University of Mississippi

eGrove
Touche Ross Publications Deloitte Collection

1-1-1961

Cost accounting manual for refrigerated

warehouses;
Wayne E. Mayhew

Dale S. Bowen

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Part of the Accounting Commons, and the Taxation Commons

Recommended Citation
Mayhew, Wayne E. and Bowen, Dale S., "Cost accounting manual for refrigerated warehouses;" (1961). Touche Ross Publications. 760.
https://egrove.olemiss.edu/dl_tr/760

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COST A C C O U N T I N G MANUAL
FOR
C O L D STORAGE INDUSTRY
 C O S T A C C O U N T I N G M A N U A L

FOR

R E F R I G E R A T E D W A R E H O U S E S

PREPARED FOR THE

PACIFIC STATES COLD STORAGE WAREHOUSEMEN'S ASSOCIATION

BY

WAYNE E. MAYHEW, C. P. A.

AND

DALE S . BOWEN, C. P. A .

PARTNERS, TOUCHE, ROSS, BAILEY & SMART

CERTIFIED PUBLIC ACCOUNTANTS

SECOND PRINTING
1961
 P R E F A C E

THIS COST ACCOUNTING MANUAL FOR COLD STORAGE WAREHOUSE COMPANIES HAS BEEN PREPARED FOR
THE PACIFIC STATES COLD STORAGE WAREHOUSEMAN'S ASSOCIATION, NORTHERN CALIFORNIA GROUP. MONTHS
OF STUDY, RESEARCH AND PRACTICAL TESTS PRECEDED THE WRITING OF THE MANUAL; THIS INCLUDED DISCUS-
SIONS WITH REPRESENTATIVES OF TEN MEMBERS OF THIS GROUP. THE BASIC PRINCIPLES AND PROCEDURES
WERE ALSO DISCUSSED AT SEVERAL INDUSTRY GROUP MEETINGS. FINALLY, ADVANCE COPIES WERE RELEASED
TO MORE THAN 30 COLD STORAGE WAREHOUSE COMPANIES IN BOTH THE NORTHERN AND SOUTHERN CALIFORNIA
AREAS, WITH AN INVITATION TO EACH COMPANY TO SUBMIT COMMENTS AND SUGGESTIONS.

THE FACT THAT COLD STORAGE COMPANIES IN C A L I F O R N I A ARE UNDER THE PUBLIC UTILITIES
COMMISSION REGULATIONS HAD SOMETHING TO DO W I T H "SPARKING" THIS INDUSTRY UNDERTAKING; BUT THIS
HAS HAD LITTLE TO DO W I T H THE PRACTICAL PROBLEM OF EVOLVING A SIMPLE AND WORKABLE COST FINDING
SYSTEM. COLD STORAGE COMPANIES ANYWHERE AND EVERYWHERE CAN BENEFIT BY SUCH A SYSTEM. THERE HAS
BEEN WIDESPREAD INTEREST IN THIS PROBLEM THROUGHOUT THE UNITED STATES FOR MANY YEARS. AS EVI-
DENCE OF THIS FACT, THE FOLLOWING IS QUOTED FROM THE OPENING REMARKS OF MR. F. D. NEWELL, JR.,
WHO A C T E D AS MODERATOR FOR A PANEL DISCUSSION BEFORE THE 68TH ANNUAL MEETING OF THE NATIONAL
ASSOCIATION OF REFRIGERATED WAREHOUSES, HELD IN W A S H I N G T O N , D. C. IN APRIL, 1959.

"GENTLEMEN, WE D I D A LITTLE RESEARCH. THIS ASSOCIATION IS 68 YEARS OLD AND THERE

IS ONE SUBJECT THAT HAS BEEN ON CONVENTION AGENDAS NEARLY EVERY YEAR FOR THOSE 68 YEARS.
IT'S PROBABLY THE MOST ABUSED SUBJECT. WE A L L SIT HERE EVERY YEAR AND SAY 'LET'S DO
SOMETHING ABOUT OUR COSTS,' T H E N WE GO HOME AND DO NOTHING ABOUT IT IN MOST CASES.

"IN THE HOPE THAT WE COULD STIMULATE A NEW A P P R O A C H TO THIS THING WE ARE GOING
TO TACKLE IT FROM A LITTLE DIFFERENT STANDPOINT. BUT , BASICALLY IT IS THE SAME
THING YOU HAVE BEEN TALKING ABOUT FOR 68 YEARS."

