The Very High Cost Of Small Batch (HasLab)

The "value" question is still being raised with respect to the Vintage Collection Cantina HasLab. I'm personally puzzled by this because the piece is absolutely epic. It's a gargantuan environment, yet we can make it fit our displays thanks to the modularity. That aside, I don't think some in the community appreciate how insanely expensive small batch figures are. Remember, when setting the price, Hasbro has to assume the worst case scenario for production, which would be exactly 8,000 backers. So they have to set their pricing for that production level. If it goes beyond that, the cost per unit for Hasbro goes down, and they can afford to give us "free" stuff via stretch goals.

We need to look at how insane the cost per unit is for an action figure at a production level of only 8,000 units compared to a main line figure at, for the sake of argument, 30,000 figures. If you've taken a basic accounting course, you know that there are two types of costs when calculating the cost per unit to produce something: fixed and variable. As the names imply, fixed costs do not change as a company produces more of the item, but variable costs do. I've used the simplistic example of a bakery in the past to illustrate this. Say the bakery is making muffins. The muffin tray would be the fixed cost. Whether they bake a dozen or twenty dozen muffins, they need a muffin tray. They have to incur that cost regardless of the production size. The batter would the variable cost. The more muffins they make, the more batter they need.

Let's look at how higher production volume lessens the cost per unit as a result. We'll say the tray cost $10 and the batter to make one dozen muffins costs a $1. To calculate the unit (one dozen) cost, it's the fixed cost divided by the number of units plus the variable cost. So if the bakery only makes a dozen muffins, that would be ($10 / 1) + $1 which equals $11. It cost the baker $11 to make that dozen muffins. Now lets say they bake 100 dozen muffins. The equation becomes ($10 / 100) + $1 which equals $1.10 per dozen muffins. Increasing production drastically reduces the cost per unit.

So lets assume the variable cost for Hasbro to make a figure is $5. This would be the material, packaging and labor costs. What, then, are the fixed costs? First and foremost, it's the steel tooling, the cost of which has been floated on the interwebs. But that't not the end of the costs. There's also the fully loaded salaries (including benefits and proportional amount of overhead) of the designers, engineers, and sculptors. Let's say that the cost of the steel tooling plus all of the up front R&D costs amounts to $200,000 for a single action figure. We've established our fixed cost of $200,000 and variable cost of $5. We now have the basis to demonstrate the drastic impact on the cost per unit at small batch levels. First we'll run a main line production of 30,000 through the formula:


Now let's do the same at 8,000:


If my numbers are anywhere even close, Hasbro's cost is $30 per figure before any licensing fees. The three base figures are where a big part of the cost of this HasLab is going toward. Small batch is extremely expensive when you have high fixed costs. If we want niche characters, we have to come around on this and #BackTheBar. This exercise also demonstrates why a figure-only HasLab is likely never going to happen. Either the minimum backing level would be out of reach, or the cost per figure would turn off too many collectors. Notice I said "likely". Maybe there's a scenario where clones repainted their armor between seasons one and two. Please note, this isn't a hint (I have no idea of a Bad Batch HasLab is coming). I'm just citing it as a thought exercise.

I know we have at least one accountant in our community here. I hope my portrayal wasn't insultingly simplistic and/or embarrassingly wrong. Lastly, I don't mean to insult anyone's intelligence. So if you read this with a "well duh" while rolling your eyes, I apologize.

CLICK HERE if your would like to back the Vintage Collection Cantina HasLab

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