Bob Kadis, vice president at Harmony Printing has talked about industry's struggle with economic meltdown that are resulting in reduced sales with an immediate reduction invariable costs, as direct labor. He also raised questions regarding market downturn with increased internal cost rates to reflect the absorption of overheads by fewer/smaller jobs, even when the market is soft. The cost rates reflect the variable costs of doing business and a portion of your fixed costs, the latter being allocated according to a burden rate usually applied to chargeable direct labor hours. He suggest that the constant baseline can monitor pricing more effectively with the lack of volume. The sales commission plan based on profitability or value added, changing costs rates can mean having to renegotiate commission contracts. The printers pay commission based on sales volume can create jobs with a positive margin that do not exceed the commission.