THIS MANUAL SHOULD BE CONSIDERED AS TENTATIVE IN THE SENSE THAT SOME MODIFICATIONS
WILL BE NECESSARY FROM TIME TO TIME AS FUTURE EXPERIENCE PROVES THE NEED FOR SUCH MODIFICATIONS.
THIS IS PARTICULARLY TRUE OF THE COST RELATIONSHIP FACTORS SHOWN FOR LOT SIZES, AS THEY APPLY
TO BOTH STORAGE AND HANDLING OPERATIONS. IT WILL BE A SIMPLE MATTER TO SUBSTITUTE AND INSERT
REVISED OR NEW P A G E S , OR EVEN REVISED SECTIONS, IN THIS LOOSELEAF BINDER; AS AND WHEN IT BECOMES
NECESSARY OR DESIRABLE.

THE BASIC UNIT COST FINDING CONCEPT SET FORTH HEREIN WILL BE BOTH NEW A N D REVOLUTIONARY
FOR THE COLD STORAGE INDUSTRY. HOWEVER, THE USE OF COST RELATIONSHIP FACTORS IS NOT A NEW TECH-
NIQUE; IT HAS BEEN USED SUCCESSFULLY FOR MORE THAN 20 YEARS IN THE FOOD PROCESSING INDUSTRY;
PARTICULARLY IN THE CANNING AND FROZEN FOOD INDUSTRIES, BOTH OF WHICH INVOLVE UNIT COSTS FOR
NUMEROUS SIZE AND GRADE ITEMS, FOR MANY DIFFERENT PRODUCTS. IN RECENT YEARS IT HAS ALSO BEEN
ADAPTED TO THE PROBLEM OF UNIT COST FINDING FOR THE FIR PLYWOOD INDUSTRY WHICH INVOLVES NUMEROUS
ITEMS OF PLYWOOD PANELS, BY GRADE AND THICKNESS. THE APPLICATION OF THIS SAME GENERAL TECHNIQUE
TO THE PROBLEM OF UNIT COST FINDING FOR COLD STORAGE WAREHOUSES IS EXPLAINED AND ILLUSTRATED IN
SECTION V OF THIS MANUAL; REFER PARTICULARLY TO PAGE 6 OF SECTION V.

THE IMPORTANCE OF THE UNIT COST FINDING TECHNIQUE REFERRED TO IN THE PRECEDING PARAGRAPH
CANNOT BE OVEREMPHASIZED, BECAUSE IT IS THE TOOL WHICH IS SO EFFECTIVELY USED TO SIMPLIFY A COM-
PLEX PROBLEM; AND SIMPLICITY IS ALL-IMPORTANT. BY CONVERTING THE UNITS HANDLED AND STORED (IN
EACH DEPARTMENT) BY COST RELATIONSHIP FACTORS WHICH PROPERLY REFLECT THE TWO M O S T IMPORTANT COST
VARIABLES - (1) DENSITY, (2) LOT SIZE - THE UNIT COSTS CAN BE EXPRESSED IN TERMS OF COST PER 100#
UNIT. IF THE COST RELATIONSHIP FACTORS ARE CORRECT, THEN THE COST PER UNIT FOR THE COMMON DENOM-
INATOR I T E M W I L L A L S O BE ACCURATE. THIS SIMPLE TECHNIQUE MAKES IT POSSIBLE TO DETERMINE UNIT
COSTS MOSTLY BY ARITHMETICAL COMPUTATIONS, RATHER THAN BY DETAILED AND CUMBERSOME BOOKKEEPING
RECORDS.

THE AUTHORS OF THIS MANUAL HAVE LITTLE DOUBT THAT THE GENERAL PRINCIPLES AND PROCEDURES
OUTLINED HEREIN FOR COLD STORAGE WAREHOUSES CAN BE READILY ADAPTED TO THE PRACTICAL COST ACCOUNTING
NEEDS OF THE DRY STORAGE INDUSTRY, THE MEMBERS OF THAT INDUSTRY ARE ALSO IN THE BUSINESS OF
SELLING SPACE, BOTH AS TO THE STORAGE ROOMS, AND AS TO THE PALLETS WHICH CARRY THE MERCHANDISE IN
AND OUT OF THE WAREHOUSE. THE TWO IMPORTANT COST VARIABLES IN THAT INDUSTRY ARE ALSO (1) DENSITY,
(2) LOT SIZE.
 C O S T A C C O U N T I N G M A N U A L

FOR

R E F R I G E R A T E D W A R E H O U S E S

T A B L E OF C O N T E N T S

SECTION I - INTRODUCTORY;

SIMPLICITY AN IMPORTANT OBJECTIVE - UNIFORMITY - NEED FOR A COMMON UNIT OF MEASURE -

DENSITY, AN IMPORTANT UNIT COST VARIABLE - LOT S I Z E S , A VARIABLE UNIT COST FACTOR - PARTIAL LOT

DELIVERIES - SPECIAL SERVICES - INCIDENTAL SERVICES,

SECTION I I - DEPARTMENTAL OPERATIONS;

FREEZER STORAGE - COOLER STORAGE - HANDLING - QUICK FREEZING - REFRIGERATION - SPECIAL

SERVICES - NON-UTILITY.

