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The Lumhermans Round Table 



Valuations at Inventory 



.lust at this seascu of the yeai- discussions naturally turn to the 

 (jucstion of the proper method of iuventorving stock on the yard. 

 Tlio question is particularly interesting to tlie man who has had a 

 lather bad year, and who is anxious to make as sjood ix showing on the 

 liooks as possible by "pricing up" stock which has deiirei'iated in 

 \.ilue since the time it was put on sticks. 



The question is, is such a plan good bookkeeping; further, is it 

 ;;i"jd business? 



Leading hardnooj manufacturers seem to Ijc of the o|uui()n that 

 it is poor policy to try to thow the "unearned increment" on the 

 biioks, because of the element of speculation which is thus introduced. 

 'I'lie inventory, in their opinion, should be reserved for listing stock 

 at actual cost. Tliore will (hus lie provided a logical basis for fig- 

 uring jirofit. To attemjit to make the sales department show a profit 

 on a, more or less artificial basis of inventory values developed by 

 iaking market changes into account is decidedly unbusiness-like. 



.\ml yet, on tiie oilier hnnd, the man who would like to make his 

 statement look a little fatlcr can retort that if the market were to 

 collapse, and bring market values below the cost of manufacture, it 

 wiinM not be argued that the latter should be the basis for the in- 

 Nciiliiry. In that event, it is generally agreed, the basis should be 

 rurrent market prices. This may seem a trillc inconsistent, but 

 the obvious point is that it is conservative. The manufacturer al- 

 \v;;ys is giving himself the worst of it, theoretically, in order that 

 when it comes down to the practical question of selling his goods at 

 a profit, he may be in the best possible position. 



AVIiilo there are times when marking up values for inventory pur- 

 poses, especially when the owner of the lumber knows "good and 

 well' that it is worth more now than it was when it was stacked, 

 looks mighty atlrai-tive, it is one of those things which a strict ad- 

 herence to good business (irinciples does not countenance. 



Keeping an Eye on the Overhead 



.Not long ago a big construction company which holds several iui- 

 piirtant contracts v.ith tlie United States (lOvernment for the con- 

 struction of locks and dams on the Ohio river, aggregating several 

 luillion dollars, was put in the hands of a creditors' committee. It 

 is unable to meet its current obligations, not because the contracts 

 were taken at too low a price, for they were not; but because the un- 

 expected, in the form of floods, threw it back to such an extent that 

 it was unable to realize as rapidly as it had expected to do. The 

 floods made it impossible to carry on construction work, but over 

 head, in the form of interest on equipment, office expenses, salaries 

 of executives in the office and on the job, who could not be re- 

 leased like day laliorers, and other big items of that kind which 

 rapidly ate into the capital of the contracting company, went on. 

 'I'lio result was inevitable, and yet it was not due to bad manage- 

 ment. 



There is a lesson in tliis for every lumbennan, who ought to re- 

 , member that no matter whether he is doing business or not, over- 

 head is going on. If he has a plant that is not running, it is de- 

 teriorating; if he has lumber that is not being sold, he is paying 

 carrying charges in interest, insurance, storage, etc.; if he has idle 

 inspectors and other employes, their wages, jiaid without a cor- 

 responding production of valuable work, are adding to the burden 

 of the business, and making it more difficult to pay dividends. 



One of the reasons why lumber concerns are taking kindly to the 

 idea of building sheds where loading and unloading of cars can be 

 carried on, no matter what the weather, is that furnishing this pro- 

 tection insures the work being carried forward and overhead ex- 

 ]iense being held within bounds. Eainy days no longer have any ter- 

 rors for the lumberman whose inspectors can work in any kind of 

 weather, while the concern whose salaried men have to "lay oft:" 

 iu inclement weather must realize that their expenses are helping to 

 pile up overhead without a corresponding offset in work performed. 



And, from the practical standpoint, it is comforting to know that 



during the rush season — wlii''h usually coincides with the period when 

 there is !nost bad weather — cars can be loaded out and customers 

 hungry for lumber taken care of. 



Is This Unreasonable? 



Xot long ago a prominent furniture iiianulacturer wanted to buy 

 some hardwood lumber. Prices were secured from a leading manu- 

 facturer, whose stock was known to be just about what was wanted. 

 The consumer proposed that the lumberman ship the stock subject 

 to inspection at the factory. This jiroposition was promptly turned 

 down, inasmuch as it was too one-sided an arrangement to appeal to 

 anybody with ordinary business sense; Init he made a counterpro- 

 posal, which was that the buyer take up the stock on the shipper's 

 yard, the latter paying half the expenses of the representative of the 

 manufacturing concern. This proposition, however, was not found 

 agreoable, and the deal was declared off. 



From where the writer sits, it looks as if the consumer was assum- 

 ing an unreasonable attitude, and one which could not possibly be 

 supported by any logical process. To sell subject to inspection by the 

 buyer puts the seller entirely in the latter 's hands, especially if the 

 opportunity to dispose of rejected material were not especially good, 

 as it happened to be in this case; while to take up the material on 

 the shipper's yard, which would have enabled the lumberman to pro- 

 tect himself from the possibility of any of the stock being thrown 

 out later on, would have insured mutual satisfaction. Possibly the 

 shipper ought to have been willing to pay all of the expenses of the in- 

 spection under this arrangement, but inasmuch as the buyer would 

 have been benefited, as well as the hardwood manufacturer, the pro 

 posal to split the cost seemed an equitable one. 



The plan of having the buyer take up his own stock is one that 

 is commendable from many standpoints. First, the inspector for the 

 consumer knows better than anybody else just what his principal 

 wants, and what he doesn't want. Second, if there is any question as 

 to grade, it can be determined by flie inspectors of the two parties 

 concerned before the expense of transportation has been assumed. 

 Third, all i>ossibility of dispute after the shipment of the car is 

 eliminated, and the transaction can be closed with nothing but satis- 

 faction on both sides. 



Where the consumer is a big enough user to justify the plan, he 

 ought to make a point of sending out his own man to take up the 

 lumber which he buys. In most cases this representative would get 

 the heartiest coiiperation from the lumbermen, and if the buyer's 

 inspector knew his business, it would mean better lumber at the same 

 p].i,,p__better lumber from the standpoint of his use, that is — accurate 

 measurement and a lot of other advantages, the lack of which fre- 

 quently cause argument under present conditions. 



Cheap Stump Destruction 



The London Timhcr Neics tells of a cheap method of removing 

 stumps or objectionable trees. It says: "Bore a 2-inch hole 18 

 inches deep into the trunk or root during the autumn. Put in 1V> 

 ounces of saltpetre, fill with water and plug tightly. During the fol- 

 lowing spring put in the same hole half a gill of kerosene oil and 

 set aliwht. The tree or stump will smoulder away without blazing 

 down to every part of the roots. For removing large tree stumps 

 without the expense of grubbing out this latter method is to be 

 recommended." 



If this method shall be found efficient it ought to be worth a great 

 deal to persons who have stump land to clear. It costs much money 

 to pull the stumps out, and grubbing them is even more expensive. 

 A gallon of Saltpetre and a gallon of kerosene ought to sufSee for 

 an acre of ordinary stump land. It is worth trying, even to the extent 

 of doubling or quadrupling the dose for each stump. However. 

 Hardwood Eecord is inclined to doubt the sufficiency of the method 

 when applied to the big stumps of our cut over lands; but the mere 

 possibility that it might be a success entitles the method to a thor- 

 ough test.. 



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