The What, Why and How
of Hourly Rates

Business enterprise with its associated hourly rates is organized for the purpose of making a profit.

To do this a printing company makes its services, facilities and technical knowledge available to printing buyers. Each customer on each order must pay a portion of these items so that the printer gets back all of his incurred costs. Against these costs and associated risks the printer balances his profits, and the selling prices that should bring in the expected profits. When estimated costs are wrong, anticipated profits may be nothing but a fantasy.

The basic function of a cost/estimating system is to help management achieve the maximum profit possible. It is critical that management knows its costs while events are current, not "after the fact" when the events have become ancient history. A proper cost/estimating system must be able to predict in advance, whithin close limits, the ultimate costs of running an order.

The most important benefit of this predictability is its application for pricing purposes. Although in practice prices are affected by many forces over which an individual printer has little or no control, good cost information is mandatory. A company that has an intimate and accurate knowledge of its costs can base its price estimates on a sound foundation.