14 



SELLING LUMBER 



The Question 

 of Proper 

 Fixed Charges 



The Problem 

 of Getting a 

 Profit 



Denied the 

 Use of 

 Remedies 



manufacturing cost and selling cost, so that we may arrive finally 

 at the average cost; and we will then have simply gotten to a 

 starting point in the securing of the average cost of manufacturing 

 the entire product. Beyond that is the question of distribution 

 of the average cost of manufacture to each item produced. 



And then our thought is to bring home to you, to bring home 

 to our sales departments, this fact, that we must have a yield ; that 

 we must have a percentage return on our investment. It would 

 be well to illustrate just what we mean here. Assuming that 

 today it would cost $6.00 per thousand to buy the tract of timber 

 we are going to operate, and $1.25 per thousand to develop it, 

 and that we are going to have a ten-year operation for a thirty 

 million feet capacity plant, in such a case we would have an in- 

 vestment of $1,800,000 in timber, and we would have $375,000 in 

 the plant account, or, say, a $2,100,000 total investment. Now, in 

 order to secure a reasonable return, we should have at least 10 

 per cent on our money, as money is worth 6 per cent anywhere 

 you put it, which would be $210,000 as a return on an investment 

 of $2,100,000; and on an output of thirty million feet we would 

 have to have $7.00 per thousand over and above the manufactur- 

 ing cost of $14.50, or $21.50 per thousand, in order to make this 

 investment yield us a return of 10 per cent. 



In the past we have seen the value of stumpage in the South 

 range from $3.00 per acre to $90.00 per acre, and this increase 

 in the value of our stumpage has carried our cost up. Whereas 

 in 1909 our stumpage was worth $4.00 per thousand that was 

 seven years ago today it is worth $6.00 per thousand, having 

 advanced 50 per cent in the past seven years. If you will figure 

 your stumpage at its cost seven years ago of $4.00 per thousand, 

 with interest and taxes compounded, you will find that your cost 

 of this timber is in excess of $6.00 today, and in the future that 

 situation is going to become more pronounced than it has in the 

 last seven years. 



Now, after we have secured all the information, we are fre- 

 quently unable to apply the remedy which we should apply by 

 reason of our failure or inability to agree on some uniform method 

 of action. That is due to the present state of our laws. We 

 have had that situation in mind, and during the campaign which 

 we have been conducting before the Federal Trade Commission 

 the thought occurred to a few of us to see if we could not secure 



