Evening journal., 1916-09-30

chasing, stores, etc. are much less per car than
in the case of OBJ.
To illustrate. machine that costs (A) $zS.-
600. costs thirty-three and one-hird cents on
each automobile he turns out Il costs OBJ two
dollars and half on each automobile he turns
out.
The same is true Of salaries; the salary
of $4,000 engineer employed by (A) adds
only thirty-three and one-third cents to the cost
of the car. whereas if OBJ employs a 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 $5.00000o factory ever
head expense for (A), his cost per car would
be $66.67, whereas $3.000,000 overhead fer
(B) would be $4,000 per car.
Quantity Production Reduces Costs
Quantity production reduces the cost per car
for item 90, administrative, selling and adver.
Using and general expenses, in the same way.
Supposing the annual expenses of (A) are
$4,000 900. 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 OBJ
$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
81, quantity manufacturers (A) allow deal
ers smaller percentages of discount. usually
running from 81 to 25% according to the sire
of the dealer. whereas smaller makers (B) al
low from 20% to 40% discount. because their
dealers sell fewer cars and must therefore re-
eeive greater discount per car to make a
profit. The expenses of dealers average about
the same whether they handle quantity pro-
duction car or a small production car, and man
ifestIy the dealers in the former case, selling
seven and 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
ereases In the illustration it is shown as 500
on the LOO 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 90.
makers profit, which in the case of quantity
production (A) rarely exceeds 500 per car.
but in the case of small production OBJ usually
amounts to at least 60% more. because Of the
latter makers smaller volume.
The large profits being made by small max
ers, which are matter of public record az
shown by annual reports Of these companies.
prove the truth of this statement. Thess
profits often run from $500 to $400 per car
for cars selling for less than $1,000. whereas
no quantity manufacturer in this country (Al
makes any such profit per car.
Any concern which buys its engines. nxles.
transmissions. diferentials. steering gears.
bodies and tops. parts comprising 60% of the
cost of an automobile, from parts manufae-
turers, is necessarily taxing buyers about 23s
premium because of this fact. This truth ex-
plains the difference in price of from $500 to
$500 in different on the market of appar-
emily the same value. and this truth is well rec.
ognized in the automobile industry.