Practical application of cost work to management
Originally presented at the Fall Convention of the Cost Association of the Paper Industry in New York, on September 27, 1920
Abstract
The phase of cost and accounting work with which this discussion will deal is the contribution which it can be expected to make to the solution of sales problems, particularly to the method by which selling prices may be determined upon a basis of cost. It is not contended that an automatic system for the determination of selling prices has been or can be devised. Supply and demand are and will remain dominant factors. However, the price which must be obtained for our product if under average conditions fair profits are to be earned is the resultant of certain determinable factors, and these factors are susceptible to systematic analysis. After these factors have been determined and analyzed they can in turn be applied to the systematic determination of the selling price of each and every individual item manufactured, be those items one or one thousand, and determined in such a way as to make each sale contribute its fair share, no more and no less, to the desired profit. From prices so determined such deviation may be made as the exigencies of the market demand or permit, and with prior knowledge of what the consequences will be.