Document gar0LpKmDoXmZKYjmzLgeELje

( 1OFFICE OP THE ASSISTANT TO THE PRESIDENT SOI CANAL ROAD, N. W. CLEVELAND, OHIO f r Executive M"- B V Lsvenhagan AN6WERIN0 LETTER OP Of f ic e Dat e January 8th, 1980 Review of Martin Varnish Co, Statement s. Dic t at e d b y RETURN t o R-W. L. JU requested, I have thoroughly atudlad the various statements representing charge by tha Martin Varnish Co. to tha Martin* Sanour Co. for manufactured rarnishaa. COMPARATIVE TRADING 8TAMHEHT It is erllant from this report that the Martin-Senour Co. has baan oharged a generally higher price on all manaf&etnred varniahes than tha Martin Varnish Co. haa charged to tha trade. the items sold to tha M-S Co. of 111. for rasala gave than 9.46^1 greater profit and such items aa vara sold to tha Martin-Senour Co. of Rib. for rasala gave the* 8.27^ greater profit. This amounted to $4,321,53 o Tercharge to tha Martin-Sanour Co., if wa assome that thaaa items charged for resale should have baan invoiced oat of the Martin Tarnish Co. account at tha same price aa those sold direct to tha trade. Ton will also note particularly that last year M-S Co. of 111. and Ms Co. of Nob. resale itsms gave to tha M V Co. only 31.42^ profit as against 35.73^ for direct salt. OPABATING 3TA1Si'lLSill this statement shoea a surplus of $34,454.58 on a value of output of $394,996*19, or 8.3j(. I do not thihk this correctly rep resents tha situation for the reason that thara has bssa deducted the item of loss and gain general, $9,538.93, which I feel doss not belong lIpl the manufacturing account. lha total cost to manufacture all roducts la really only $338,089.75 lnataad of $347,618.67 as indicated, Tand compared with the total credit of the account shows a surplus in cost figuring of $33,993.50, or 11.5^ on the value of the production,H$t:394,996.19. condition. fttfT.MgterUl fttfBfrM ,- $191,4|7.91, indicate# a bad The comments in the statement cover this quite fully but it la inexcusable for the manufacturing reports to be incomplete. There should be no difficulty in reporting ingrsdLisnts exactly aa used end I believe that at least for awhlla it would be advisable to keep a perpet ual book Inventory of both quantity and value of raw material. The cost pr unit of raw material can ba easily checked against purchases. - Package Addition Surplus - $6,765.45. This ia a bad showing,- a surplus of 15> against an expenditure of $43,609.03. I thlrk the revised package additions submitted will overcome this condition in the current year as they are considerably lower than the figures used during 1919. They are, however, lower then the Cleveland factory 1930 additions end I fear they may be too low. They should, therefore, be kspt under constant observance and revised if at the close of thai quarter it appears that they are not covering all of the expenditures. .f Mr LevenhageJj1-8-30 Ba* Material Ihel Deficit - $155,84, 1 not particu larly serious. Productive Labor Dsflclt - $165.18, la not particu larly serious. Department Burden Surplus - $8,433.67. This indicates bad ooat figuring at ttaa rate used was alaeat twice What It ahould hare bean, Dai a condition should have bean detected from the analysis of fosanla record daring the year and the rate reduced. The suggested 1980 rate, 4O0t, seems satisfactory. QjatrakArjtel 9mht - $5,617.49, is bad. The rate used was aaob too high end should hare bean noticed and adjusted, the suggested 1980 rate of 70jt seams satisfactory. SPECIAL AUDIT TBTDffl ATVmBTMlWT 0? AC000HT8 Bis overcharge of $17,800.76 may be not far off, but the basis of .089 per gallon for 193,867 gallons is not sound, I think the adjustment should be made on the basis of the per cent to the value of this over-figuring, which 1 calculate is U.50K. Vis chief error in the cost figuring is in raw materials. I cannot lo cate the source of the figure $87,888.05 shown as the surplus on bulk goods, Which is divided by the total gallons meaufaetored to get the net overcharge per gallon - .089. I think that the over charge to M-8 Co. ahould be daterained by taking the figure of cor- root billing, $156,712.98, and dsdieting from it 11.5501 to oovar the surplus over figured. this amounts to $18,081.99. Also, because these items were charged at figured cost plus 50l, this B$ ahould bo oensldered iu this overcharge, an addition $901.10. Bxus the total overcharge on bulk goods 1 make $18,923.09 as coopered with $17,200.76. Further, if ll-S Co. of 111. and Vab. ware overcharged that .089 per gallon or 11.50t, so waa tha 8-W Co., Who bought 19,368 gallons. If figured at .089 per gallon this le $1,723.75, or, considered on the value of $11,080.58 at 11.501, this overcharge is $1,874.87. Incidentally, the costs of resale goods shown on the trading statement are exoeseive bemuse of this over-figuring. Con sidered on the baaie of .089 per gallon, M-3 Co. of 111, resale is charged $1,731.05 too much and, on tho basis of 11.50 on the value, the exoeseive charge is $2,563,96. M-S Co. of H*b. resale on the basis of .089 per gallon shows an excessive ehargs ef $335.75, or on the basis of 11.501 this overcharge is $860.86. Also the manufactured merchandise charged against Trade and MS D salsa of $67,074.01 was figured 11.5 too hli, or $7,713.51 which should be added to the gross trading profit, making this $37,781.72, or 34.901 instead of 27.6901. Tbs general summary in this special audit also oovers an overcharge for quantity - $2,388.64; erroneous billing $181.10; charges for barrels returned - $381.00, all of which figures I an unable to check. 1 calculate that the amount $31,958.60 shown as net due M-S Co. is not sufficient. It should be $23,681.92 - this for the reason that the overcharge on bulk goods was $18,933.09 instead of $17,800.76 and there is also dna to tha 8-V Co. for oven*, charge $1,874.27. Mr Levenhagen - 3 1-8430 3PBCIAL MBPOBT OF AUDIT 0? BILLIMSS 1 an unable to check; the figure of $1,105*61 for rafund, on bulk good* determined by a unit basis, and, ae explained before, I think the only basis to be considered is the percentage on the Talus, is mentioned before,' the refund on billing, $3337.33, checks up correct ly. I am unable to locate the source of figures - erroneous billing $181.10 or returned barrels $381. Bxe amounts due M.V. Co. for drams, $3,361.41 and for barrels, $1,537.33, eaten satisfactory. The net due lt<S Co., $10,006.40, as mentioned before, I do not think is corroct. AUDIT 07 M_3 D SALES This shows sales of $11,605.46 as easqpared with cost $9,904.41,- a profit of $1,701.06 or 14.66$. Ths over-figuring ofi the cost should be taken into consideration and, as the general was 11.5 too high, it makes the real cost of this material $1,139.01 lower, or $8,765.40. This makes ths profit on M 8 D sales $3,f40.06 or 34.7$. I note the remark that unlisted items are sold to the H-8 Co. on a theoretical price basis. I fail to see iftvy, if listed Tarnishes are charged at 30$ below the netjprlee, unlisted mrrdihes should not be charged to the MUJ Co. at 30J less than the price at which they were sold. Xridantly alto B SI Co. are sold at prices lower than the *>S Co. Further, I fail to understand why in the analysis the gross profit on Trade Sales should be Meowed to be 37$. This groes profit can be readily determined by deducting the cost of M S from the total sales shown as $78,344.46 on the trading statement. I trust I hare properly understood these statements and that ths conclusions I express are correct. Tours Tsry truly,} /' VBS:I Can. kxpt. of Cette. 0007-SWP