Examples of Sell (Manufacturing Company) Costs

Example 1:

Over the years, USG has purchased some of its distributor customers. The decision to integrate was driven by a desire to have a guaranteed market for USG gypsum in down markets, to insulate the Company from the dramatic swings in utilization rates, which plague the industry, and to produce more profit for the Company in a tight market. (
Year 1995-SIC 3270)

Explanation: USG reduced its Sell Costs by purchasing some of its larger customers.

Example 2:

Sales at Heinz are down nearly 1%. Its advertising declined over 40% from 1990, to an estimated $78.5 million. Heinz is putting an extra $100 million into trade spending, the fees and discounts it gives to retailers. (
Year 1992-SIC 2000)

Explanation: Heinz spending on advertising and trade expenses are part of its Sell Costs. The Company is changing its approach to the management of these costs by emphasizing trade spending over advertising.

Example 3:

Southdown's customer portfolio is stronger but smaller than Holnam's. Southdown does not have the luxury of spreading many bad accounts over a large customer base like Holnam. Instead, Southdown selects the customers with the best credit, reducing allowances for losses. In 1990, Southdown's allowance for doubtful accounts was 3.4% versus Holnam's 5.8%. (
Year 1991-SIC 3241)

Explanation: Expenses related to the creation of allowances for doubtful accounts are part of the Sell Costs of both Southdown and Holnam in the cement industry. These two companies use different approaches to manage these costs.

Example 4:

Margins on retail water sales are about the same as on other beverages – less than 5%. But home and office delivery, which accounts for more than 80% of the water business, allows sellers to tack on $15 to $30 in monthly charges for dispensing machines. (
Year 1986-SIC 2086)

Explanation: The home and office delivery service entails additional Sell Costs of $15 to $30 over the cost of selling through retail outlets.

Example 5:

Both Shaw and Mohawk have a national system of distribution which allows them to plan inventory levels adequate to ship product to every market within 24 hours. This service level is unrivaled by other competitors. Shaw's superior sales force and customer response system far exceed the quality of those offered by its rivals. (
Year 1996-SIC 2273)

Explanation: Shaw's extra spending on its sales force and customer response system are part of its Sell Costs.