ABSTRACT
Prices must be fixed at such a point that they shall at least cover materials, or goods; labor, or service; and expense burden, or what are commonly called “overhead charges.” Obviously, if the last of these is not quite fully covered, the continuance of production or service is not economically advisable (unless, of course, the work serves other purposes than those which are immediately connected with the initial enterprise). Efficient management always attempts to eliminate as much as possible of excess consumption of material, excess expenditure of labor—both mental and muscular,—and excess investment in machinery, in other facilities, and in supplies. On the announcement of the figure of profits under an agreement which makes no provision for interest, the first mental act of anyone interested in the business is to see what relation those profits bear to the capital—so as to see what are the excess profits over a reasonable return on the investment.
