Reducing production costs;

              10 HASKINS & SELLS February
COST figures serve a variety of pur­poses.
Primarily, perhaps, they
constitute a basis for determining what the
selling price should be in order to yield a
satisfactory profit. Incidentally, they fur­nish
a measurement of effective operation
and information which may lead to the
checking of waste. Their greatest value
probably consists in making past perform­ance
serve as a basis for future guidance.
Just now there is much talk of reducing
costs. British industry finds it the chief
problem, we are told. But there is no
reason why it should be the chief problem
of Great Britain more than any other
country largely engaged in manufacturing.
Prices are high the world over. The
great capital destroying event which began
in August, 1914, may be indicted as the
cause. It is inconceivable that the whole
world should aid and abet, whether will­ingly
or otherwise, the casting of billions of
dollars worth of the world's resources into
a seething caldron of destruction without
the resulting rise of prices.
There were many fortunes made on the
way up to the peak. Costs, less so than in
normal times, except as they became the
basis for government contracts, were fre­quently
ignored without damaging effect
because free competition was put out of
business by the abnormal conditions which
prevailed. If ever the rule of "charge what
the traffic will bear" enjoyed complete
operation it was during the upward pull to
February, 1920.
But the inevitable has occurred. The
peak has apparently been passed. The
camel's back has been broken. The long-suffering
public has refused longer to be a
party to the rampage of high prices. A
buyer's strike has decreed that prices shall
come down.
The first step has taken place. Manu­facturers,
wholesalers, and retailers have
courageously taken their losses. The
workers, either through force of conditions
or voluntarily, are arranging to stand their
share, and education of the workers in at
least one instance is responsible for a sane
view of that group which led the members
thereof to suggest a reduction in wages.
But the end is not yet. Even though
wholesale commodity prices have fallen
Reducing Production Costs