WHAKATANE PAPER MILLS

Greymouth Evening Star, 20 February 1940, Page 3

WHAKATANE PAPER MILLS

ACCOUNTANT’S EVIDENCE [PEB PBBBB ASSOCIATION.] WELLINGTON, February 19. The hearing by the Price Tribunal of the application by Whakatane Paper Mills, Ltd., to increase the prices cf the cardboard it manufactures was continued in the Ciotart of Arbitration to-day, the day being (levoted to the examination of one of the accountants of the company. Mr. Justice Hunter presided, with him Mr. H. L. Wise. Mr. H. P. Richmond and Mr. W. G. Glavis, 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, registered accountant, of Auckland, who gave evidence on Friday afternoon on the company’s costing system, said that he did not check up on the relevancy or necessity of all the items of expenditure in respect of plant or buildings. That was outside the ambit of his inquiries. Before asking anyone to ac-

cept the mill expenditure ngure oi £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 the policy of trial and error in many phases .of the mill activities. Witness: Speaking generally, one. might say that they had’ nbw gained

sufficient experience to get on a more satisfactory basis as regards costs. ,i Mr. Perry: If the mill could have had continuous running, the costs of production would be loxvef? —It follows that if it is passible to get the ideal of continuous running on one I type of board, coSts must fall. It is very difficult in practice to get it? —very difficult. Therefore, margins had to be made for contingencies

of that nature. Therefore, thorn a practical point of view, it is very 1 difficult to get what vou call continuous running?—Yes, unless you had standardisation o,n 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. 1 understand that they had got down to an irreducible minimum. In answer to Mr. ‘Wise, witness agreed that if there were any serious __ •!« 4-1-. XX fitrn-i'OC-' hfixl IIPPT

given 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, that 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.

’ “Can you tell me," ms nonor asned, “why it was necessary to vary! these prices foul’, five or six times in as many, months?” Witness said he thought the simple fact was that prices in the earlier stages were hot 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 fee unable to get the mill going. His Honor: Do you say that though

the “lite” which the company has now’ got arises from the fact that thei e is a war and import control is now in force, nevertheless we should , nx prices on that very large sum which they say was invested in the l mill ? Witness said he thought so. If the matter was looked at from the othei point of view—high prices due to the ar _th e 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 accountant for the companysaid that there was a diversity of opinion when I'the accounts of the company were reclassified. He had handed m his re- ’ signatioiT, but it had not been acceptr ed in reply to his Honor, the witness said that in costing theory did not matter in the least. Dr. Foden: Apparently the system of Horrocks, in dealing with the main items alone, prevailed. Was that in keeping with sound accountancy ?

Witness: Yes: . In reply to Dr. Foden. Langton said it did not matter so much if a detail of costing was mot exactly coriect so long as the aggregate was correct.

UNALLOTTED EXPENDITURE e ! E Dr Foden: Can you explain the en-.j = try of £22,000 shown as unallotted ex-[| penditure? , ; Witness: Yes. This might be called j pioneering expenditure in establish- - lug a new industry. It was made' up : mostly of engineering costs. E i Dr. Foden drew attention to an item ; icf £5,700 shown as expenses incurred j by Horrocks and de Guyre on a nine- : months’ trip to England to acquire ; plant for the company. j 1 His Honor: Princes or rajahs might :

I have travelled on this sum. ( ; [ Mr. Richmond: Before we talk of;; ' princes or rajahs 1 —- I; His Honor: I repeat that two princes,; or rajahs might well have travelled!; according to their state on £5,700 foi , nine months. Mr. Lapgton said that there may have been a proportion of salary in--1 eluded in the £.5,700. | | Dr. Foden: What staff of bookkeepers does the company have? I Witness: We have three. I Are you in charge?—No. Wright is l in charge. I is your bookeeper competent?—Yes. You admit that with assets totalling 'more than £1,000,000 some amount 1 should be set aside for supervision.?— . Yps I would say about 8 per cent. The

forests are growing, and nature does, not require much, supervision. i In reply to Mr. Richmond witness, said that the aggregate costs were cor-. IS Mr. Richmond: It has been said that 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., lit has been made clear now. I ;'i Is there a stage at which costing; breaks down of its own weight?—Yes. j If. too much detail is_.requi.red the cost-'

Illg WOUltl ue UlUi.e.umu. lb wa,a wuivw.j His Homer: Your ' prices have been r.i'tered frequently in the last year. On what principle were your prices based?— Dp till October of last year the cost was based;on the prices of the imported article.Mr. Wise: Ate you satisfied with the present price list? —Yes. I even think they may be under-estimated. This closed the case for the company. Dr. Horace Hugh Corbin, director

and- technical forestry adviser of the company, called by Dr. Foden, said that it was quite possible that pulp ; wood would have been obtainable fiom Pukenui in 1937. A statement made in the 'prospectus issued by New Zealand Timberland’s Wood Pulp Company, Ltd., that pulp wood would be obtained 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. .1 The hearing will be continued tomorrow.