It is a common misconception that it doesn't cost a lot of money to manufacture an item and that folks are being shafted by the middle - men. Ergo, eliminate the middle-man and the price would go down.
Here's the problem: It is common for accountants to use "Car Door Cost" - which is the cost to manufacture an item and get it to the railroad car door at the entrance to the warehouse. This is a good way of comparing manufacturing costs, but a poor way of isolating what it truly costs to deliver a product to a customer. FYI: Typically this cost is about half what the average consumer pays at the retail level.
- BUT -
Car Door Cost only includes 3 items: Material, labor, and burden (burden being the cost to keep the factory running - electricity, gas, water, buiding maintenance, etc.) - typically, the costs are divided 1/3, 1/3, 1/3 for pretty much every product - not just cars!
Car Door Cost does NOT include the infrastructure to run the company - engineering, management, accounting, warehousing, transportation - in other words, everything else that is not included in directly manufacturing the product.
So when folks ask the accounting department for manufacturing costs, they get "Car Door Cost" - which is not a true reflection of what it costs to design, manufacture, and deliver the product.