Music Trade Review

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HIGH LIGHTS
Dr. Backman on Absorption Says;
"Congress Is Now the Only Recourse 1
In an address recently at the fall
convention of the National Retail Dry
Goods Association in New York, Dr.
Jules Backman of New York Univer-
sity, author of the recent study on
cost absorption presented by mer-
chants to the OPA said that, "nothing
may be expected" from the OPA with
respect to cost absorption by retailers
because of that price agency's "fixed
ideas" on price control and that "Con-
gress is now the only recourse." He
declared that OPA says it has its
"marching orders," and it is now up
to Congress to change those orders.
The "top crowd" at OPA, he asserted,
knows only one type of price control,
based on their experience, and that is
controlling all prices, whereas selec-
tive price control has bee found highly
effective in a number of countries, in-
cluding Great Britain.
Reviewing the arguments presented
to OPA and the Smith committee re-
cently, with emphasis on the fact that,
while retailers showed sharp percent-
age profit increases during the war
period because of low expenses, these
costs are now due to rise, Dr. Backman
said:
"OPA is pricing manufactured goods
on what it considers to be long run
costs, thus forcing absorption at that
level and then for retailers OPA uses
short run costs as the basis for pric-
ing in order to force absorption there.
Temporary cost increases are excluded
from the manufacturer's permitted
price. Temporary cost decreases for
retailers are cited as evidence of the
ability to absorb higher costs."
Recent Changes in O.P.A.
Durable Goods Pricing
A special pricing method used by
maufacturers of consumer durable
goods who were forced to change their
productsi because of wartime shortages
of materials and parts was revoked
on November 5, 1945, the Office of
Price Administartion has announced.
From now on, manufacturers who
previously would have used this me-
thod—the second pricing method of the
consumer durable goods regulation—
will price instead under the third
method.
All applications for new or changed
models from manufacturers who have
ceiling prices already established for
comparable models now will be filed
under a single pricing technique. This
will help to speed up processing of re-
ports, OPA said.
The new action also revises the third
pricing method by directing manufac-
turers to figure their ceiling prices on
the basis of current costs rather than
March 1942 costs.
Many manufacturers are producing
goods that will require use of provi-
sions in both the consumer durable
goods regulation and the reconversion
pricing order for individual manu-
facturers. Many individual adjust-
ments on reconversion items are handled
by OPA district offices. So that these
manufactuers may have all their busi-
ness processed in one place, today's
amendment permits them to file their
reports under the third pricing me-
thod with their district offices as well.
For similar reasons, manufacturers
who price new articles on the basis of
prices already set for comparable ar-
ticles, may file their third pricing me-
thod reports with the field offices that
priced the comparable items. A corol-
lary action broadens the authority of
district and regional offices to make it
possible for them to issue pricing or-
ders or to approve prices in these cases.
These changes will not affect the
general level of prices under the reg-
ulation, which is stabilized at the
THE MUSIC TRADE REVIEW, NOVEMBER, 1945
March 1942 level, OPA said. Nor will
they have any effect on consumer prices
for furniture, bedding, housewares,
tools, small electrical appliances, lug-
gage, lamps and other goods covered
at the manufacturing level by this
regulation.
Both the second and third pricing
methods were designed to keep prices
at the same general levels, OPA said,
so a transfer from one technique to
the other will not make any appreci-
able difference.
Use of current rather than March
1942 direct costsi will generally pro-
duce the same end-prices for the pro-
ducts, but manufacturers' mark-ups
over direct costs may be reduced.
Where this is so, however, it merely
recognizes a condition that already
exists.
The change is being made because
as the current situation moves farther
and farther away from March 1942,
it becomes more difficult to obtain cost
figures for that period. In addition.,
other pricing provisions, including
some of the reconversion pricing rules,
require use of current or 1941 costs,
and it is burdensome to the manufac-
turer to have to compute still another
set of costs for 1942.
Under the revised third pricing me-
thod, a manufacturer figures the aver-
age mark-up allowed under the ceilings
for two comparable articles and ap-
plies it to the current unit direct cost
of the article to be priced. If the
manufacturers' costs for the compar-
able article have legally risen since
March 1942, his mark-up will be
smaller because his ceiling price has
not changed. When this smaller mark-
up is appied to the current cost of the
new articles, the final price is about
the same as the price derived from a
March 1942 mark-up over March 1942
cost.
Other changes follow:
A special order (Order No. 4332)
under the regulation provided a sim-
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