SCHEDULE 14.-Hot plastic paint milling, drumming, and weighing costs for period Jan. 20 to June 19, 1951, inclusive SCHEDULE 15.—Canning and recanning costs for period Jan. 20 to June 19, 1951, SCHEDULE 16.-Summary of cost of operations for period Jan. 20, 1951, to June 19, 1951, inclusive FOOTNOTES 1. Direct, indirect, supervision and office labor recorded on S and A Form 285b for the accounting period February 1 to June 30, 1951, was adjusted as follows: (a) To conform to production period January 20 to June 19, 1951. (b) To include labor costs incurred by the Supply Department for the handling and warehousing of raw materials received at Mare Island Naval Shipyard for use in the manufacture of paint products. (c) To include the cost of group IV-b personnel employed at the paint manufacturing shop, but carried on the rolls of the shipyard shop super intendent. 2. Allowance for vacations, holidays, and sick leave is at the rate of 17 percent of basic straight-time compensation, which excludes overtime pay (straight time and premium). This rate, prescribed in the Bureau of Supplies and Accounts Manual, volume VI, paragraph 66357-2, for application to work performed for other military departments, is considered appropriate for use in the period of this study. 3. Allowance for Government contribution to the retirement fund is at the Civil Service Commission's reported present actuarial experience rate of 6.5 percent of basic straight-time compensation, including accrued vacations, holidays and sick leave pay, but excluding overtime pay (straight time and premium). No special consideration was given for any temporary employees who were covered by the Federal Insurance Contributions Act, and who are not presently eligible to participate in the Government's retirement plan. 4. The cost of compensation insurance is based on the net rate of $1.46 per $100 of all straight-time labor, except office labor for which a net rate $0.06 is used. These net rates, after consideration of premium refunds based on probable experience, were quoted by a major insurance carrier. 5. The depreciation rates were taken from the Bureau of Internal Revenue Bulletin "F" published in 1942, and the Accountants' Handbook, second edition. Provision for annual depreciation of buildings averaged 2.95 percent of cost. Provision for annual depreciation of machinery and equipment was based upon the normal rates set forth in the above references for the individual items of machinery and equipment, and averaged 7.81 percent of cost. In computing depreciation, the supervisory cost inspector, with one exception referred to below, accepted the costs recorded on property record cards (S and A Forms 267 and 278) maintained by the fiscal officer of the Mare Island Naval Shipyard. For those items of machinery and equipment which, by the application of recognized depreciation rates would be fully depreciated, no provision for depreciation was made. The one exception referred to above was with respect to the building presently being used for warehousing raw materials for use in the manufacture of paint products. This building was originally constructed for use as a shipfitters shop with an over-all cost for building and operating equipment of $507,840. Information contained in the files of the public works officer indicated that the material and labor costs for the construction of the building alone approximated $300,000, and it was this figure that was used as the basis for computation of the provision for depreciation, taxes, and fire insurance. 6. Fire insurance rates were secured from the local fire insurance rating bureau. Actual inspection of the physical plant was not made by them, but the following net rates were recommended on the basis of information submitted by the supervisory cost inspector, and are based on a 90 percent average clause, less 16.67 percent for 3-year policies: With the exception of the raw-material warehouse (see footnote 5 above), the insurable values of the buildings were based on 150 percent of 1940-42 (dates of acquisition) costs to compensate for present increased replacement costs. The insurable values of machinery and equipment were based on acquisition costs on the theory that accumulated depreciation has offset the difference from original costs to present replacement costs. Computed cost was the insurable value used in determining the cost of fire insurance on inventories. The "other" insurance is the cost of comprehensive public liability and property damage insurance computed at rates quoted per $100 of straight-time labor. 7. Deputy assessors for the city of Vallejo and county of Solano, Calif., without inspection of the physical plant, estimated probable assessed valuations of the real and personal properties based on cost and other information furnished to them by the supervisory cost inspector. The combined property-tax rate of the city of Vallejo and county of Solano for the fiscal year ended June 30, 1951, of $6.84 per $100 assessed value was used to determine property taxes applicable to the 5-month period under study. 8. Repair and maintenance costs are based on five-twelfths of the recorded costs for the fiscal year ended June 30, 1951, plus payroll burden (see footnotes 2, 3, and 4) applicable to the labor included therein. 9. The usage of utilities was determined from meter readings applicable to the paint manufacturing shop. Mare Island Naval Shipyard billing rates were used to determine "costs payable from current naval appropriations," and the differences between shipyard rates, and rates quoted by the supplying utility companies for independent plants of similar size were used in determining "constructive costs" of utilities. 10. In the State of California, a corporation must pay a franchise tax for the privilege of doing business. The tax is computed at 4 percent of a corporation's net earnings before Federal income and State franchise taxes. Reference to published statements of paint manufacturers indicate that total manufacturing costs and profit, approximate 65 percent, and 10 percent of sales, respectively. Since it is assumed that an operation of the scope of the paint manufacturing shop would normally be by a corporate entity the afore-mentioned percentages were used as criteria by the supervisory cost inspector in the computation of the State of California franchise tax. 11. In view of the multitudinous operations of the Mare Island Naval Shipyard, it is questionable whether any reduction in general, and administrative expenses would inure to the Government should the Government procure its requirements of paint products solely from commercial sources. However, and since cost data relative to general and administrative expenses incurred by commercial paint manufacturers could not be obtained, as a conservative measure an allowance of 5 percent of total operating costs (costs payable from current naval appropriations and constructive costs, but excluding direct material costs) has been included as general and administrative expenses. |