SECTION I I I - COST ALLOCATION PROBLEMS AND PROCEDURES;

POWER AND REFRIGERATION, FIXED CHARGES - MAINTENANCE AND REPAIRS, SUPERINTENDENCE AND

INDIRECT LABOR - GENERAL OVERHEAD.

SECTION IV - OPERATING STATEMENTS AND GENERAL ACCOUNTING PROBLEMS:

SEASONAL OPERATIONS - DIRECT COSTS NOT ANNUALIZED - ANNUALIZING FIXED CHARGES -

REFRIGERATION COSTS ANNUALIZED - GENERAL OVERHEAD ANNUALIZED - DEFERRED INCOME - ILLUSTRATIVE

OVER-ALL OPERATING STATEMENT - ILLUSTRATIVE DEPARTMENTAL OPERATING STATEMENTS - ILLUSTRATIVE

SCHEDULES, REFRIGERATION, POWER AND FIXED CHARGES.

SECTION V - UNIT COST FINDING;

QUANTITIES HANDLED OR STORED - INCIDENTAL OR ACCESSORIAL REVENUES AND COSTS - PARTIAL

LOT DELIVERY CHARGES - SPACE U T I L I Z A T I O N - ILLUSTRATIVE SCHEDULES, CONVERSION WORKSHEET, COST

ALLOCATION FACTORS, UNIT COSTS (FREEZER STORAGE, COOLER STORAGE, HANDLING, QUICK FREEZING) -

COMPARATIVE UNIT REVENUES AND COSTS.

SECTION VI - CHART OF ACCOUNTS:

SUMMARY CHART OF OPERATING ACCOUNTS - DETAIL CHART OF OPERATING ACCOUNTS - DESCRIP-

T I V E CHART OF OPERATING ACCOUNTS, GENERAL AND ADMINISTRATIVE EXPENSE ACCOUNTS, OTHER INCOME

AND EXPENSE.
 SECTION I - INTRODUCTORY

THIS MANUAL OF ACCOUNTING FOR THE CALIFORNIA COLO STORAGE INDUSTRY WILL RECOMMEND

AND ILLUSTRATE PROCEDURES FOR THE PREPARATION OF DEPARTMENTAL OPERATING STATEMENTS, AND THE

DETERMINATION OF DEPARTMENTAL UNIT COSTS. THE ACCOUNTING PROBLEMS ARE BASICALLY THE SAME FOR

CALIFORNIA AS FOR A N Y OTHER AREA, THE PRINCIPAL DIFFERENCE BEING THE FACT THAT IN CALIFORNIA

THE RATES ARE REGULATED BY THE PUBLIC UTILITIES COMMISSION.

IN T H I S INTRODUCTORY SECTION THE ACCOUNTING PROBLEMS AND OBJECTIVES ARE DISCUSSED IN

VERY GENERAL TERMS; THE SOLUTIONS ARE DISCUSSED AND ILLUSTRATED IN LATER SECTIONS.

IT W I L L BE OBVIOUS, OF COURSE, THAT THE ACCOUNTING PROCEDURES OUTLINED IN THIS MANUAL

WILL NEED TO BE MODIFIED TO MEET THE PARTICULAR NEEDS OF EACH COMPANY. EACH COMPANY WILL HAVE

PROBLEMS AND PRACTICES THAT ARE PECULIAR TO ITSELF AND THE ACCOUNTING SYSTEM MUST BE TAILORED TO

FIT THE NEEDS OF EACH COMPANY. THIS CAN BE DONE WITHOUT VIOLATING THE BASIC AND FUNDAMENTAL

PRINCIPLES WHICH ARE OUTLINED HEREIN.

A SIGNIFICANT DIFFERENCE IN COLD STORAGE WAREHOUSES |S IN THE TYPE OF OPERATION; I.E.,

"PRODUCTION" WAREHOUSES AND "DISTRIBUTION" WAREHOUSES. HOWEVER, THEY CANNOT BE CLASSIFIED INTO

TWO D I S T I N C T GROUPS BECAUSE THERE ARE MANY "IN-BETWEEN" TYPES. THE ACCOUNTING PROCEDURES OUTLINED

HEREIN CAN BE ADAPTED TO BOTH T Y P E S WITHOUT VIOLATING THE PRINCIPLES THAT WILL ACCOMPLISH

UNIFORMITY.

