Sales costs

The sales costs are those involved with contacting the customer and convincing him to buy. Included are such items as warehouses throughout the country for quick distribution, sales offices, salaries and expenses, advertising, and technical service departments. 

In 1968 the average selling costs were 10% of the sales dollar. There is, however, a large variance in this percentage. For basic bulk chemicals such as sulfuric acid, caustic, and soda ash the sales costs are less than 5% of the selling price, while for specialty chemicals having a low sales volume the sales costs may exceed 50% of the selling price. 

The sales costs are generally greater for plants not running at capacity than for mature plants. It is easier to keep a customer than it is to attract new business. Assume that the total sales costs remain the same, so the cost per pound increases. 

Sales costs in the base currency are calculated applying the sales cost share rate on sales turnover. 

Secondly, customer-specific variable selling cost shares r sc, V e A" are applied as a percentage to net turnover and comprise customer-specific sales costs like insurances, bank charges or import tariff costs for the customer or the related country. Regional transportation costs c c, / a,k eIsl reflect costs differences between articles and/or customers for transportation within the sales location. Finally, article-specific packaging costs c p°, / a.k e Is 1 in the sales location currency on a currency per ton basis are considered. 

Manufacturing assets used for NITS products are normally allocated between home sales to the NITS and exports pro rata to cost of sales. Costs must be computed on a fully allocated basis, that is, overheads are spread on a consistent basis between home and export products. 

Gross profit margin Net sales - cost of goods sold/sales 25-40%... 

Net revenues (3.3) are calculated by adjusting gross revenues for sales costs incurred in a country. These sales costs include costs for marketing, country management, etc. and are expressed in per cent of the sales price. 

Gross profit margin = (sales — cost of goods sold) -=-total sales... 

The operational costs, sales costs and resultant profitability should be recalculated once the plant is running to its full capacity, and the revenue should be checked against the forecast figure. Maintenance costs should also be carefully checked for future use. 

Variable cost items (Figure 12-6) are materials and parts (where the amount required depends on the units produced). In a plant using large amounts of energy, this is often a variable cost - if you turn down production you need less energy. Persoimel that can be hired at will, such as for maintenance or transport, can be seen as a variable cost. Marketing and sales costs that can be assigned to a product are also variable costs, as is most overhead. 

Benzene. The cost of benzene from petroleum has been estimated by Williams 81), He quotes a sales cost of 24 cents per gallon for benzene produced from a debutan-ized natural gasoline by the Platforming process. 

The roster of new products will be accompanied, of course, by many technical data. Our sales organizations will have to be made up of technically knowledgeable specialists. Their function may well be to act more as agricultural consultants than as salesmen. As a consequence we can anticipate that technical service will be one of our major sales costs in the next decade. Moreover, as our own manpower costs increase, not only in terms of cost per man but also in light of the broadened technical services we shall be called upon to render, we shall have to capitalize upon the most economical communications techniques we can devise. 

As the chemical industry races ahead, it becomes increasingly important to continue the assault on high distribution expenses which are so characteristic of all industrial fields. In view of the fact that each customer call runs from 10 to 20, this area is of paramount importance. The more than one half billion dollars per year, as now expended for sales costs by the chemical industry, represents an enormous goal for the application of more precise sales monitoring. 

New money Existing facilities Working capital Annual sales Cost... 

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