[D8939ABG], Letter from Edison Lamp Co to Thomas Alva Edison, April 16th, 1889

Item

Abstract

Harrison, N.J., April 16th, 1889####Thoams A. Edison, Esq.,####Orange, N.J.####Dear Sir:--####Enclosed you will find the cost sheet for 1888.####Yours truly,####Edison Lamp Co.####By J. Melick####[Enclosure]:####Memorandum Regarding selling Price of Lamps####In the year 1888 the Lamp Company sold 1,206,695 lamps####The cost of each lamp per the Cost Sheet which is made up distributing all items of expense to each part of the manufacture, was-------$0.2864####The cost of each lamp found by dividing the gross cost of manufacturing lamps in the year 1888 by the number of lamps produced, makes the cost of each-----$0.2838####The average of these two figures makes the cost of the lamp during the year 1888-----$0.28 1/2####In the United states during the year 1888 there were sold were sold------1,006,578 lamps####These lamps brought-----$0.42####This makes a profit per lamp sold in the United States of-----$0.14 1/2####The Lamp Company sold to the Illuminating Companies in the United States in the year 1888---602,919 lamps####The Lamp Company sold on account of the Light co. in the year 1888------403,659 lamps####The Light Company received as royalty for lamps during the year 1888-------$83,500.####If the Light Company had received full royalty upon this, they would have receied-----$165,500.19####The increase from lamp renewals does not increase as the natural increase is more than met by the inroads of our competitors, who can make a profit of .35 cents by selling to our customers. At the present rate that the Edison Company is losing customers the Edison Light Company's income will diminish one half inside of two years. This in its turn will raise the cost of the lamp in the factory of the Edison Lamp Company two or three cents per lamp, if the sales to the Illuminating Companies do not increase to make up the deficiency.####Now let us see if we cannot devise a scheme that will not only ruin the lamp renewal business of our competitors, but give to the Edison Company's business commercially an increase, so that more money will be made than now by the Edison Light Co, and Edison Lamp Co. together. From estimates made by Mr. Steringer the total lamp output of the competitors of the Edison Company is-----11,000 daily####Last year the Edison Lamp Company made 4,0000 daily####1.####[Enclosure]####Suppose the Edison Company sell all lamps at 40 cents. If this was the case the Edison Light Company and the Edison Lamp Company combined would lose just the amount the Edison Light company now make, under the conditinos that there was no increase in the sales of lamps####Now I can devise a change in the method of making lamps that will savev just 5 1/2 cents per lamp, this reducing costing price to------$0.25####The 5 1/2 cents for lamps upon the sales of 1888 makes a saving of -----$66,368.11####This reduces the loss of the Edison Light Company and the Edison Lamp Company, at selling lamps at 40 cents each to-----$17,132.####The lowest price that competitors of the E Edison Company can make lamps, ship and sell same for is::::::-----------$0.50####This being so, and as the Edison ocmpany can offer better lamps for 40 cents,, it is reasonable to assume that we shall get a large fraction of their trade. Assuming this to be less than one fifth of their out put or 2000 lamps a day that is gained by the Edison Company, the nature of the lamp business is such that the general expense per lamp largely diminishes as the output increases.####I estimate that an increase of 2000 lamps a day or 600,000 lamps a year will reduce the cost of the lamp 3 cents, that is, from 23 cents to 20 cents.####That is the three cents saved upon the original output upon the 1,206,613 lamps is------$36,200####This changes the loss of $17,132. to a gain of $19,067.####Now the profit upon 2000 extra lamps a day or 600,000 costing 20 cents each and selling at 40 cents is -----$120,000.####Adding to this the gain made upon the original output $19,067, this would make a total gain on the output as------1,866,613 lamps####of---------$139,667.####That is if the combined Companies are $139,067 better off than they were in 1888, and the uniersal price throughout the United states is 40 cents which is 10 cents lower that the opposition companies now make lamps for.####My improvvement mentioned by which 5 1/2 cents a lamp is saved will make the difference on the estimated output at selling price of 40 cents of 1,806,693 lamps of-------$99,367--####Included in this improvement is $139,067., thereofre, if there is no improvement in the cost of lamps due to the methods of manufacturing lamps, can be sold at an average price of 40 cents each and the business be more perfectly controlled than to day and still a profit be made of-----$39,609.####I propose that the Edison Company first reduce the price of Isolated renewals to 60 cents to the customers of the Edison companies. This to be a temporary expedient to prevent the customers of the Edison Company leaving the Edison Company too rapidly. Then, try to get the renewals from the opposition ompanies at 40 ents, or what would perhaps be betterm offer our lamps at 60 cents give guarantee and agree in ase the customer will agree to take all lamps from us for two years to givve hima rebate that will bring the price to 40 cents. To get customer from other companies we should givve our sockets at cost or make lamps for competitors sockets.####supposing lamps were sold at 35 cents each, the loss of 5 cents on 1.806,693 lamps will amount to-----$90,334.####This taken from the gain of $139,067. will leave still a gain of $48,733/####If this reduction of price would enable us to take 1000 lamps more faily or 300,000 lamps a year, this would add to the profits mentioned above an additional profit of $45,000. making a total profit, while selling price of lamps was 35 cents each, of----$93,733.####{Enclosure]: Summary, 85 cents and 42 cents selling price.####year 1888, Profit Lamp Co. $138,523.07####Light Company 83,500.00####Total /$222,023.07#### Estimated 40 cents selling price all round. Sales 1,800,000, Profit per lamp of 20 cents $360,000.####Edison Light Co. Royalty 100,000./#####Lamp Co. will net 260,000.####Gain 1888 $138,523./####Gain to Lamp Co. Oer 1888, 121,477####At 35 cents selling price all round sales 2,500,00 or equal to present capacity, Lamp Co. adding only to rooms for socketing and packing Profit 16 cents per lamp $400,000.####100,000./####$300,000.####138,523/####Gain to Lamp Company, over 1888 $161,477.#### Year 1890 at 32 1/2 cents selling price all round####Sales 3,000,000####Profit 32 1/2 less 18 14 1/2 $435,000.####100,000./####$335,000.####138,523./####Gain to Lamp Co. over 1888 $196,477.####[name mentions: Edison Lamp Co., Edison Light Co., Thos Edison, J. Melick]

Date

1889-04-16

Decade

1880-1889

Type

Identifier

D8939ABG

Folder Set

D8939

Title

[D8939ABG], Letter from Edison Lamp Co to Thomas Alva Edison, April 16th, 1889

Microfilm ID

126:511

Publisher

Thomas A. Edison Papers, School of Arts and Sciences, Rutgers University