SIMPLICITY - AN IMPORTANT OBJECTIVE

THE PROBLEM OF UNIT COST FINDING FOR THE COLD STORAGE INDUSTRY IS INHERENTLY COMPLEX;

THIS IS BECAUSE OF THE NUMEROUS VARIABLES DISCUSSED HEREIN WITH RESPECT TO LOT SIZES AND

DENSITIES. IT IS POSSIBLE, HOWEVER, TO REDUCE THIS COMPLEX PROBLEM TO A SIMPLE SOLUTION; AND

THIS IS THE PRIMARY PURPOSE OF THIS MANUAL. THE MOST IMPORTANT STEP |N A C C O M P L I S H I N G THIS

OBJECTIVE IS TO (1) ADOPT A COMMON UNIT OF MEASURE AND (2) DEVELOP SUBSTANTIALLY ACCURATE COST

ALLOCATION FACTORS THAT WILL ENABLE THE WAREHOUSEMAN TO CONVERT ALL THE MERCHANDISE HANDLED

OR STORED (ACTUAL WEIGHT) TO THE COMMON D E N O M I N A T O R UNIT OF MEASURE. THESE TWO STEPS ARE SO

CLOSELY RELATED THAT IN ACTUAL FACT THEY REPRESENT ONE PROBLEM AND ONE SOLUTION.

WHEN THE UNITS HANDLED OR STORED (100# UNITS) ARE RECORDED AND COVERTED TO COMMON

DENOMINATOR UNITS, THE PROBLEM OF UNIT COST FINDING IS THEN ESSENTIALLY THE SAME (FOR EXAMPLE)

AS WOULD BE THE CASE FOR A WAREHOUSE THAT HANDLES ONLY DRY STORAGE WHEAT, MEASURED IN TERMS

OF BUSHELS OR TONS. THE VARIOUS MAJOR ELEMENTS OF COST, DIVIDED BY THE NUMBER OF BUSHELS

HANDLED OR STORED IS THE COST PER BUSHEL FOR THAT OPERATION. WHEN THE UNIT COSTS FOR ALL

OF THE FUNCTIONAL DEPARTMENTS ARE ADDED TOGETHER THE RESULT IS THE GRAND TOTAL COST PER BUSHEL

FOR HANDLING AND STORING WHEAT. THIS IS COST A C C O U N T I N G IN ITS SIMPLEST FORM.

SECTION I - PAGE 1
 IN ORDER TO CONVERT FROM A C T U A L 100# UNITS TO EQUIVALENT 100# UNITS, IT IS NECESSARY

TO PROVIDE FOR QUANTITY RECORDS WHICH WILL SHOW T H E NUMBER OF UNITS FLOWING THROUGH EACH DEPART-

MENT FOR EACH ACCOUNTING PERIOD. AN ACCURATE RECORD OF QUANTITIES IS THE "OTHER- HALF" OF ANY

RELIABLE UNIT COST FINDING SYSTEM. THE COST SYSTEM OUTLINED HEREIN WILL PROVIDE FOR A STRICTLY

ACCURATE ANALYSIS OF CUSTOMER BILLINGS IN TERMS OF ACTUAL AND CONVERTED 100# UNITS. THIS RECORD

OF QUANTITIES, TOGETHER WITH A CONDENSED FUNCTIONAL CHART OF OPERATING ACCOUNTS WILL MAKE THE

COST FINDING PROCEDURES VERY SIMPLE INDEED.

REVENUES MUST ALSO BE SEGREGATED BY FUNCTIONAL DEPARTMENTS SO THAT REVENUES PER BASIC

100# UNIT CAN BE DETERMINED IN THE SAME MANNER, AND BY THE USE OF THE SAME ALLOCATION FACTORS AS

FOR THE UNIT COSTS. THIS IS IMPORTANT BECAUSE IT ACCOMPLISHES THE ULTIMATE OBJECTIVE OF ANY UNIT

COST FINDING SYSTEM, WHICH IS TO BE ABLE TO COMPARE UNIT COSTS WITH UNIT SELLING PRICES. THE

SYSTEM OUTLINED HEREIN WILL ENABLE THE EXECUTIVE TO COMPARE THE BASIC UNIT COSTS WITH THE BASIC

UNIT SELLING PRICE (OR REVENUE) FOR THE SAME BASIC 100# UNIT. THIS IS POSSIBLE BECAUSE THE TOTAL

COST OF THE BASIC UNIT FOR EACH MAJOR DEPARTMENT IS A TRUE INDEX TO THE COST OF ALL ITEMS FLOWING

THROUGH THE DEPARTMENT; AND THE SAME IS TRUE OF THE REVENUE PER BASIC UNIT. THE TECHNICAL PRO-

CEDURES FOR ACCOMPLISHING THESE ULTIMATE OBJECTIVES WILL BE MADE CLEAR BY THE ILLUSTRATIVE STATE-

MENTS AND COMPUTATIONS CONTAINED IN THIS MANUAL.

