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Abstract
Printing company managers seeking profitability may understand the relationship between cost controls and pricing models that yield margins, but they may not be so clear on selecting the best methods for assessing costs and establishing prices. The most prevalent costing tool used in the printing industry is the budgeted hour cost rate (BHR), reports professor Philip K Ruggles of the Graphic Communication Department, California Polytechnic State University. Ruggles says that the typical model for costing a printing job, sometimes called the cost estimating formula, is: (Production time hours x BHR) + material costs + outside purchases = estimated manufacturing cost. The estimated or baseline manufacturing cost is the dollar amount it will take to do the job in the printing company, says the professor. This baseline manufacturing cost is then commonly used as one factor in setting the price for the job. Pricing the job is frequently done by adding a profit markup, which is typically a percentage added to the estimated manufacturing cost. The price is then formally given to the customer as an estimate, proposal, or quotation to do the job.