Evening star., 1916-10-01

chasing, stores, ETC.. are much less per car than
in the case of (B).
To illustrate machine that costs (A) $25,-
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 $4,000 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 (B) occurs in
the case of purchasing agents, inspectors, fac
tory executives, superintendents, etc.
With an annual $5,OOO,0O0 factory over
head expense for (A), his cost per car would
be $66.67, whereas 50 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-
tisine and general expenses. in the same wav
Supposing the annual expenses of (A) are
$6,000,000. 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 h dealers only. In the case of item
(5), quantity manufacturers (A) allow deal
ers smaller percentages of discount, usually
running from | Sd to 25g according to the size
of the dealer, whereas smaller makers (B) al
low from 20% to 40g discount, because their
dealers sell fewer cars and must therefore re-
celve greater discount per car to make a
profit. The expenses of dealers average about
the same whether they handle quantity pro-
duction car or small production car, and man
ifesty 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
a 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 $22O
on the $l.l00 car (A) against $40 on the
1850 car (B), using 20% in both cases, so
that quantity production saves the buyer $50
on this item.
The Makers Profit
What has been said regarding dealers dis
count apples With equal force to item (6),
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 60g more, because of the
latter makers 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 $1,000, 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 80g of the
cost of an automobile, from parts manufac-
turers, is necessarily taxing buyers about 23g
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
ognized in the automobile industry.