OTHER CONSIDERATIONS THAT WILL CONTRIBUTE IMPORTANTLY TO THE SIMPLIFICATION OF THESE

COST ACCOUNTING PROCEDURES ARE (1 ) A CONDENSED CHART OF OPERATING ACCOUNTS. GREAT DETAIL I S NOT

A VIRTUE, AND DOES NOT HAVE ANY APPEAL TO THE EXECUTIVE WHO STUDIES AND MAKES DECISIONS BASED

UPON RELIABLE COST COMPUTATIONS, (2) ONLY MAJOR OPERATING DEPARTMENTS ARE RECOGNIZED AND PRO-

VIDED FOR IN THE CHART OF ACCOUNTS AND IN THE OPERATING AND UNIT COST STATEMENTS. THE M A T T E R OF

DEPARTMENTALIZATION HAS NOT BEEN EXTENDED BEYOND THE PRACTICAL NEEDS OF A COLD STORAGE WAREHOUSE

COMPANY.

UNIFORMITY

SINCE COST ACCOUNTING IS NOT AN EXACT SCIENCE IT IS NECESSARY TO FORMULATE ACCOUNTING

RULES FOR DETERMINING UNIT COSTS. THESE RULES ARE BASED UPON REASON, LOGIC, AND COMMON SENSE;

SOMEWHAT IN THE SAME MANNER AS PROFESSIONAL ACCOUNTANTS HAVE DONE IN ESTABLISHING THE RULES OF

SO-CALLED "GOOD ACCOUNTING PRACTICE," WITH RESPECT TO THE PREPARATION OF BALANCE SHEETS AND

INCOME STATEMENTS. THE RULES WHICH THE ACCOUNTING PROFESSION HAS GENERALLY ADOPTED FOR ITS

GUIDANCE IN DETERMINING UNIT COSTS ARE NECESSARILY SO BROAD THAT IT BECOMES NECESSARY FOR THE

INDIVIDUAL ACCOUNTANT TO ADAPT THEM TO THE NEEDS OF A PARTICULAR COMPANY. THIS PROCESS OF

ADAPTING GOOD COST ACCOUNTING PRINCIPLES TO A PARTICULAR PROBLEM LEADS TO A MULTIPLICITY OF

SOLUTIONS FOR DIFFERENT COMPANIES IN THE SAME INDUSTRY, SIMPLY BECAUSE THE PROBLEM IS SOLVED BY

DIFFERENT ACCOUNTANTS. THIS LACK OF UNIFORMITY IS THE ONLY THING THAT IS A "UNIFORM"

CHARACTERISTIC OF THE COST SYSTEMS (IF ANY) NOW B E I N G USED BY THE MEMBERS OF THE COLD STORAGE

WAREHOUSE INDUSTRY.

SECTION I - PAGE 2
 THERE IS A GREAT AND IMPELLING NEED FOR A UNIFORM SYSTEM OF COST ACCOUNTING FOR THIS

INDUSTRY, AND THE REASONS ARE SO OBVIOUS THAT IT WILL NOT BE NECESSARY TO D O MORE THAN MAKE A

BRIEF COMMENT ON T H E SUBJECT. In CALIFORNIA, FOR EXAMPLE, THE INDUSTRY HAS NOT BEEN ABLE TO

COMPILE DEPARTMENTAL STATEMENTS, NOR UNIT COST DATA IN A UNIFORM MANNER FOR THE PURPOSE OF

SUPPORTING APPLICATIONS FOR RATE ADJUSTMENTS. IN OTHER AREAS, EACH WAREHOUSE COMPANY MAKES ITS

OWN R A T E S , AND IN MOST INSTANCES THE WAREHOUSEMAN IS GUIDED ENTIRELY BY HIS COMPETITORS' RATES,

WITHOUT THE BENEFIT OF A COMPARISON WITH HIS OWN C O S T S . THIS IS BECAUSE HE MAKES NO ATTEMPT

TO DETERMINE UNIT COSTS. AS TO THE FEW COMPANIES THAT DO D E T E R M I N E COSTS, THEIR RESULTS ARE NOT

COMPARABLE BECAUSE OF THE LACK OF UNIFORMITY IN THEIR COST ACCOUNTING PROCEDURES; IF THEIR COSTS

ARE DETERMINED IN A DIFFERENT MANNER THEY MAY HAVE VASTLY DIFFERENT AND UNREALISTIC IDEAS AS TO

WHAT THE RATES SHOULD BE. THE PRIMARY PURPOSE OF A UNIFORM COST ACCOUNTING SYSTEM IS TO HELP THE

MEMBERS OF AN INDUSTRY TO LEARN HOW T O SPEAK A COMMON L A N G U A G E , AND THUS BECOME MORE INTELLIGENT

COMPETITORS.

