PRICE INQUIRY

Bay of Plenty Beacon, Volume 2, Issue 128, 26 February 1940, Page 4

PRICE INQUIRY

ACCOUNTANT'S EVIDENCE

! METHOD OF ADDING PROFIT Further evidence on behalf of the Crown was given by Mr J. R. Middleton, senior investigating officer, Department of Industries and Commerce, and assistant-secretary of supply, when the Price Investigation Tribunal resumed the hearing, on Friday of the application of VVhakatane Paper Mil's, Limited, to be allowed to increase the price of the cardboard it manufactures. Witness expressed the view that an adequate safeguard would be provided for the tribunal if the company was required to submit at, say, two-monthly intervals, a costs statement based on the past quarter and taken out under a new formula. The company should instal a costs accounting system and proceed on the new formula. His Honor remarked that two months appeared too short an interval. Witness said the interval could be four months. Less Than Import Prices Witness. agreed that on the evidence already given the prices the company was now asking for were less than prices that would be cliarg eel for imported cardboard. Whaltatane had been faced with a market of 900 boards and ca'ibres. By stand ardisation this range had been reduced to 12. It lost £27,000 in the first six months at low prices,, but he did not think it would have serious losses, if any, this year.

Herbert D.ug as Vickjiy, public accountant, referred to the report On the costs and costing system of Whakatane. His criticism of fiVi.ig profit as a percentage on capital outlay was that if this was done and selling prices were adjusted from time to time the only factor which might remain constant was the assured profit per ton for various grades. Fixed Px*cfit of £58,563 \ In effect, continued witness, the company asked to be permitted to make a constant profit of £08,563 yearly, irrespective of the quantities of output or of the next production costs. If the profit return was static, based as suggested as a return on capital outlay, there could be no incentive to reduce pro duction costs or effect economies in working. Witness suggested that 'when the cost of production of the varying grades of board to the point of delivery ex mill was determined there should be added to these figures a percentage of. say* 12% to cover profit. To the figure so ascertained freight could be added to make the selling price. This was more nearly in accordance with accepted commercial practice in determining selling prices. He was reluctant to comment on salaries, because lie believed £100 or £200 a year more was neither here nor {here in getting the right man. but for a new business Whakatane had a very expensive executive. ' The hearing will be continued today.