Labor and material costs are also directly proportionate to sales. These are things that go directly into the making of the product or into doing the service. a. Labor cost is the actual direct labor used in the making of product or doing the service. The cost would also include all the fringe benefits like social security, payroll taxes, vacation pay, holidays, sick pay days, etc. b. Material costs are all the materials used in the making of product or in doing the service. In the lawn mower service as an example it would be the gasoline used in the mower and any other materials used directly in that service. For producing a product it would be all the materials used in the product that is sent to the customer including all the packaging materials.
Succession Planning _ Unless you plan to run your business for your entire life, you will need a plan of succession. If you are the only person who can run and operate your company, it is doomed to fail when you can no longer run it. Create a plan that will spell out what steps will be taken to either sell your company or hand it over to another manager. Develop a system that allows your business to be run without you. An operations manual that details the key components of running your company is the first step in succession planning. Consult an attorney about the legal aspects of either selling or transferring ownership of your company.