Markup is decidedly NOT 100% over parts cost. The manuracturer generally sets the retail price at about 4-5x the manufacturing cost. A dealer generally gets a 40 point discount over retail so they can make a profit. This is not just in the Audiophile industry, it is pretty much true in manufacturing in general.

So a component with $4000 in parts and manufacturing costs (excluding start up and research and test model costs) would result in a retail price of somewhere in the $20,000 range. The manufacturer sells to the dealer at $12,000, making an $8000 profit to cover those other corporate expenses, like rent and salaries and machining and those other initial expenses. The dealer will likely offer a $10-15% discount to attract buyers. All in all, for a component costing that much money the manufacturer will hope to sell maybe 20-30 per year. That's only about $200,000 in "profit" from the sale, most of which might go into a better lathe or computerized milling machine for the next product development phase.

It really sounds more like a labor of love to me than a real profit generating operation. Of course, big manufacturers like Sony and such have far lower costs than smaller boutique manufacturers. The reason their prices are so high in many cases is because they can be. It's a reputation and pride thing, and I agree, that is out of control.

But you will always pay multiples of a "reasonable" price for custom made boutique items of any type. Audiophile components are no different.