-355-


 Fcjr'.,.ar/ 1r 1 lJ'.


*.2,MORAl.iDUM.

TO: Mr. Leih r. Ore,
 Leather Section,
 Assistant Dc-puty AcLaiui strator

FROM: Orton W. Boyd,
 Cost Accounting Unit,
 Research and Plannin,, Division

SUBJECT: Ladies' Handbai Industry Standard
 Cost .orra.la.


 This formul-. has been submitted under the -rovisions of Article VI,
Section 8(i) and Article VIII, Section 14.

 The first named section empowcrs the Code Authority to recommend
the uniform cost and/or accounting systemm for each divisio- of the
industry vhich, u-pon Pr.PvaE.L by the Administrator, shall become a
part of the code. Any member of the industry is permitted to con-
tinue the use of his current cost or "'.cco_--ti:i system provided that
selling prices estimated by the use of that system shall not be less
than the cost of the article determined in accor&dance with the ap)-
proved formraula.

 Article VIII, Section 14 prohibits sales below individuals cost
as computed by the a-pproved uniform cost system. Exceptions, however,
are ,ranted from th:t rule for the --ur-;ose of meeting, competition of
another member who is not sellin:.. below his incliividuJl cost, and for
seasonal clearance sales, distressed goods, etc.

 The -- nproval or di.-)-pprov'-l of this -roposal is-'rcly a mntter
of Administrative policy, inasmuch as if it "cr'c to be n'- ,rove., it
would effectuate the above cited sections of the Code of FP-ir Corm-
petition, each of which conflicts with 1ERA policies as set forth in
the Office manual.

 In any event, this proposal is an unsa.tisfactory device for the
effectuation of the no-sellin.L-below-cost provision for reasons "s
follows:

 1. According to Pa.-,o one, the minimum amount of overhead to' be
used in the determination of unit costs is 33-1/3' of tle direct costs
(m,.teria.l, and direct labor). An cxce-tion to this rule will be per-
mitted by the Code Authority if a member of the industry requesting
the sc.me is in -osition to demonstrate the fact that his -.cturl over-
head expe-nse is a lower perccntpsc of the direct costs. This p-ro-
vision conflicts with Office Mecmora.ndum -.1.0-3 which provides th-.t no
cost accounting system shall sug est differentials or perccnt".gcs


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