X 



DEALERS' DISTRIBUTION COSTS 



The center of the milk problem in all cities is considered to be the 

 cost of milk distribution. While there are some economies which could 

 be secured through better business methods in the production of milk 

 by the dairy farmer, it is well recognized that these are difficult to estab- 

 lish and would require a considerable number of years. 



On the other hand, the inhabitants of every large city and the public 

 officials are carrying on their agitation on the high cost of milk, prin- 

 cipally with the thought in mind that the cost of distribution is excessive 

 and that through some reorganization in the industry, or perhaps through 

 municipal control or ownership, these costs can be greatly reduced. 



In approaching this problem in this survey, a new method of in- 

 vestigation was planned. In all previous surveys the main dependence 

 for the investigators into the cost of milk distribution has been the work 

 of expert cost accountants who have devoted the greater part of their 

 time to the examination of the dealers' books and the checking up of 

 vouchers with book entries to determine whether these entries were cor- 

 rect or not. 



* 



The reports handed in as a result of the work of the expert account- 

 ants have, in every survey where this work has been done, presented to 

 the investigators only a financial statement which the books themselves 

 contained. 



Such financial statements are unsatisfactory in two respects. In 

 the first place, the methods of bookkeeping in the milk industry have 

 never been standardized. Consequently the financial statements taken 

 from dealers' books rarely correspond. For this reason, even though 

 the financial statements may be correct, it is impossible to make accurate 

 comparison of cost items between one milk company and another milk 

 company. 



The second and more serious cause for dissatisfaction with such 

 figures is that they in no way reveal to the investigators what are the 

 reasons or causes for these expenses, or whether the expenses are justi- 

 fied. Consequently, in all surveys whose main dependence has been placed 

 on the work of auditors, it has been impossible for the directors of such 

 surveys to draw conclusions or to make recommendations based on any 

 accurate knowledge of expense items, or to state whether such expense 

 items are justified or whether they could be reduced. 



In order to overcome these difficulties in this Survey, a new plan 

 was inaugurated which consisted in a study of the conduct of the busi- 

 ness itself outside of the dealers' books. These studies were made by 



