Rate

This Return Management term measures the dollar cost per unit of building block cost employed to produce products and services. Examples include dollars per hour for people, dollars per unit for purchases, and the required dollar amount of pre-tax profits per dollar of capital invested in the business. (See also Building Block Costs)

Example 1:

It is estimated that labor represents 40%-50% of production costs. Significant rate reductions were made during the period of hostility, and resulted largely from Phelps Dodge's confrontation with its union in 1983. Phelps Dodge became non-union, and it was three years before Phelps Dodge's competitors were able to renegotiate labor contracts. (Year 1983 - SIC 1021)

Example 2:

While top executives at Barrick receive salaries 5-10% below the industry norm, they can qualify for lucrative stock options if the company does well. The program has already made a number of Barrick executives wealthy. Miners at Barrick can earn an extra 10% above their average annual salary of $40K if they meet monthly production quotas. (Year 1993-SIC 1041)

Example 3:

Chocolate is still 90% of Hersey's business. Even a surge in the spot price of cocoa won't hurt Hershey much because it has already locked in low-priced cocoa by buying forward in the futures market. (Year 1990-2000)

Example 4:

Competitors in Texas, Idaho, Mexico and Guatemala, where labor and utility costs can run 50% less than in California, are taking share from the California packing plants. In response the California plants have unilaterally cut wages, shifted production to plants in low cost, non-union plants in the inexpensive parts of the country and world and instituted a two tier wage plan that starts new hires at lower rates than old timers. (Year 1985-SIC 2038)

Example 5:

Japanese make cars at about $8 or $9/hr labor cost advantage over Big 3. (Year 1992-SIC 3711)