• Clement S. Sealy, Jr.

HOW TO CALCULATE PRICING YOUR MUSIC CORRECTLY: PART 3

OVERHEAD 1 - Continuation from part 2

Starting off as an independent Music Professional usually your home is your office and rehearsal space.  There are expenses that are accrued due to using your home and these are called overhead. A cost that needs to be evaluated in the music that you is being sold.  


An expense is a reduction in the value of an asset as it is used to generate revenue.


Utilities

Utility expense is the cost consumed in a reporting period related to the following types of expenditures:


Electricity

Calculating Watts

Step 1.   Find the wattage on the appliance label.

Step 2.  Multiply the wattage by hours used each day

Step 3.  Divide the result by 1,000. A kilowatt is equivalent to 1,000 watts, so this step converts your answer from watt-hours into kilowatt hours.

Step 4.  Multiply your answer by the number of days you're measuring.

Step 5.  Multiply by the cost of electricity per kWh.


Calculating Amps

Step 1.  Find the amps rating on your appliance. Some appliance labels do not list watts. In this situation, look for an amp or "A" measurement instead

Step 2.  Find the voltage in your region. In the United States and a few other countries, the standard household Voltage is 120V. In the EU and most of the rest of the world, the voltage is between 220 and 240V.

Step 3.  Multiple amps and volts together. Multiplying amps and volts give you an answer in watts or electrical power.

Step 4.  Multiply by hours used per day. The wattage tells you the rate energy is consumed while the appliance is active. Multiply the wattage by the number of hours the device runs during an average day.

Step 5.  Divide by 1000. This converts from watt-hours to kilowatt hours.

Step 6.  Multiply to find the kilowatt hours for a larger time period. For example, if you want to find out how many kilowatt hours you'll be charged for during a 31-day billing cycle, multiply your answer by 31 days.


Heat (gas)

to calculate how much heat you were using, you can get the information from your local Gas service provider.  You can calculate usage if you have your bill by using an online gas usage calculator: example  below:

https://accel.peoplesgasdelivery.com/home/gas_calculator.aspx


Automobile Usage

Using your car (price per gallon miles per gallon = price per mile)

Again, you can use a variation of the same equation to calculate the price per kilometer: (price per liter kilometers per liter = price per kilometer). Once you’ve found out how much it costs you to travel per unit of measure, you can apply that price to the distance of whatever trip you’re planning. This will tell you how much a given trip will cost in your particular car.


Telephone

Always use the minute usage on your phone to calculate how much time you spend for your business.

How much is your bill monthly? Calculate that into how much it cost per minute. How much time did you spend for business usage?  The answer should be deducted and multiplied by the value of minutes. Depending on how many songs you created for that month or year, divide the multiplied amount by that number and that should be your cost of usage per song.


Internet

This is an important expense, especially as the industry has transitioned into technology.  You use in networking and accruing fans is costly and time-consuming.

Insurance

If you have the equipment, you should have insurance for that equipment.  Remember, your equipment is your lively hood. An expense that will help replace or assist in financial monetization of your lost or stolen belongings.  In order to incorporate the expense into your sale of music look at the following process.

If you calculate how much you're paying a year on your insurance.   example $40 every two months is $240 yearly. Divide by the number of months /12 = $20 and then hours /8 = $2.5. The answer is what you will apply to your music’s cost.



All of these expenses are deductible from your business.  Using the IRS Form 8829. to deduct your business use of your home. Consult with your accountant for further information.

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