Tariffs trip up the all-American RV industry

DallasSteve wrote:

WTP-GC wrote:

DallasSteve wrote:
I saw the same story this morning and I thought about starting a thread like this one. I'm actually hoping for a big recession soon. Sorry about that. It would probably help me since I am retired and planning to buy an RV next year. I'm not working so losing my job is not a worry and RV prices would probably be cut - simple economics. Too much supply, not enough demand. It would also probably reduce the number of RV park visitors and drop those prices.

Which brings me to:

pianotuna wrote:
I'm a small business man. If I buy an item to resale and it costs me $10 then I sell it for $20. So if there is a 25% tariff it would cost me $12.50 and I'd sell it for $25.00.

That represents quite a large jump in price to my client.

Mr Small Business Man, as a former CPA I have a question. Why would your price go to $25.00 instead of $22.50? At $25.00 your profit jumps 25%. That's a jump that would make a hospital CEO blush. At $22.50 you cover your increased cost and you get the same $10 profit. If I'm your competitor that's what I would do and most customers would come to me.

Edit: I see that Schlep beat me to this observation by 3 minutes. Good work Schlep.

Steve

As a retired CPA, why don’t you see profit as a percent instead of a number? $10 item sold for $20 is 100%. $12.50 item sold for $25 is 100%. Exposure and risk increased, so the profit should follow suit. The margin didn’t increase. By your logic, a $10 profit is equitable on a $10 good the same as a $20 good or a $2000 good.

Again...profit is a MARGIN of cost, not a fixed number.

WTP

Profit is not "MARGIN of cost". Profit is revenue minus expenses. I promise you. Part of getting my bachelors degree in Accounting required 2 semesters of Economics. If he has a monopoly he can charge what he wants, but in the real world he probably has competitors and if they could make a good profit with a $10 markup before, they can make a good profit with a $10 markup after, and they will undercut his $12.50 markup.

Steve

And such is the mincing of words...
The determination of your profit is indeed a margin of cost. If your profit margin is 10% or 100%, it's going to remain the same regardless of the cost paid by the seller for the item. Everybody knows that profit is revenue minus expense, but you maintain the same profit margin when you can. In the contracting world, if the job costs are $200K or $400K and I use a 10% profit margin, I'm dang sure not going to do the $400K job for $20K profit. But the logic expressed by some people in this thread suggests that I should.