www.signshop.com: How many times have you wondered how your competitor could afford to sell a job at a ridiculously low price?
In many cases, the other guy actually can’t afford it. While these shops may cover their direct material and labor costs, they may not have allocated a reasonable share of the overhead.
2 comments:
I found this article helpful at explaining some of the language behind job costing out plainly and directly and even though there wasn’t in depth discussion of the interplay between various costs and how they all factor into the price for each job they complete, this was a great introduction to this work. What I remain the most curious about though is the percentage of total labor hours that are indirect labor hours and whether or not this is a metric of a ‘successful’ company or if it just reflects certain different stages for the company. Ideally, this percentage should be as low as possible to keep overhead costs low and have as many jobs be completed with as little indirect labor as possible. Yet this idea encourages the minimal amount of organization to get a job done as it was estimated. As such, do companies that purposefully spend a little more on indirect labor than they have to do better? Finally, it is important to also note that what is most important about this indirect labor is its effectiveness at preparing the direct labor to complete its work, but nonetheless examining this percentage proves interesting.
It never really occurred to me what all the calculations that went into job costing and running a business really were. I mean I have definitely thought about it before but it just never really cemented itself in my head what each step was and what they all cost. In class we are always told that everything we do affects others and also depending on what we are doing costs a different amount of money but I would think about that and then brush past it but this was very eye opening to me in seeing what actually went into job costing. I feel like this article is more scenic and shop oriented but it could definitely be applied to all different contexts and just adjusted for that. It is definitely a new perspective that I have gained and will continue to keep in mind for the rest of my career.
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