Music Trade Review
Issue: 1907 Vol. 44 N. 1 - Page 10
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10
THE MUSIC TRADE REVIEW
ACCORDING TO SALES—OR PROFITS?
The Apportioning of General Expenses Among
Departments Always a Live Question to
Piano Merchants as Well as the Thoroughly
Up-to-date Business Men.
The apportioning of general expenses among
departments is a question that always comes up
for consideration and discussion about this time
of the year. The method which is perhaps most
generally employed, and the one used in some
of the leading stores of the country, is to pro-rate
all general expenses, with the possible exception
of rent, advertising and fire insurance according
to sales. Serious objections are made to this
plan by department heads. And not without rea-
son. As is well known, in almost every depart-
ment, some goods are sold at or below cost, and
it stands to reason that when general expenses
are apportioned according to sales the more
the department sells the more it has to pay, de-
spite the fact that if a department's volume of
business is unduly swelled by sales effected a t
a small profit it can ill afford the additional bur-
den thus thrust upon it. To put it more clearly
—just as the sales of a department forge ahead
of those of other departments so does that de-
partment's share of the store's general expenses
increase, and this independently of whether
the gain in sales represents increased profits or
not. It may be urged that the store management
does not want its departments to sell at a small
profit any more goods than they can possibly
help, but it must be remembered that if the cus-
tomers call for the goods the department must
supply the demand.
Some merchants may ask: "Since this is true
of all departments, doesn't it even itself up in
the long run?" It by no means follows, how-
ever, that the proportion of goods sold at or be-
low cost is alike in all departments, seeing that
the sales of some departments may involve a far
larger percentage of "leaders" than do those of
others.
Some merchants may say: "Each department
head ought to be able to overcome the small per-
centage added by him on some goods by increas-
ing the mark-up on others, thus effecting the
proper average." The fact remains, however,
that different departments in a house show alto-
gether different ratios of average gross profit.
Pro-rating general expenses solely according to
sales ignores these facts; whereas the method of
pro-rating • general expenses according to gross
profits not only recognizes it, but in a simple
way protects those departments whose gross
profit was smaller than that of other depart-
ments.
Another point which, is practically ignored
when general expenses are pro-rated on the basis
of sales is the question of the value of the serv-
ices rendered. Take, by way of example, the
case of a property owner. If such a one is about
to rent a store to a business which he knows
will render a good, round profit, he will in all
likelihood demand more rent from the prospec-
tive tenant than if the business is known to be
a far less profitable one. In the same way, if the
store divides general expenses according to gross
profits it practically says to the department
head: "We are going to charge you for these
services just what they were worth to you, and
the more your department earns in the way of
gross profits the greater will be the assumed
value of the services rendered to it by the store."
To sum up: If it could be clearly demonstrated
that every time a department increased its sales
it increased the quota of service derived from the
store—in the way of general expense—then i t
would be just to pro-rate this general expense
according to sales; but since it can by no means
be generally proven that increased sales in a de-
partment are necessarily followed by increased
general expenses of the character enumerated by
us on our store accounting page last week, it is
obviously unjust to use the increase in sales as a
basis for increasing the charge for such expenses.
On the other hand, as the Dry Goods Economist
properly says, if no fixed standard can be found
for determining precisely how much service was
rendered to each department, and if no fixed
value can be set upon the
perfectly fair to assume
worth to each department
it helped that department
said service, is it not
that the service was
precisely as much as
to earn?
SHERMAN CLAY & CO. IN SPOKANE.
(Special to The Review.)
Spokane, Wash., Dec. 24, 1906.
Sherman Clay & Co. have opened their new
branch in this city, thereby completing their
chain of music stores on the Pacific Coast. The
Spokane store is at 810 Sprague avenue, an ideal
business location, and is most attractive in ap-
pearance both as regards interior and exterior
fittings and makes a welcome addition to the
city's handsome stores.
The company have inaugurated an extensive
advertising campaign in the interests of their lat-
est branch and have installed a line of high grade
instruments that should insure the success of the
project.
THOMAS & SONS ANNUAL CELEBRATION.
Will T. Thomas & Sons, Sharon, Pa., held their
fifteenth annual opening recently and scored an
immense success. An orchestra furnished music
both afternoon and evening and souvenirs were
distributed. This house expects the year 1907 to
be a record breaker and they have started in a
fair way to gain that result.
Their line includes the Packard as leader, the
Behr Bros., Poole, Briggs, Keller Bros., Schiller
and Van Dyke pianos, as well as the Farrand
Co.'s line. They also handle the Victor talking
machine and Edison phonograph.
COL.
ESTEY IS A DELEGATE.
Among the delegates to the foreign commerce
convention to be held in Washington on January
14, is Col. J. Gray Estey, of the Estey Organ Co..
who was appointed to represent Vermont by Gov.
Proctor.
WARNING TO INFRINGERS!
This Trade Mark is cast in the plate and also appears upon the fall board
of all genuine SCHUMANN PIANOS, and all infringers will be prosecuted.
Beware of imitations such as SCHUMANN & COMPANY, SCHUMANN & SON,
and also SHUMAN, as all stencil shops, dealers and users of pianos bearing a
name in imitation of the name SCHUMANN, with the intention of deceiving the
public, will be prosecuted to the fullest extent of the law.
FACTORY AND GENERAL OFFICES,
ROCKFORD, ILLINOIS.
