ABSTRACT
Having explained the methods employed to secure the proper rate of gross margin, it is now possible to turn to the second stage of budgetary control involving a study of the administrative side, which is concerned with the expenses or “overheads” of the business, and with the resultant nett profit. Here again it is a pity that the term “Overheads” has been taken over from manufacturing accountancy, and has been somewhat misapplied to retailing. Speaking broadly, the factory in turning out a manufactured article changes the aspect of the raw material employed in such a way that the work done and the value created is clear to the simplest intelligence because a physical transformation has been effected. The public, therefore, accepts the costs involved in the transformation, and these ordinarily include the complete running of the factory as well as the actual process of manufacturing. Naturally, therefore, these costs easily overshadow in magnitude the few “Overheads” which remain to be added as being necessary for the sale of the final product in bulk quantities.
