Daily Kennebec journal., 1916-09-30


plain why and how Studebak
o0% are assemblers and only 10% manufac-
turers in the true sense of the term. This
means that consumers are paying 23% premium
to o0% of the automobile concerns in the coun-
try. over and above what they could buy the
same cars for. and in fact. much better cars,
from the large manufacturers.
Quantity Production of Automobiles
Vague statements are frequently made con-
corning the effect of quantity production in re-
ducing manufacturing costs. To illustrate this
truth to uniformed persons, it is necessary to
state the elements that enter into costs and
selling prices of automobiles. Many people
will be a.tonished at the number Of these ele-
ments. Primarily. the basic cost of an auto
mobile is:
,(D The raw material contained in it.
(2) The wages of the workmen who fashion
the material into finished car. The sum of
these two items is the prime cost and the actual
car value the customer receives. All costs and
expenses beyond these are of little, if any, value
to him.
(3) Factory overhead expenses should be
included providing the manufacturing methods
are simple. direct and economical.
Factory overhead expenses include sup
plies, supervision and factory organization ex-
penses which, according to the intelligence of
the personnel. determine whether the output
of the manufacturer is large or small, whether
the proper material is purchased and at tho
right prices, whether the design Of the car is
correct and the manufacturing methods simple
and effective. Hence we may say that factory
overhead expenses are legitimate part of the
actual car value received by the customer, and
if we admit this, these three items, representing
manufacturing cost, are all the actual car value
the customer receives. In making up the sell
ing price. however, other items are added, as
follows:
(4) Administrative, advertising and sell
ing and general expenses.
(5) Discount allowed automobile dealers
who sell the customer and give him service
afterwards.
(6) Manufacturer or assembler's profit.
Quantity Production Distributes Expense
The total of these six items comprises tho
selling price. 1t may be astonishing, but it is
true that every one of these six items must and
does vary with production. Every small pro-
ducer. whether he is q manufacturer or an as.
sembler, necessarily suffers an increase in every
one of these six items and must therefore
charge more for his car than the large producer.
Illustrating this, we will take the cars of
manufacturer (A) producing $4,000 cars per
annuna. and either a small manufacturer or the
usual assembler (B) producing 10000 cars.
Commencing with item ~ raw material. it
should be obvious that (A) can obtain much
lower prices than (B) for the same material,
because his buying power and purchases are
seven and half times greater.
In item (2), labor it is obvious that (A) can
employ skilled mechanics in specialized single
operations to greater extent than (B), and
consequently obtain better work and more
work from the same men.
In item (3), factory overhead expenses, it
is obvious that (A), owning the highest priced,
most modern labor-saving machinery, can elm
mate excessive labor and supervisors; that ex-
penscs of non-productive departments such as
experimental. engineering. laboratory. pur-
} in 1914 to $4,000 in 1915 and from $4,000 II
ce Of the Six tUas $l5z5; in 1915, $l385 t.
zr t0as better than the preceding year. These
le only BY the increase in production.
ced and sold more seuen-passenger SKIES ana
znufacturer in the .0orld for like period, thu.
nufacturer of fine cars