Friday, October 29, 2010

Corporate Overreach

The pricing of automobile repair is established by coded standards based on units of time. The labor costs based on these units of time are in excess of the actual time required. The system rounds upward the unit of time, usually in 15 minute increments. A 5 minute task will be charged 15 minutes. A 35 minute task will be charged 45 minutes. These charges start with a base labor cost of 60 minutes, due, I suppose, for the work required to start the process. Some call it a ‘hedge factor’ to offset possible losses in the estimate.

Added to these labor costs is the material cost of parts which is fixed at a straight 100% mark-up.

When the repairs are finished and billed, the customer finds at the bottom of the invoice, as a percentage of the subtotal for material and labor, a figure for ‘Shop Costs’, ie, rags, hand cleaner, paper floor mats, etc. This add-on percentage will run from 10% to 25% of the subtotal for material and labor.

I submit that the policy of coded pricing is a form of price control. I further submit that the Shop Cost add-on is passing the cost of normal overhead on to the customer. This is not free market capitalism. It is despotic capitalism and works only for the benefit of the corporate state.

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