b'AnnualCostSurveyoftheroofingindustryfor1962,conductedunder theauspicesoftheNat ionalRoofingContractorsAssociationa TableIpresentsthenationalaveragesofthevari ousexpenses aspercentagesoftotalsal esoPleasenoticethatthereareonlytwo i t emsintheenti relistthataredirectgDirectLaborandRawMaterialsa Al ltherestareindi rect""=costsorexpensest hatareofnovaluein. themselvesbutwhichmustbeincurredi nordertoaccomplishthedirect functionofbuildingroofsInallproba.bil i tythe"IndirectLabor"item o ismuchunderstatedoNoticealsothatthenetprofithasbeencalculated beforeowners\'salar-iesandincometaxeswerepaido TableIIfollowsthesameformatasTableIbutcoversonlythe statesindicatedinthef ootnoteandclassifiesthefirmsbylevelsof sal esasindicatedoThediff erencesinthefiguresfromoneclassto anotherarequitesignificantandrevealingoThepercentageofrevenue paidoutforwages(DirectLabor)tendstodecreasewiththeincreasein sizeoffirmoOntheotherhand~rawmaterialsincreasewiththesize offirmscoveredoThisisprobablyduetothedifferenceintypesof jobsperformedoThelargerfirmsprobablydolargerjobsandapply proportionatelymorehighcostmaterials,thanthesmallerfirms oHence theincreasedportionofsalesdollarspenttor materialsa Asignificantvariationis revealedintheAdministrativeand Di rectivePersonnelpercentagesoWithregardtothisitemthe$250,000 to$500,000andtheover$1,000$000groupsseemtohaveadefinitead= vantageovertheothertwoclassesoTheDepreciationandRent~Equipment percentagesdecreasewi ththesizeofthefirmoTheTruck-DeliveryExpenseisratherinconsistentandprobablyindicatesavariationinhow theseexpensesareaccountedforbydifferentfirmsoAnextremely significantfigureisthe\'\'Profit"figureofthe$250,000to$500.000 classo(Thefavorablepositionoft;hisclassiscorroboratedbyevery oneofthetablesinthereporto) TableIIIistheauthorgssummaryoftheprevioustabulationaThe directcostsconstitute71008 ~7la26B72083and76al0percent,respectively~forthefourclasssizesoThesemaybeconsideredoperating ratiosoInviewoftheabilityofmanyfirmstochargedeliveryexpense tojob 1theseexpensepercentageswereaddedtotheoperatingratiosto form"revised"operating ratiosoThedifferencebetweentheoperating ratioand100%isthegrossmarginoNoticethe$250,000to$Soo.ooo classhasthelargestmarginofthefourclassesoThisissignificant becausethisrepresentstheamountfromwhichallindirectcostsmustbe paidoItalsoincludesaprofit~i fonehasbeenearnedo Inordertorendersomeofthesepercentagesmoreconcrete,let usassumesaleslevelsforeachofthefourclassesoWecanprobably safelyassumethattheaveragesalesforeachclasswereapproximately $200~000~$375,000~$750,000and$1, 250~000,respectivelyoWemaynow calculateanaverage"profit"foreachclassbymultiplyingthesesales figureswiththe~profit"percentagesfromTableIIoTheserangefrom $9~600forthesmallestaveragefirmto$61~875forthelargestaverage firmo'