REDUCED TO ITS SIMPLEST TERMS A UNIFORM COST FINDING SYSTEM FOR THE COLD STORAGE

INDUSTRY SHOULD INCLUDE THE FOLLOWING:

1. A UNIFORM CHART OF ACCOUNTS; ALL REVENUES AND COST ACCOUNTS DESCRIBED SO SPECIFICALLY
THAT THEY WILL MEAN THE SAME THING TO ALL PEOPLE. THIS WILL ALSO INCLUDE A DEFINITION
AND DESCRIPTION OF THE MAJOR OPERATING DEPARTMENTS FOR WHICH UNIT COSTS ARE TO BE
DETERMINED.

2. A PRESCRIBED METHOD OF ALLOCATING AND/OR PRORATING VARIOUS ELEMENTS OF COST TO THE MAJOR
OPERATING DEPARTMENTS; THIS WILL INCLUDE ALL ELEMENTS OF COST, BOTH D I R E C T AND IN-
DIRECT, SO THAT THE FINAL STATEMENTS WILL SHOW THE GRAND TOTAL COST.

3. THE SELECTION OF A COMMON U N I T OF MEASURE FOR ALL PRODUCTS HANDLED AND STORED, TOGETHER
WITH A PRACTICAL METHOD OF COMPILING RELIABLE STATISTICS OF THE QUANTITIES OF THESE
UNITS FLOWING THROUGH EACH MAJOR DEPARTMENT DURING THE ACCOUNTING PERIOD.

4. THE DETERMINATION OF SUBSTANTIALLY ACCURATE COST RELATIONSHIP FACTORS WHICH WILL PROPERLY
REFLECT THE TWO MAJOR VARIABLES IN UNIT COSTS, WHICH ARE: LOT SIZE AND DENSITY. THIS
TECHNIQUE WILL MAKE IT POSSIBLE TO ACHIEVE THE END RESULTS BY THE USE OF ARITHMETICAL
COMPUTATIONS RATHER THAN BY ELABORATE AND D E T A I L E D COST ACCOUNTING RECORDS.

5. A COMPLETE SET OF DEPARTMENTAL OPERATING STATEMENTS AND UNIT COST STATEMENTS EXPLAINING
AND ILLUSTRATING THE ACCOUNTING AND UNIFORM COST FINDING SYSTEM. This IS THE K|ND OF
ASSISTANCE WHICH THE INDIVIDUAL COMPANY WILL NEED IN ORDER TO MAKE THE S Y S T E M WORK FOR
HIM AND TO ACHIEVE UNIFORMITY FOR THE INDUSTRY.

THE PURPOSE FOR OUTLINING THE ABOVE LISTED ESSENTIAL FEATURES OF A UNIFORM COST

ACCOUNTING SYSTEM IS THAT THESE ARE THE OBJECTIVES OF THIS MANUAL.

SECTION I - PAGE 3
NEED FOR A COMMON UNIT OF MEASURE

ONE OF THE CALIFORNIA INDUSTRY'S MOST DIFFICULT ACCOUNTING PROBLEMS ARISES OUT OF THE

FACT THAT THE TARIFF REGULATIONS DO NOT RECOGNIZE A COMMON UNIT OF MEASURE. THE STORAGE AND

HANDLING RATES ARE EXPRESSED IN TERMS OF MANY D I F F E R E N T KINDS OF UNITS, SUCH AS, 100#, CUBIC

FEET, CASES, CANS, BOXES, BARRELS, ETC. THE TARIFF REGULATIONS HAVE BEEN ISSUED IN SECTIONS FOR

VARIOUS KINDS OF PRODUCTS, AND IN MANY INSTANCES THERE ARE THREE DIFFERENT UNITS OF MEASURE FOR

THE SAME PRODUCT. FOR EXAMPLE, IN THE TARIFF REGULATION FOR "DECIDUOUS FRUITS, BERRIES, AND

PINEAPPLE," THE FREEZER STORAGE RATES ARE SHOWN FOR THE FOLLOWING UNITS OF MEASURE:

