From the Rolls-Royce experimental archive: a quarter of a million communications from Rolls-Royce, 1906 to 1960's. Documents from the Sir Henry Royce Memorial Foundation (SHRMF).
The calculation of costs, general expenses, and profit margins according to legal requirements.
| Identifier | ExFiles\Box 19\4\ Scan256 | |
| Date | 9th September 1930 guessed | |
| -4- material used as part of the "material" cost, and the labour as part of the labour cost. After the costs of material and fabrication have been ascertained, the law requires an addition for general expenses. This must not be less than 10% of the sum of the cost of materials and fabrication. If it be more, the actual figure must be used; if it be less, then 10% of the sum of the cost of material and fabrication is added. In arriving at the percentage to be added for general expenses there is sometimes considerable difficulty. To use your own goods as an example, it would probably be quite simple to arrive at the percentage of general expenses in the manufacture of the completed car, for you would merely have to add together the cost of your material and fabrication and to that the cost of administration and other overhead expenses of the factory. The percentage could thus be easily arrived at. In your case, however, it is proposed to import separate parts, and as these would not be sold generally by you it would be unfair to consider as general expenses any of the selling expenses and probably a large part of the administration expenses. Where you had a separate department for making the parts, as I presume might be the case in producing of axles, for example, it seems to me it would be fair to add to the cost of labour and fabrication only the expenses of the axle department with perhaps a proportionate share of the factory administration and other overhead which would apply generally to the whole factory. This is a detail which will have to be taken up with the customs officials after you have arrived at what you consider to be the fair figures. Having added up the cost of material, labour and other items of fabrication and to that a percentage for general expenses, there must now be added a profit. Under the law, this profit may not be less than 8% of the total sum of the material, labour, fabrication and general expenses. Referring to the law, we see that this profit must be "equal to the profit which ordinarily is added, in the case of merchandise of the same general character as the particular merchandise under consideration, by manufacturers or producers in the country of manufacture or production who are engaged in the production or manufacture of merchandise of this same class or kind." I need not point out the difficulty in arriving at this | ||