DISTRIBUTION COST ACCOUNTING

(ACCOUNTING METHODS AND PRACTICES)

On August 9, 1939, the Federal Trade Commission, pursuant to section 6 of its organic act, directed an inquiry into the accounting methods of business in order to ascertain how these may better serve the needs of business management and the public, to provide legislative bodies the basis for guidance in the enactment and revision of legislation, and to make more effective the administration of existing legislation. Because of the breadth of the general accounting field and the present timeliness of a study devoted specially to distribution cost accounting, the scope of the inquiry was restricted to the latter field.

The Commission's report on the inquiry entitled Case Studies in Distribution Cost Accounting for Manufacturing and Wholesaling, was sent to the Congress on June 23, 1941, and printed as House Document No. 287, Seventy-seventh Congress, first session.

Distribution cost accounting is of comparatively recent date. It is still a developing field and is becoming increasingly important as the part played by the distributing functions in the Nation's total economy becomes more significant.

The report on case studies points out that both business and the Government are interested in sound methods of ascertaining distribution costs: Business, because of the aid such methods give in the proper conduct of its operations; Government, because of the responsibility it has of administering such laws as the State and Federal antidiscrimination acts.

Distribution cost accounting is concerned with the costs of such distribution functions as selling and sales promotion, warehousing, handling and delivery, credit and collection activities, and all other office, supervising and administrative activities necessary to the proper functioning of the distribution processes.

Distribution costs may be found for sales according to the various classifications of sales, that is, by commodities, sales territories, distribution channels, size of order, volume of sales, method of delivery, terms of sales, etc., depending upon the cost information needed.

When distribution costs are separately incurred and recorded as regards two or more members of a sales classification, for example, two or more commodities, such costs need only be accumulated by a process of addition. When, however, such costs are jointly incurred, a sound method of allocation or apportionment must be found before such costs, together with those separately incurred, can be accumulated to arrive at the total distribution costs for any one member of a sales classification.

canned), fresh milk and dairy products, canned fruits and vegetables, flour and flour mixes, crackers and cookies, packaged cereals, coffee, sugar, structural steel, cement, lumber, and paints and varnishes. The study had not been completed at the close of the fiscal year,

1940-41.

RESALE PRICE MAINTENANCE

On April 25, 1939, the Commission, by resolution under authority of Section 6 of the Federal Trade Commission Act, directed its Economic Division to make inquiry respecting the effects of resale price maintenance on the interests of manufacturers, wholesalers, retailers, and consumers of price maintained and competing non-pricemaintained articles. A report on the investigation was in the course of preparation at the close of the fiscal year.

FURNITURE PRICES, COSTS, AND PROFITS

Shortly before the close of the fiscal year 1940-41, the Commission, at the request of the Administrator of the Office of Price Administration, directed an immediate investigation of the legal and accounting aspects of a situation resulting from an increase in furniture prices in recent months. Pointing out that "The prevention of unwarranted price increases is vital to the defense program of the United States," the Administrator asked the Commission "to undertake a quick check of prices, costs, and profits in the furniture industry" so as to determine whether and to what extent the recent increases were justified. The investigation was in process of organization at the close of the fiscal year.

MASS FOOD DISTRIBUTORS

A Commission resolution of April 29, 1941, authorized an inquiry the purpose of which is to present a comparison of (1) the savings in costs of selling and delivering certain foods in large quantities, particularly when delivered to the buyer's warehouse, and (2) the concessions in price made to the buyer on such sales. The inquiry was in progress at the close of the fiscal year 1940-41.

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