1. BOXES, CARTONS, CRATES, BARRELS, ETC. - RATE PER 100#

2. METAL CANS OF CERTAIN SPECIFIED SIZES - RATE PER CAN
3. ALL OTHER CONTAINERS - RATE PER CU. F T .

IT IS SIGNIFICANT THAT "ALL OTHER" CONTAINERS ARE BILLED AT A RATE PER CUBIC FOOT,

BECAUSE THE WAREHOUSEMAN IS IN THE BUSINESS OF SELLING REFRIGERATED SPACE. IT NATURALLY FOLLOWS,

THEREFORE, THAT THIS IS THE MOST LOGICAL UNIT OF MEASURE FOR COST FINDING PURPOSES. THE MOST

COMMONLY USED UNIT OF MEASURE IS 100#, ALTHOUGH ALL OF THE OTHER UNITS LISTED ABOVE ARE USED FOR

CERTAIN PRODUCTS. THE 100# UNIT OF MEASURE WILL PROVE TO BE THE MOST PRACTICAL FOR UNIT COST

FINDING PURPOSES, AND THE REASON FOR THIS CONCLUSION WILL BE MADE CLEAR IN THIS MANUAL OF COST

ACCOUNTING PROCEDURES. THE COMMON UNIT OF MEASURE (100#) WILL BECOME THE BASIC UNIT OF MEASURE,

AFTER IT HAS BEEN ADJUSTED FOR DENSITY AND LOT SIZE WHICH MEANS THAT THE COMMON D E N O M I N A T O R UNIT

IS THE EQUIVALENT OF CUBIC FEET.

DENSITY, AN IMPORTANT UNIT COST VARIABLE

NEARLY ALL OF THE TARIFF REGULATIONS PROVIDE FOR RATES THAT VARY ACCORDING TO THE

DENSITY OF THE PRODUCT; THUS RECOGNIZING THE IMPORTANT FACT THAT THE WAREHOUSEMAN IS IN THE

BUSINESS OF SELLING REFRIGERATED SPACE. REDUCED TO ITS SIMPLEST TERMS THIS MEANS THAT THE COST

OF STORING PACKAGE A - ONE CU. FT. IN SIZE AND WEIGHING 20# WILL BE THE SAME AND SHOULD HAVE THE

SAME STORAGE RATE (PER PACKAGE) AS PACKAGE B, WEIGHING AND ALSO MEASURING ONE CU. FT. THE

TARIFF RATES RECOGNIZE THIS FUNDAMENTAL COST PRINCIPLE; BUT HERE AGAIN THERE IS A LACK OF

UNIFORMITY IN THE MANNER IN WHICH THE RATE STRUCTURE HAS BEEN APPLIED TO DIFFERENT PRODUCTS.

FOR EXAMPLE, ALL OF THE FOLLOWING DENSITY GROUPINGS ARE FOUND IN THE PRESENT

REGULATIONS, FOR VARIOUS PRODUCTS:

1. LESS THAN 15# PER CU. F T . - 15 TO 25# - OVER 25#

2. LESS THAN 20# PER CU. F T . - OVER 20#
3. LESS THAN 15# PER CU. F T . - 15 TO 20# - OVER 20#

THIS IS NOT A COMPLETE L I S T , BUT THESE ARE THE MOST COMMONLY USED RANGE GROUPINGS

ACCORDING TO DENSITY.

SECTION I - PAGE 4
 IN ACTUAL PRACTICE, THE WAREHOUSEMAN RECEIVES THE MERCHANDISE IN TERMS OF ACTUAL

WEIGHTS, OR IN TERMS OF PACKAGES THAT ARE READILY CONVERTIBLE TO ACTUAL WEIGHTS. THE VARIATION

IN COST ACCORDING t o DENSITY CAN BE COMPUTED IN A S C I E N T I F I C A L L Y ACCURATE MANNER. FOR PRACTICAL

ACCOUNTING PURPOSES, THE DENSITY RANGE GROUPINGS NEED NOT COVER MORE THAN 5 DENSITY POINTS, I.E.,

FROM 15 TO 20# PER CU. F T . , 20 TO 25# PER CU. F T . , ETC. IN DOING T H I S THERE IS AN ASSUMPTION

WITH RESPECT TO THE AVERAGE DENSITY FOR EACH RANGE GROUP. FOR EXAMPLE, FOR THE 15 TO 20# RANGE

GROUP THE AVERAGE IS ASSUMED TO BE 17.5 cu. FT.; foR THE 20 TO 25# RANGE GROUP THE AVERAGE IS

ASSUMED TO BE 22.5# PER CU. F T . THE FOLLOWING IS A TABLE SHOWING THE COST ALLOCATION FACTORS

FOR EACH OF THE SEVEN SUGGESTED DENSITY RANGE GROUPS:

Assumed Cost
Density Average Allocation
Range Group Density Factor

Under 15# per cu. . f t . . 13.5 2.00

15 TO 20# PER CU. .FT. . 17.5 1.50
20 TO 25# PER CU. FT. 22.5 1.25
25 TO 30# PER CU. FT. 27.5 1.00
30 TO 35# PER CU. FT. 32.5 .85
35 TO 40# PER CU . FT . 37.5 .75
Over 40# per c u . ft. 42.5 .65

The ASSUMED AVERAGES WILL BE ONLY APPROXIMATELY CORRECT; THE ACTUAL AVERAGE COULD VARY

SLIGHTLY, DEPENDING UPON THE PRODUCT. FOR THIS REASON, IT SEEMS PERMISSIBLE TO "ROUND OFF" THE

COST ALLOCATION FACTORS; THIS HAS BEEN DONE IN COMPUTING THE COST ALLOCATION FACTORS SHOWN IN

THE RIGHT-HAND COLUMN OF THE ABOVE TABLE. ALSO, IT IS REASONABLE TO ASSUME THAT IF THIS TABLE

IS SUBSTANTIALLY ACCURATE FOR ANY ONE PRODUCT, THEN IT SHOULD BE APPLICABLE TO ALL PRODUCTS ALIKE.

