8 



N. H. Agri. Experiment Station 



[Bulletin 251 



They have a net loss of $.0628 and $.0941 respectively for each dol- 

 lar of goods sold. These cases are the extremes, and it will be noted 

 that the largest group maintain a more even balance between gross 

 margins and total costs. 



When there is so even a balance between operating a business for 

 a loss or a profit, it is absolutely essential that a clear-cut system of 

 accounting be used which will show on a monthly basis which way 

 the business is headed. It is too late to wait until the end of the 

 year to figure final results. The men who are continually running at 

 a loss cannot stay in the business for long. 



FIXED COSTS 



Fixed costs are often referred to as the "dirti" five, namely, depre- 

 ciation, insurance, rent, taxes and interest. Yearly interest costs are 

 flexible, whereas the other costs continue at approximately the same 

 amount year after year. Large or small stock inventory values and 

 varying amounts in accounts and notes receivable will affect the net 

 worth, which in turn may reduce or increase the interest charge on 

 net worth. For this reason, the men who are on a cash basis would 

 have smaller overhead expense. Also, a convenient and not too large 

 a building located on a railroad siding is an important factor in keep- 

 ing the fixed costs as well as the necessary labor requirements low. 



Table 3 — Fixed Cost and Capital Distribution of 13 Rented and 28 Owned Stores 



*Rent for railroad siding and railroad land. 



The total sales of 13 rented stores was $1,250,748.39, or a fixed cost per dollar of sales 

 of $0.0221. Total sales of 28 owned stores was $3,288,269.86, or a fixed cost per dollar 

 of sales of $0.0282. 



