How to cost handmade silver piece jobs: codes and drivers

What to take away

This is a method to cost handmade silver piece jobs, not a tax or accounting rule. Treatment of inventory, cost of goods sold, depreciation and sales tax varies by entity and state, so confirm it with a qualified accountant. Your state department of revenue is the authority for sales tax registration and filing.

Open the job record before you cut metal

Pick a format you will actually fill in: a spreadsheet tab per job, a small-business accounting program such as QuickBooks or Xero, or a paper job traveler with a cost sheet stapled to it.

Freeze that first estimate. Revisions get their own dated version. If you overwrite it, you lose the only evidence of why the piece cost more than you thought.

Weigh the metal, do not trust the invoice

Record supplier, invoice number, alloy, and fineness.

Fineness has a legal side too. In the United States, the FTC's Jewelry Guides (16 CFR Part 23) govern how you may describe silver, and the National Gold and Silver Stamping Act requires a quality mark and a maker's mark on the piece. If you buy assay or hallmarking as an outside service, put that invoice line on the job record.

The marks carry the information the piece is judged by: a quality mark states the fineness of the silver, and a maker's mark identifies who is responsible for it. Write on the job record which stamps went on the piece, who applied them, and any piece that had to be restamped, so a marking error shows up as a job cost and not as a surprise at delivery.

Keep clean sheet, polishing dust and bench scrap as separate inventory lines. They recover at different rates, and valuing a gram of each the same way hides real cost. Value consumed metal at the price you paid for that lot, or at the day's spot price if you buy on the market, and write the basis you used on the job record.

Time each stage, not the whole job

Run a timer or job traveler with start, stop, stage and operator.

When several pieces share a batch, decide the allocation before you look at the result. Equal pieces can divide per unit. Uneven work is better split by machine time or direct labor. Keep setup and development visible either way.

Your labor rate has to recover the cost of that labor under your own method. For an employee that is more than the hourly wage: add payroll taxes, workers' compensation insurance, paid time off and benefits before you set the rate. For an owner, pay yourself for bench time and treat return on the business as a separate number.

Allocate overhead by a driver you can defend

Pick a driver: direct labor hours, productive bench hours, machine hours, or units. Group overhead only where the driver tracks consumption. A casting run pulling kiln power and a hand-soldering job do not deserve the same flat charge.

Code every deviation

Label each one:

Do not delete failed labor because the customer never saw the piece. The bench still burned the hours and the metal. Decide openly whether that cost sits with the job, overhead, warranty, or a corrective account.

Build the price from cost

Keep the worksheet in separate lines:

Consumed materials and outside services
+ direct labor
+ allocated production overhead
+ channel and fulfillment costs
= total unit cost

Total unit cost
+ contingency for defined uncertainty
+ target profit
= proposed pretax selling price

Sales tax is not revenue and not margin. Model discounts, commissions, returns, card fees, shipping and bad-debt risk for your actual channel. Then look at what you keep rather than the tag price.

Break the channel costs into lines you can compare. A gallery or marketplace takes a commission on the sale; card processing is a percentage of the sale plus a flat amount per transaction; packing, shipping and insurance are paid whether or not the customer keeps the piece; returns and exchanges add a second handling cost; and some invoices are never collected at all. The same piece sold from the bench and sold through a gallery does not carry the same cost, so the record should say which channel it went through.

For federal treatment of a sole proprietorship, IRS Publication 334 covers inventory and cost of goods sold and notes the exception for qualifying small business taxpayers. It sorts materials, labor and certain manufacturing overhead in a tax context. It does not set a pricing formula.

Close the record at delivery

Before the piece leaves, link the cost sheet to the final alloy and weight. Link it to the marks and batch and dated photographs. Also link any approved concessions and care and repair terms. Finally, link the invoice. The IRS generally asks that supporting records be kept for at least three years after you file. Set any longer retention period with your accountant and insurer, and keep customer payment data under a written access policy.

After delivery, compare estimated against actual for material, labor, overhead, and selling cost. Also compare net revenue and margin. Explain the variance by cause. Do not raise the next quote by the whole gap if one failed seam drove it.

Read several similar jobs together. Unrecorded design time, underestimated finishing and channel fees show up as patterns, not one-offs. Feed the pattern into a new dated estimate.

Common questions

These come up on almost every job.

Should reclaimed silver reduce the job cost right away?

Only under a method you apply every time, one that accounts for recovery yield, contamination, processing time and how your accountant treats it. Write the assumption on the job record so the next person reads the same number.

Is profit part of overhead?

No. Overhead is what it costs to keep the bench open. Profit is added after cost and funds equipment, slow months and the risk you carry.

Does a rejected piece disappear from the record?

It should not. Record the metal, the hours, the cause and what happened to the scrap, or the same loss repeats without anyone noticing.

How often should the overhead rate change?

Review it on a set schedule and whenever rent, equipment, staffing, energy or realistic capacity shifts. A rate left alone for years quietly undercharges every job.