COST OF CARDBOARD

Otago Daily Times, Issue 24227, 20 February 1940, Page 10

COST OF CARDBOARD

PRICE INVESTIGATION ACCOUNTANT'S EVIDENCE COMPANY’S CASE CLOSED (Per United Press Association) WELLINGTON. Feb. 19. The hearing by the Price Tribunal of the application by Whakatane Paper Mills, Ltd., to increase the prices of the cardboard it manufactures was continued to-day. Mr Justice Hunter presided, with him Mr H. L. Wise. Mr H. P. Richmond and Mr W. G. Clavis, of Auckland, appeared for the company, Dr N. A. Foden for the Crown and Mr W Perry for the users of Whakatane cardboard.

Under cross-examination William Drummond Barclay, a registered accountant, of Auckland, who gave evidence op Friday afternoon on the company’s costing system, said he did not check up on the relevancy or necessity of all the items of expenditure in respect to the plant or buildings That was outside the ambit of his inquiries. Before asking anyone to accept the ’ mill expenditure figure of £586,000 as conclusive he would expect him to check up on the amounts from the beginning. Dr Foden: I take it that, speaking generally, they are still adopting a policy of trial and error in many phases of the mill’s activities? Witness: Speaking generally, one might say they had now gained sufficient experience to get on a more satisfactory basis as regards costs. Mr Perry: If the mill could have continuous running the costs of production would be lower? Witness; It follows that if it was possible to get the ideal of continuous running on one type of board costs must' fall.

It is very difficult in practice to gel it?—Very difficult. Therefore, margins had to be made for contingencies of that nature.

Therefore, from a practical point ol view, it is very difficult to get what you call continuous running?—Yes, unless you had standardisation on a smaller number of boards,

Some kind of rationalisation? — Rationalisation, and as small a field as possible. Do you know the boxmakers had made certain efforts to meet them?— Yes, I understand they had got down to the irreducible minimum. In answer to Mr Wise, agreed that if there were any serious errors in the figures that had been given to him his costing might be considerably affected, but he had indicated clearly the sources of his information. He agreed that costing figures should be checked before they were accepted, and thought that if accountants on both sides got together the matter could be cleared up. He felt that the total mill expenditure of £586,000 would be found substantially correct.

His Honor questioned the witness about changes in the company’s prices in the last six months.

Changes in Prices

“ Can you tell me,” his Honor asked, “why it was necessary to vary these prices four, five or six times in as many months? ” Witness said he thought the simple fact was that prices in the earlier stages were not based on costs at all, but on the selling prices of imported lines. The company realised that if it did not sell at the imported price it would get no business, and it would be unable to get the mill going. His Honor: Do you say that though the “life” which the company has now got arises from the fact that there is a war and that import control is now in force, nevertheless we should fix nrices on that very large sum which they say was invested in the mill? Witness said he thought so. If the matter was looked at from the other point of view—the high prices due to the war—the company would be entitled to the price at which board could be imported. It was not asking for that; it was asking for prices based on costs. The public could not have it both ways. Clifton Frederick Langton, costs acccuntant for the company, said there was a diversity of opinion when the accounts of the company were re-clas-sified. He had handed in his resignation. but it had not been accepted.

In reply to his Honor, the witness said that in costing theory did not matter in the least. Dr Foden: Apparently the system of Mr Horrocks in dealing with the main items alone prevailed. Was that in keeping with sound accountancy?— Yes. In reply to Dr Foden, witness said it did not matter so much if the detail of costing was not exactly correct, so long as the aggregate was correct. Dr Foden: Cain you explain an entry of £22,000 shown as unallotted expenditure? —Yes, this might be called pioneering expenditure in establishing a new industry. It was made up mostly of engineering costs.

Travelling Expenses

Dr Foden drew attention to an item of £B7OO shown as expenses incurred by Mr Horrocks and Mr De Guyre on a nine months’ trip to England to acquire plant for the company. His Honor: Princes or rajahs might have travelled on this sum. Mr Richmond: Before we talk of princes or rajahs His Honor: I repeat that two princes or rajahs might well have travelled according to their state on £5700 for nine months. The witness said there may have been a proportion of salary included in the £5700. Dr Foden: What staff of bookkeepers does the company have?—We have three.

Are you in charge?—No. Mr Wright is in charge. Is your book-keeping competent?— Yes.

You admit that with assets totalling over £1,000,000 some amount should be set aside for supervision?—Yes, I would say about 8 per cent. The forests are growing and Nature does not require much supervision.

In reply to Mr Richmond, witness said the aggregate costs were correct. Mr Richmond; It has been said that the Government officers had been unable to trace £39,000 of the cost of £586.000 in establishing the business. Has this amount been cleared up?— Yes. it has been made clear now.

It there a stage at which costing breaks down of its own weight?—Yes, if too much detail is required the cost would be more than it was worth. His Honor: Your prices have been altered frequently in the past year. On what principle were your prices based?—Up till October of last year the cost was based on the prices of the imnorted article. Mr Wise; Are you satisfied with the present price list? —Yes. I even think they may be under-estimated. This closed the case for the company.

Supplies of Pulp Wood

Dr Horace Hugh Corbin, director and technical forestry adviser of the company, called by Dr Fodcn, said it was quite possible that pulp wood would have been obtainable from Pukenui in 1937 The statement made in the prospectus issued by New Zealand Timberlands Wood Pulp Company, Ltd., that pulp wood would be obtainable from Pukenui in 1937 was justifiable. The trees at Pukenui were fit for pulping now, but he had not gone into the cost of transport. The hearing will be continued tomorrow.