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 Replies: 10 / Views: 2,498 |
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Pillar of the Community
United States
591 Posts |
Hi Everyone. I'm new here. Was hoping someone had an opinion on this question that I recently posed to the US Mint customer support. They only provided me with canned responses that totally avoided the actual question.
Here was my email to the US Mint:
I am hoping you can clarify how the US Mint arrives at the sale price of $5 gold commemorative coins. From the legislation, it is stated that the cost shall be equal to the surcharge ($35 for gold; $10 for silver) plus the face value plus cost of materials plus cost of labor for designing/issuing. It would seem this last component would be generally consistent "overhead" whether one is dealing with a silver coin or a gold coin.
From the legislation:
(a) SALE PRICE.—The coins issued under this Act shall be sold by the Secretary at a price equal to the sum of—
(1) the face value of the coins;
(2) the surcharge provided in section 7(a) with respect to such coins; and
(3) the cost of designing and issuing the coins (including labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping).
So for purposes of this discussion, the term "overhead" will mean the cost of designing and issuing the coins except for the cost of materials (intrinsic metal value), which will be accounted for separately.
For example, the approximate retail price for the commemorative $1 silver coins is say $45 (on avg). So for a $1 silver coin, one can deduce the approximate cost of the "overhead" component by the following: $45 - [$10 surcharge + $1 face value + (0.773 oz Ag x $17/oz Ag) materials]. This would yield approximately $21 for "overhead".
Based on the current pricing grid for gold/platinum products, the $5 gold commems are priced at approx. $390 (on avg) in the current tier of gold between $1,150 to $2,000 / oz. Oddly, when running the same equation, one yields a much higher cost of "overhead":
high end of pricing tier:
$390 - [$35 surcharge + $5 face value + (0.242 oz Au x $1200 / oz)] = $60
low end of pricing tier:
$390 - [$35 surcharge + $5 face value + (0.242 oz Au x $1150 / oz)] = $72
Would you be so kind to elucidate as to why this "overhead" component would be so vastly different between the silver and gold coins?
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Bedrock of the Community
 United States
12813 Posts |
I could have to do (at least partly) with mintage numbers. Far fewer gold commemorative coins are made than silver and generally it costs less per unit to produce the more of said units is made.
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Pillar of the Community
 United States
591 Posts |
Thanks CelticKnot. Not sure if I've stumped most everyone else. I started thinking about the actual pricing of these coins from the US Mint vs. what the pricing is supposed to be based on per the governing legislation, and it just doesn't add up. Why would the cost to produce the gold coins be around 3 times as much as that for the silver, after the precious metal value is taken into consideration?!
Edited by one_fine_dime
04/13/2015 2:22 pm
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CCF Master Historian of USA Commemoratives
 United States
12256 Posts |
Quote:
Not sure if I've stumped most everyone else. Not stumped, just needed time to provide a thoughtful reply.  Note: The following is conjecture on my part based on my past business experience - I am not privy to the internal financial/accounting policies of the US Mint.One possibility is that the Mint does not calculate the cost of "labor, materials, dies, use of machinery, overhead expenses, marketing, and shipping" on a specific/case-by-case coin basis (i.e., it does not use one calculation for its commemorative silver dollars and another calculation for its gold half eagles). Instead, it may take a more macro approach and use pro-rated allocations of its overall "Sales, General and Administrative" (SGA) costs to its various products. With such an approach, the Mint's products that generate a higher overall dollar volume via their sale (such as its gold coins) would be assigned a larger percentage of the overall SGA costs. This proportional allocation method helps balance overall costs that really aren't coin dependent (e.g., the Mint's HR Dept, its Finance Dept, Security staff, etc.) and helps ensure lower priced items are not over burdened by SGA costs. Collecting history one coin or medal at a time! (c) commems. All rights reserved.
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Pillar of the Community
United States
4211 Posts |
I would also think that along with commens thoughts of higher cost per unit due to a lower number being produced that volatility in pricing (gold climbs and falls much harder than silver) is an issue concern as well as I would think much more security measures (labor, security, storage etc.) would also come into play. Think about hiring security for a $150,000 house VS a $1.5 million dollar mansion as one example? Just a thought  |
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Pillar of the Community
United States
591 Posts |
Thanks for your thoughts. I called the US Mint customer service again today. They claim that a manager/supervisor will be calling me - so far none of the customer service staff have any clue about this. The governing legislation is very direct on how the sale price is to be determined. I'll keep you posted if I get some resolution on this.
