Daily Kennebec journal., 1916-09-30

chasing. stores. ETC.. are much less per car than
in the case of (B).
To illustrate machine that costs (A) $751;
600. costs thirty-three and one-third cents on
each automobile he turns out. 1t costs (B) two
dollars and half on each automobile he turns
out.
The same Is true Of salaries; the salary
of SIS 900 engineer employed by (A) adds
only thirty-three and one-third cents to the cost
of the car. whereas if (B) employs man of
equal ability and salary, his cost is $3.50 per
car. The same excess cost for OBJ occurs in
the case of purchasing agents. inspectors. fac
tory executives, superintendents, etc.
With an annual $5.0O0,000 factory over
head expense for (A), his cost per Car would
be $66'67, whereas 100000 overhead for
(B) would be $4,000 per car.
Quantity Production Reduces Costs
Quantity production reduces the cost per car
for item (4). administrative, selling and adver-
tising and general expenses, in the same way.
Supposing the annual expenses of (A) are
$6,OOO,OOO the cost is only $50 per car, which
is much less than the average person imagines
this charge to be.
In the illustration. we have allowed (B)
$50 per car, which on a basis of 10000
cars per annum. makes his expenses $780,
600. which he can get through with if he
maintains no branch Offices but markets his
cars through dealers only. In the case of item
(5). quantity manufacturers (A) allow deal
ers smaller percentages of discount, usually
running from l5% to 25% according to the size
of the dealer, whereas smaller makers (B) al
low from 20I to 40% discount. because their
dealers sell fewer cars and must therefore re-
ceive a greater discount per car to make
profit. The expenses Of dealers average about
the same whether they handle quantity pro-
duction car or q small production car, and man.
ifestly the dealers In the former case. selling
seven and a half times more cars than in the
latter case. can afford and actually do receive
less discount per car. Again. the dealers
discount, at the same percentage, amounts to
more money. as the list price of the car in
creases In the illustration it is shown as $220
on the 100 car (A) against $40 on the
that quantity production saves the buyer $50
on this item.
The Makers Profit
What has been said regarding dealers dis.
count applies with equal force to item (6),
makers profit, which in tho case of quantity
production (A) rarely exceeds $lO0 per car.
but in the case Of small production (B) usually
amounts to at least 60% more, because of the
latter maker smaller volume
The large profits being made by small max
ers. which are matter of public record as
shown by annual reports of these companies,
prove the truth of this statement These
profits often run from $500 to $4OO per car
for cars selling for less than $4,000. whereas
no quantity manufacturer in this country (A)
makes any such profit per car
Any concern which buys its engines, axles,
transmissions. diferentials. steering gears,
bodies and tops. parts comprising S0g Of the
cost of an automobile. from parts manufac-
turers. is necessarily taxing buyers about 23Z
premium because of this fact. This truth ex.
plains the difference in price of from $500 to
$500 in different cars on the market of appar-
emily the same value. and this truth is well rec.
osnized in the automobile industry.
CLOSED CARS
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