-357-
 in the cost below which sales mar not be made. This .-wovision is ob-
 hectionable inasmuch as it would tend to introduce losses of a specu-
 lative na.tUre within the cost below which sales mai not be Tndc.
 Furthermore, the pro.,os:al makes a statement which conflicts with
 Office emorandu ?.-, n-mely, 'It is safe on the vcr., c - for
 any manufacturer to figure fifty per cent dc-reciation on his in-
 ventory at the end of the year."

 "Dereciatio. of Inventory" as used herein refers to the loss
 of value in unsold merchin`ise attributable to style chnn.-.c3, broken
 or odd lots, etc.

 7. The following additional restrictions and exclusions from
 cost should be made a part of the stz7ndard formula:

 a. Any amount of dc-reciation shown on the books
 in excess of that allowable for federal income
 tax pur-ioses. must be excluded.
 c
 b. HTo reserve for conti.-.; rcies or similar item
 which does not represent reasonable ascertvinable
 cost, but merely an estimate of uncertain
 eventualities, is to be included.

 c. Recognition ml..st be given whcLeever necessary to the
 influence 'i- on costs of differences in n-rkcting methods,
 customer classes, and distance from the point of
 delivery when jc-ods are sold on a delivered basis.

 d. Losses on the sale of capital assets such as land,
 buildings, equi'.mcnt, etc., shpll be excluded.

 e. Purchase discounts maw be applied as a reduction
 of the cost of the commodities or equipment bought.

 f. Holding conany devices or affiliated relation-
 ships should not permit a meo.-er of any industry
 to evade the s-irit and -urpose of the no-sclling-
 below-cost provisions.

 g. In the event that a member of an industry engages
 in other activities, his indirect costs shall be
 allocated to the several classes of -roducts on
 a fair or equitable basis. A cost accounting
 formula which prescribes such method of allocation
 should not conflict with the similar provisions
 of any other cost finding method which rrfy, in all
 probability, govern the accounting methods of an
 individual -Droduccr.
 (Siincd) ORTOT W. BOYD
 Orton W. Boyd,
 Cos'- Accou:itin-. Unit,
OWB:dw 1-ascarc,: and Plan,'inf Division.


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