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Pillar of the Community
United States
591 Posts |
Thought I'd update everyone on my dialogue with a US Mint manager/supervisor tonight. The following was their answer to my question, I transcribed it during the phone conversation as I was a bit bemused to say the least. I read it back to the gentleman and he agreed this is indeed his best answer to my question. "The overhead for production of any one line is incorporated into the whole of the production of the US Mint overhead cost of production for the entire numismatic collection. The overhead costs tend not to be separated out into individual line items, as the individual line items cannot be separated out and maintain their proportionality across all products."  Suffice it to say, I am not satisfied with this overly convoluted and vague answer, so I've submitted a FOIA request. I've been a bit fed up with US Mint pricing for a while now and looking into the legislation a bit, things are just not adding up. I see no reason to pay some $40 more for gold coin "overhead" than for silver coin "overhead". I'll let you know if I get something a bit more forthcoming via FOIA. Commems: Looking over your thoughts again, seems like a similar answer, though as far as I can tell the governing legislation is very explicit in how pricing is to be determined, and it says nothing about the overall overhead of the Mint's products being proportionally applied based on individual product pricing, etc. I wouldn't be "complaining" if it weren't so explicitly stated in the governing legislation how pricing is to be determined for commemorative coins. Edited by one_fine_dime
04/17/2015 12:02 am
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CCF Master Historian of USA Commemoratives
United States
12256 Posts |
Just a few thoughts from my side of the table.
While it's true that the authorizing legislation does specify the components that must go into the cost of the coins, it does not specify how expenses such as overhead are to be calculated. That calculation is left to the Treasury Department/US Mint. Trying to calculate this value for individual coins would be impractical and inefficient. The Mint is following a very common business practice here (i.e., proportional assignment) - I don't see an issue with this, nor do I find their response to you "overly convoluted and vague." Of course, that's just my opinion.
Regarding US Mint pricing, I would only say that you should compare its pricing to that of other world mints. You will find that, overall, its pricing is far more reasonable in comparison.
I'm not sure what you goal is here, but I do not believe the Mint is doing anything wrong nor do I believe that it needs to be changed. From a business perspective, I find their approach to be fair and reasonable.
Collecting history one coin or medal at a time! (c) commems. All rights reserved.
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Pillar of the Community
United States
591 Posts |
commems - those are really helpful comments. thanks for the additional insight. I guess my feeling is that since it is very explicitly stated that the cost of these coins is to be based in part on (3) "the cost of designing and issuing the coins" that the overhead costs would be directly associated with these coins, and not some proportionality based on all overhead for all numismatic products. So if it were not so explicitly stated in the authorizing legislation how the Sale Price is to be determined, then sure, standard business practices of proportional assignment of overhead costs might seem reasonable. Maybe I'm splitting hairs, but the cost of overhead for producing a single coin should be the same no matter what that coin is made out of. The Mint is allocating overhead costs not per coin, but proportionally per the overall cost of each "product" (which clearly in this case is much higher since gold is at a higher value that silver). Which is totally odd, since the authorizing leg says those overhead costs for producing the coins actually go into determining the sale price. So it is like a chicken or the egg conundrum.  |
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Pillar of the Community
United States
1476 Posts |
Maybe I don't get what your saying but shouldn't the cost to prepare the planchet's make a difference when considering the cost between gold and silver?
Aren't different process's/chemicals, ect, needed for different metals?
If so then that 'might' be part of the difference?
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New Member
17 Posts |
Top Of The Morninn Coin World ... Supply & Demand ? could be it's highly based on how many coins of each kind are minted ... the more made of any wun kind would lower the 'overhead' for each coin just a newbe's way of thinkin? Or maybe just working around sheet metal and machine shops I know that makes ALOT of difference, if your only making 1 the overhead is scarrie hi
VVnME .. TOTM |
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Replies: 10 / Views: 2,498 |
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Posted 04/13/2015 2:21 pm
