CHAPTER VIII
COSTS
YOUR costs are made up of three classes of items: Labor of making; material they are made of; the container they are sold in. The other expenses of the doing of business are the “overhead,” so called.
To arrive at the cost of goods by the box and to know what profit you ought to expect, should be your first endeavor.
Selling is ninety per cent. of any business. To make sales enough to keep your plant going to its full capacity and be able to refuse undesirable business should be your constant aim. Then and only then are you making the greatest profit possible from your investment.
Your labor cost of making any piece of goods is easily figured. If a man, a boy and a girl turn out one hundred boxes in a day, the sum of the wages you pay them divided by one hundred gives the labor cost per box.
The material cost per box is easily found by finding how much raw corn it takes to give you pop-corn for a batch. Figure its cost. The candy and other materials you mix with a batch cost you a certain amount. Divide the sum of these by the number of boxes you get from a batch and add the cost of paper, string and box, then you have the material cost.
“Overhead” contains a large number of items and is the class of costs that is the worst to figure. It contains rent, heat, light, power, shipping, freight, express, cartage, advertising, printing, postage, stationery, insurance, taxes, repairs, depreciation, and all non-productive labor, such as sweeping out shop, bookkeeping, managing, etc. You must take these, figure the total for a week or a month, divide by the number of working days in the week or month, then divide by one hundred, the number of boxes made in a day. Then you have the “overhead” cost per box.
Add together the “overhead,” material and labor cost per box and you have the total cost per box if you are running your shop to capacity on that piece. Remember, in figuring your selling price and profit that making several kinds in a day increases the cost per box because of the time and labor lost in getting ready, and remember that some dull days will come when your “overhead” continues on just the same, but you have less boxes of goods to carry it.
Before you turn a wheel you should estimate your “overhead” expenses, and then watch them close to see that you do not increase them.
The manufacturing retailer receives one hundred cents of the consumers’ dollar. The wholesale manufacturer must sell to the retailer at a price at which the retailer can make a profit.