Whakatane Costs Under Fire

Northern Advocate, 24 February 1940, Page 5

Whakatane Costs Under Fire

[Special tq "Northern Advocate’’] WELLINGTON, This Day. 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 yesterday of the application of the Whakatane Paper Mills, Ltd., to be allowed to increase the price of 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 install a cost accounting system and proceed on the new formula. Two Months Too Short. His Honour remarked that two months appeared too short an interval. Witness said the interval could be for four months. \ Witness agreed that on the evidence already given, the prices the company were now asking were less than the prices that would be charged for imported cardboard. Whakatane 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 Douglas Vickery, public accountant, referred to the report on t,he costs and costing system of Whakatane. His criticism of, fixing profits 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 profits per ton for various grades. Incentive Goes. In effect, continued witness, the company asked to be permitted to make a constant profit of £58,563 yearly, irrespective of the quantities of output or of the next production costs. If the return profit was static, based as suggested as a return on capital outlay, there could be no incentive to reduce production 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* per cent, to cover profits. To the figures 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 he believed £IOO or £2OO a year more was neither here nor there in getting the right man, but, for a new business, Whakatane had a very expensive executive. The hearing will be continued on Monday.