supplier?

Answer 1

I think that the people who want a prototype should cover the materials and labor costs incurred to create it. Tacking a profit margin on prototypes will, as you say, probably decrease the number of possible future production runs. Better to just cover your costs on prototypes, and wait for the production run to make profits.