In some instances, the price a client is willing to pay may seem too low to make it worthwhile.  On paper it seems to make sense: if it costs more to produce the job and will be received, it's not worth it..or is it?

If we consider the proper meaning of "cost" we will have to pay for the paper, any buy-outs, sales commission, and possibly some factory wages if the order is accepted.  The cost will not usually include buying another press, adding to the front office, or renting a new building.  So for the typical commercial printer selling at "average" prices, the actual dollars expended to produce a job will be about 60 percent of billed dollars, leaving 40 percent as a contribution to overhead.  The overhead (which includes rent, depreciation, front office, etc.) is paid from these contribution dollars.

Profit occurs in a month when there is more contribution than overhead dollars.  Even a job sold at a 20 percent discount from average prices gets the firm closer to profitability.  In just the same way, contribution dollars are enhanced by picking up the dollars left needlessly on the table.  If the firm's pricing system is focused on traditional BHRs (budgeted hourly rates), which include overhead in the rates, it will be led to reject opportunities to gain contribution and make it harder than necessary to achieve profitability.