March 23, 191G 



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Using Uniform Value for Inventory 



In the February twenty-fifth issue of Hardwood Record the Lum- 

 berman 's Round Table contained a paragraph on ' ' Valuations at 

 Inventory. ' ' This story is reproduced as f ullows : 



Valuations at Inventory 



Just at this season of the year discussions naturally turn to the 

 question of the proper method of inventorying stock on the yard. 

 The (luestion is particularly interesting to the man who has had a 

 rather bad year, and who is anxious to make as good a showing on the 

 books as possible by "pricing up" stock which has depreciated in 

 value since the time it was put on sticks. 



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

 good business? 



Leading hardwood manufacturers seem to he of the opinion that 

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

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

 The inventory, in their opinion, should be reserved for listing stock 

 at actual cost. There will thus be provided a logical basis for 

 figuring profit. To attempt to make the sales department show a 

 profit on a more or less artificial basis of inventory values developed 

 by taking market changes into account is decidedly unbusinesslike. 



And yet, on the other hand, the man who would like to make his 

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

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

 would not be argued that the latter should be the basis for the 

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

 be current market prices. This may seem a trifle inconsistent, but 

 the obvious point is that it is conservative. The manufacturer 

 always 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. 



While 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 attractive, it is one of those things which a strict 

 adherence to good business principles does not countenance. 



A northern operator writes the following letter commenting on 

 this article and outlining his methods of using a standard value basis 

 for inventory purposes: 



Note your remarks on Inventory in your February 25 issue, and that 

 you advisG same to be taken at cost. We ilo not believe in this for 

 the following reason : Statistics show lumber manufacturers have been 

 losing money as wholesalers for the last number of years, and only way 

 can play even is through business obtained from line yards, export 

 or some scheme outside of manufacturing end. If this is a fact, which 

 .vou must know it is, part of your theory or idea is opposite to the 

 other. You are creating fictitious values, also, the cost fluctuates same 

 as values. As your lumber produced this year at a certain cost may 

 not all be sold for one, two or three years, it mixes your figures and 

 plans, and you have no general fixed base to adhere to. 



Our theory is (and the writer might say he is somewhat green in 

 the manufacturing end ; nevertheless, has been a winner) to place in- 

 ventory each year on the Broughton list as a base. We have inventoried 

 for the last three years at $2.00 off this list and expect to continue to 

 use these values from year to year until there is some radical, standard 

 change, up or down, more than the last five years have shown. 



When we took our inventory this year, prices were way off : all the way 

 from .^3.50 to .$•'5. 00. If we had followed the market our business 



would have shown a loss ; as it was, we showed a gain. If we were 

 inventorying today, prices would be about $1.00 higher than our inven- 

 tory on this same list, and if you inventory June 1st, price probably 

 will be about on the list. So there you are. Our idea is to form a 

 base of value and keep it there. This holds us steady. If prices 

 soar high, our gains are only so much. If they go lower, our losses 

 are likewise. If you follow the higher values of one year, you are rich — 

 in your mind buy autos, take on new ventures, build fancy air castles, 

 and lay dead falls to entrap you later when price lowers. There is not 

 much danger (outside of a local war) of our lumber markets going 

 much below our inventory price of $2.00 off, and we feel we are holding 

 our business within normal lines, as the price is just as often below our 

 inventory price as above. 



There is always a handling charge for shipment which usually is 

 about the same each season. Some firms figure this as high as $3.75 

 per M, some as low as $1.00. It all depends. We intend to figure our 

 inventory to have general standard base yearly value on our wholesale 

 products. Our retail yard is inventoried at the cost price as invoices 

 show. Our wholesale lumber is sold to our retail yards at same price we 

 obtain from outside sales. 



Hakdwood Record would welcome further comment on this proposi- 

 tion, being desirous of giving to the trade the opinions of experts 

 in different parts of the country. 



The Wood and the Work 



Selecting the wood which is especially adapted for the work 

 which it is to perform is one of the most important functions of 

 the lumberman. In other words, the man who knows what mate- 

 rial is best suited to each purpose can often use this knowledge for 

 the benefit of the customer and at the same time to his own profit. 



In poplar, for example, a good many people eliminate the saps, 

 paying a higher price for the stock which is all yellow, although 

 the material is to be cut up, covered with paint, and used for 

 a purpose where saps would do just as well. On the other hand, 

 where the wood is to be exposed, sap lumber would be relatively 

 undesirable, as it will not stand the weather well. 



Wood vs. Steel — Wood Wins 



Words are not necessary to describe the photograph shown herewith 

 except so far as it is necessary to give the data concerning the wreck 

 illustrated. The trains involved are the Burlington train No. 42, which 

 was rammed by the North Coast limited of the Northern Pacific, sev- 

 enteen miles west of Spokane. Both trains were using the Spokane, 

 Portland & Seattle tracks, and were en route east. Five deaths and 

 a great many injuries resulted. 



The Pullman car as shown telescoped by the wooden ear was a 

 sleeper, in which all of the deaths occurred. The engine of the North 

 Coast limited rammed into the day coach which telescoped the Pull- 

 man ahead for its entire length. As competent witnesses testified that 

 the speed was not excessive, the wonderful resistance claimed by the 

 steel car advocates is given a substantial knockout. 



WOOD 



vs. 



STEEL- 



0^Mc& 



«..:.<•<»•*. 





REAR END COLLISION, BURLINGTON AND NORTHERN PACIFIC TRAINS. TRAVELING AT .MODERATE SPEED. TET STEEL CAR WAS TORN 



TO SHREDS 



—25— 



