Masonry Magazine September 1964 Page. 15
Maximizing Profit
(continued from page 12)
Opel models impressed them. Opel's pre-tax profits were the highest in Europe, based on investment. The other American companies were also very high. It was also agreed that there was no superiority in the cars themselves, but these additional profits and production were due to rigorous cost cutting. I bring this out because we envision the automobile market as one requiring superior styling, advanced engineering, industrial know-how, large amounts of capital, and spectacular advertising campaigns. When it gets right down to the competition between American and foreign automobile manufacturers, the principal difference between them is in their ability to set up cost accounts which, in turn, enable them to be more effective in their cost cutting. Most people, when they hear the words "cost control" or "cutting cost" turn a deaf ear, since this normally is a very unspectacular area, but one in which you could increase profits substantially. You would probably not be able to refine your cost accounting system to the same degree that can be done by a manufacturer. You have more unknowns than a manufacturer, weather probably being the greatest. But I believe you would find that over the years the amount of additional expense due to weather would average out, so that these costs would be predictable, with very slight variances. Many of you are using rules of thumb, while others have developed and are still improving on a cost system, one of your best tools to maximize profits. With a smaller and smaller margin of profit, your very survival hinges on your having an accurate record of costs and using them wisely.
First, in order to control costs we have to know what they are. These costs should then be divided between direct costs such as material and labor, indirect costs (or overhead), such as labor which cannot be assigned to any particular job, office costs, taxes and insurance. Now with accurate past costs, we can adjust them by known changes and predict with a surprising degree of accuracy what our future costs will be at a given volume. These projected costs can be used in bidding, as well as in controlling the costs on jobs which you have been awarded. How can you determine if new methods or equipment are feasible if you have no accurate cost by which to compare them?
You will not at this point we have two costs, one directly attributable to the job and the other indirectly connected with it. Which costs do you use in bidding and which to control costs? Let's take the latter first, since it is obvious you can only hold the foreman responsible for the direct costs of a job the indirect costs must be controlled by you. In bidding you can (continued on page 16)
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MASONRY September, 1964
15