Everything costs too much

"Jason Apple, a food scientist and beef specialist with the University of Arkansas, said older cows -- 36 months or so -- culled/crippled cows and heifers as well as older dairy cows are commonly slaughtered for hamburger."

This includes Angus beef of course...

I like to try to find information on the net from people who at least seem to know what they're talking about...

"Our family buys a half a steer (approx 400 lbs net) each summer when the commodity price for beef is around $70 per 100 lbs live weight. At that price, the average cost for all cuts of meat ends up being $1.80/lb (after trimming and processing costs). That includes 60 lbs of 90% lean ground beef, as well as better cuts of meat such as Filet Mignion and roasts. So I'd say that 90% lean ground beef needs to be selling for less than $1.80/lb to be a good deal."

I guess we have to assume that when McDonald's wants 3.99 for their 'new' 1/3 pound Angus burger that it's 'worth' that... Never mind the simple math that equates to charging 12.00 a pound for Angus hamburger...

For the sake of argument, say McDonald's pays 2.00 a pound for Angus hamburger... That means, in meat cost, they would have less than $1.00 invested in their 'new' Angus 1/3 pound burger. Throw in a bun and a little lettuce and what not and you have their burger. I'd be very surprised if they have much more than $1.00 in total cost in that burger... The one they want 4.00 for.

Of course we all know, because we have been 'told', that meat, bun and condiment prices are not all the costs McDonald's has to deal with... They have a higher minimum wage, government mandates, taxes, payroll, buildings, services, supplies, insurance, and equipment to cover. Just to mention a few of their additional expenses.

Of course the 'idea' is to 'cover' all these costs by making enough 'profit' on the products you sell. Not to pick on McDonald's here, the same applies to all business of course.

You have, on one hand, the 'expenses' of running a business while on the other hand you have the profit potential of the product(s) you sell. When your 'profits' exceed your 'costs' that's a good thing... That's pretty much what capitalism is all about... The offer of goods and services to consumers at a fair and competitive price.

But, to me, this is where things get a little screwy... It appears that maybe 'net profits' are what I'm actually after here...

Example

Here is how you reach net profit on a P&L (Profit & Loss) account:

1. Sales Revenue = Price (of product) X Quantity Sold
2. Gross profit = sales revenue – cost of sales and other direct costs
3. Operating profit = Gross profit – overheads and other indirect costs
4. Pretax Profit (EBT, earnings before taxes) = operating profit – one off items and redundancy payments, staff restructuring – interest payable
5. Net profit= Pre-tax profit – tax
6. Retained earnings = Profit after tax – Dividends

My thesis is that our economic 'problems' are driven directly by the 'cost' of operating a business. NOT the fact that people do not have enough money. But the fact that business 'costs' are way out of whack. Thus causing business to have to 'inflate' their prices, often to ridiculous levels, to be able to turn a decent 'net profit'. If these associated 'costs' could somehow be drastically reduced for business then business would be able to lower prices and offer much better 'value' to consumers.

I just wish I had the time and desire to really research what percentage of these business 'costs' are a direct, or indirect, result of government interference in business... We have federal and state unemployment taxes, workers comp taxes, employers portion of social security and medicare, higher minimum wage law, I'm sure there are more that I have missed. Throw on top of those various state 'licenses'... A business license, liquor, separate Sunday liquor license here, agri license, franchise fees... So MANY taxes and fees! ALL these 'costs', that most of us don't spend much time thinking about, have a dramatic effect on the prices that we pay for goods and services.

And of course business has to deal with many costs not related to government as well... Wild commodity price fluctuations, payroll, rent, utilities, telephone, advertising, accounting, office supplies, supplies, contract labor, repairs and maintenance, insurance, rental equipment, depreciation, bank charges, freight, travel... And on and on...

There seems to be a 'flaw' in the system itself (capitalism) somewhere and I want to find it! We need to figure out what has gone wrong and fix it before it's too late. If it isn't too late already...

A couple of examples...

I pay 1.48 per pound for ground chuck. That makes my meat cost for a 1/3 pound burger 49 cents! I think, with a tiny bit of deflation lately, that a retail 1/3 pound burger can be had for around 3.00 but that's nearly 6 TIMES what I can build the same thing for at home, buns and all! I make a damned good burger too ;)

I personally got so sick and tired of being blatantly ripped off on the purchase of laundry detergent that I decided to make it at home too... I takes just 3 ingredients and my cost equates to about 1.00 per GALLON! Again I think you'll find that average retail for this SOAP is close to 6 TIMES that! And it's very quick and easy to make...

What has been 'bothering' me lately is the huge gap between what we can buy base ingredients for, for assembly at home, and how that compares to the price retailers must charge for that same product to meet their obligations and still have a reasonable 'net profit'. It certainly 'seems' that retailers 'costs' are way too high! I want to look at the reason for this huge gap... I suspect it is in 'cost of sales and other direct costs', 'overheads and other indirect costs', & 'taxes/regulation'. 2, 3 and 5 above... Personally I feel like 4 above is a 'gimmick' that allows business to play with with 'profits' for tax reasons... 6, dividends, I suggest are a good thing ;)

Morality, ethics, and fairness must all exist for capitalism to work properly. I think many in corporate America 'may' have forgotten this 'fact'. Probably too wrapped up in all the complexities required to run a business period... On the whole Americans instinctively know when they are being lied to and/or cheated. There is no doubt that over the last few decades Americans have been lied to and cheated by many people in both government and corporate America. I feel like that is about to change. Maybe I'm too optimistic...

Many Americans, myself included, are tired of all this being OUR problem... If government and business cannot get their collective acts together then in the end, due to the 'cost problem' described above, every business in our economy is going to end up pricing themselves out of business... When 'things' cost too much people will seek ways to avoid that cost. And we all know that Americans can be pretty darned creative at times ;)

Sadly, it is *my* opinion that the drastic measures needed to right the sinking ship of capitalism are so unpalatable for both government and corporate America that there is NO chance that they will ever occur. Things are so incredibly screwed up and complex in nature (think government, politics, financial system, tax code, regulation, legal system) that to 'fix' it is quite impossible. Certainly it is impossible for the very same people who CREATED the problems to fix them! It took DECADES for things to get this screwed up! That is why it is *my* opinion that in the end there will be a cataclysmic collapse of both our economy and our government.

God help us all...

Greg