Accounting puzzler

[Rich]

All good points and well taken.
I have a tendency to put in my hours consistently every week, so if I free up some time by doing an operation faster, it more than likely will be put to some other labor operation and that's why I see it as a profit potential.

I don't believe that productivity gains are for the large companies only and I think mojo's example of saving hours by changing his procedure is a good one.

One thing I will say in response to the "other reasons" statements is that is a big reason, I think, that folks go into their own businesses in the first place-to do things in a way that suits them. If that means buying a tool that makes the job easier, more comfortable, done quicker so they can quit early or any number of other reason, it's probably a good move for them.

crammage's answer that the gain is in total dollars is what I was thinking. If a tool or procedure  enables you to cut your labor by x amount of time, then that is a pure dollar gain based on what you charge per hour. However, in the case of the Uffy tool, even if it saved me 2-/2 hours out of 3, since I may only do that much decorative nail work in one year (or more), it would take me several years to recoup my cost. Not a good investment for me. I have to look at productivity gains in the things I do on a daily basis.
Thanks,
Rich

[byhammerandhand]

In the book, 'The Walmart Effect," I seem to recall when production costs for an item are lowered, the savings go like this:
- The customer gets a "Rollback" amounting to a third of the savings
- The vendor gets to keep a third of the savings
- Walmart keeps a third of the savings.

Applying this principle:
- The customer gets a third of the savings
- The upholsterer gets a third of the savings
- The tool gets a third of the savings.

So if the tool reduces the production cost by $120
- The customer gets a $40 lower price
- The upholsterer pockets an extra $40 profit / labor
- The tool gets $40 to amortize its cost.

[byhammerandhand]

In another seven or eight weeks, I'll quit working to pay taxes and start working to pay medical insurance and expenses.   Then I'll be working to pay business expenses like supplies, insurance, and transportation.  Sometime after mid-summer, I'll start working to pay me.   Maybe I should go on welfare?

Gene,
That's a good method for knowing where you stand especially if you'd like to know whether you'd be better off financially closing up shop and working for someone else! But it won't help you to decide if a tool or method has any benefits over the way you currently do things. I'd like to know how to do that.
As an aside, in the past year, I've been keeping track of my income and expenses and comparing them to a standard for break-even. I know when I reach that point in the month where all my expenses are paid and I begin to work for myself. That was an eye opener! Like right now, starting a new month, I go to my shop and everything I do is for someone else. Tomorrow, same thing. But I can see the expense numbers going down and the income coming up and at some point, the numbers change from red to black (spreadsheet) and I am officially making a profit. I find it's  a mental boost to keep score this way.
Sofa, I agree that time savings is not the only factor to be considered. Like you said, reducucing fatigue as well as other facors important to you can also be good reasons to pay for a new tool. You do need to know the numbers however, to judge profit, whereas with comfort or ease of use, your body will tell you that!
Rich

[Rich]

In another seven or eight weeks, I'll quit working to pay taxes and start working to pay medical insurance and expenses.   Then I'll be working to pay business expenses like supplies, insurance, and transportation.  Sometime after mid-summer, I'll start working to pay me.   Maybe I should go on welfare?

Like I said-an eye opener!
Rich