SCHUMANN PIANO CO.,
209 State St., CHICAGO, ILLINOIS.
10
THE MUSIC TRADE REVIEW
ACCORDING TO SALES—OR PROFITS?
The Apportioning of General Expenses Among
Departments Always a Live Question to
Piano Merchants as Well as the Thoroughly
Up-to-date Business Men.
The apportioning of general expenses among
departments is a question that always comes up
for consideration and discussion about this time
of the year. The method which is perhaps most
generally employed, and the one used in some
of the leading stores of the country, is to pro-rate
all general expenses, with the possible exception
of rent, advertising and fire insurance according
to sales. Serious objections are made to this
plan by department heads. And not without rea-
son. As is well known, in almost every depart-
ment, some goods are sold at or below cost, and
it stands to reason that when general expenses
are apportioned according to sales the more
the department sells the more it has to pay, de-
spite the fact that if a department's volume of
business is unduly swelled by sales effected a t
a small profit it can ill afford the additional bur-
den thus thrust upon it. To put it more clearly
—just as the sales of a department forge ahead
of those of other departments so does that de-
partment's share of the store's general expenses
increase, and this independently of whether
the gain in sales represents increased profits or
not. It may be urged that the store management
does not want its departments to sell at a small
profit any more goods than they can possibly
help, but it must be remembered that if the cus-
tomers call for the goods the department must
supply the demand.
Some merchants may ask: "Since this is true
of all departments, doesn't it even itself up in
the long run?" It by no means follows, how-
ever, that the proportion of goods sold at or be-
low cost is alike in all departments, seeing that
the sales of some departments may involve a far
larger percentage of "leaders" than do those of
others.
Some merchants may say: "Each department
head ought to be able to overcome the small per-
centage added by him on some goods by increas-
ing the mark-up on others, thus effecting the
proper average." The fact remains, however,
that different departments in a house show alto-
gether different ratios of average gross profit.
Pro-rating general expenses solely according to
sales ignores these facts; whereas the method of
pro-rating • general expenses according to gross
profits not only recognizes it, but in a simple
way protects those departments whose gross
profit was smaller than that of other depart-
ments.
Another point which, is practically ignored
when general expenses are pro-rated on the basis
of sales is the question of the value of the serv-
ices rendered. Take, by way of example, the
case of a property owner. If such a one is about
to rent a store to a business which he knows
will render a good, round profit, he will in all
likelihood demand more rent from the prospec-
tive tenant than if the business is known to be
a far less profitable one. In the same way, if the
store divides general expenses according to gross
profits it practically says to the department
head: "We are going to charge you for these
services just what they were worth to you, and
the more your department earns in the way of
gross profits the greater will be the assumed
value of the services rendered to it by the store."
To sum up: If it could be clearly demonstrated
that every time a department increased its sales
it increased the quota of service derived from the
store—in the way of general expense—then i t
would be just to pro-rate this general expense
according to sales; but since it can by no means
be generally proven that increased sales in a de-
partment are necessarily followed by increased
general expenses of the character enumerated by
us on our store accounting page last week, it is
obviously unjust to use the increase in sales as a
basis for increasing the charge for such expenses.
On the other hand, as the Dry Goods Economist
properly says, if no fixed standard can be found
for determining precisely how much service was
rendered to each department, and if no fixed
value can be set upon the
perfectly fair to assume
worth to each department
it helped that department
said service, is it not
that the service was
precisely as much as
to earn?
SHERMAN CLAY & CO. IN SPOKANE.
(Special to The Review.)
Spokane, Wash., Dec. 24, 1906.
Sherman Clay & Co. have opened their new
branch in this city, thereby completing their
chain of music stores on the Pacific Coast. The
Spokane store is at 810 Sprague avenue, an ideal
business location, and is most attractive in ap-
pearance both as regards interior and exterior
fittings and makes a welcome addition to the
city's handsome stores.
The company have inaugurated an extensive
advertising campaign in the interests of their lat-
est branch and have installed a line of high grade
instruments that should insure the success of the
project.
THOMAS & SONS ANNUAL CELEBRATION.
Will T. Thomas & Sons, Sharon, Pa., held their
fifteenth annual opening recently and scored an
immense success. An orchestra furnished music
both afternoon and evening and souvenirs were
distributed. This house expects the year 1907 to
be a record breaker and they have started in a
fair way to gain that result.
Their line includes the Packard as leader, the
Behr Bros., Poole, Briggs, Keller Bros., Schiller
and Van Dyke pianos, as well as the Farrand
Co.'s line. They also handle the Victor talking
machine and Edison phonograph.
COL.
ESTEY IS A DELEGATE.
Among the delegates to the foreign commerce
convention to be held in Washington on January
14, is Col. J. Gray Estey, of the Estey Organ Co..
who was appointed to represent Vermont by Gov.
Proctor.
WARNING TO INFRINGERS!
This Trade Mark is cast in the plate and also appears upon the fall board
of all genuine SCHUMANN PIANOS, and all infringers will be prosecuted.
Beware of imitations such as SCHUMANN & COMPANY, SCHUMANN & SON,
and also SHUMAN, as all stencil shops, dealers and users of pianos bearing a
name in imitation of the name SCHUMANN, with the intention of deceiving the
public, will be prosecuted to the fullest extent of the law.
FACTORY AND GENERAL OFFICES,
ROCKFORD, ILLINOIS.
SCHUMANN PIANO CO.,
209 State St., CHICAGO, ILLINOIS.
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