THERE IS NO N E E D TO PROVIDE TARIFF RATES BY PRODUCTS NOR TO DETERMINE UNIT COSTS BY PRODUCTS.

THESE COST ALLOCATION FACTORS ARE APPLICABLE TO COOLER STORAGE AND FREEZER STORAGE.

BY APPLYING THE FACTORS TO THE ACTUAL WEIGHT STORED, THE ACTUAL WEIGHT CAN BE CONVERTED TO THE

EQUIVALENT WEIGHT. THUS, THE VARIABLE DUE TO DIFFERENCES IN DENSITY IS ELIMINATED, AND THE

CONVERTED WEIGHT (PER 100#) BECOMES THE COMMON D E N O M I N A T O R UNIT OF MEASURE FOR COMPUTING UNIT

COSTS.

SPACE/WEIGHT RELATIONSHIP ALSO IS INVOLVED IN THE DETERMINATION OF COST ALLOCATION

FACTORS FOR HANDLING AND FOR QUICK FREEZING. HOWEVER, IN THE CASE OF THESE DEPARTMENTS THE

DENSITY FACTORS MUST BE ADJUSTED TO RECOGNIZE HANDLING TIME PER PALLET AND FREEZING TIME.

(SEE S E C T ION V).

LOT S I Z E S - A VARIABLE UNIT COST FACTOR

NEARLY ALL OF THE TARIFF REGULATIONS PROVIDE FOR RATES THAT VARY ACCORDING TO THE SIZE

OF THE LOT, RECOGNIZING THE IMPORTANT FACT THAT SMALLER LOTS ARE MORE COSTLY TO HANDLE OR STORE

THAN LARGE LOTS. HOWEVER, THERE IS A LACK OF UNIFORMITY AND CONSISTENCY WITH RESPECT TO THE

Section I - Page 5
"BREAKING POINT" FOR LOT S I Z E S . FOR EXAMPLE, ALL OF THE FOLLOWING RANGE GROUPINGS FOR LOT SIZES

ARE FOUND IN THE PRESENT REGULATIONS, FOR DIFFERENT PRODUCTS:

1. LESS THAN 5,000# - 5,000 TO 20,000# - OVER 20,000#

2. LESS THAN 10,000# - 10,000 TO 20,000# - OVER 20,000#
3. LESS THAN 5,000# - OVER 5,000#
LESS THAN 2,000# - OVER 2,000#
5. LESS THAN 2,000# - 2,000 TO 20,000# - OVER 20,000#

THE ABOVE IS NOT A COMPLETE L I S T , BUT IT WILL BE SUFFICIENT TO ILLUSTRATE THE LACK OF

UNIFORMITY IN THE PRESENT INDUSTRY PRACTICE. IT IS DIFFICULT TO JUSTIFY THESE VARIATIONS BECAUSE

IT IS LOGICAL TO ASSUME THAT THE DIFFERENCES IN COST ARE NOT RELATED TO THE PRODUCT IN THE CON-

TAINER, BUT RATHER TO THE SIZE OF THE ENTIRE LOT.

IT IS POSSIBLE TO DEVELOP AND USE A SET OF COST ALLOCATION FACTORS REPRESENTING SUB-

STANTIALLY ACCURATE COST DIFFERENTIALS ACCORDING TO LOT S I Z E . AFTER THESE DIFFERENTIALS HAVE

BEEN DETERMINED THEY SHOULD BE ADOPTED AND USED IN A UNIFORM AND CONSISTENT MANNER FOR ALL PRO-

DUCTS A L I K E . THE FOLLOWING TABLE OF COST ALLOCATION FACTORS IS PROPOSED FOR COOLER STORAGE AND

FREEZER STORAGE:

COST
LOT S I Z E ALLOCATION
RANGE GROUP FACTOR

UNDER 500# 6.00

500# TO 1,000# 3.00
1,000# TO 2,000# 1 .50
2,000# TO 5,000# 1 .25
5,000# TO 10,000# 1 .05
10,000# TO 25,000# 1 .00
OVER 25,000# .95
WHILE THESE SUGGESTED COST DIFFERENTIALS ARE NOT REPRESENTED TO BE 100% ACCURATE, THEY
ARE SUBSTANTIALLY CORRECT, AND THEIR USE BY AN INDUSTRY WILL ACCOMPLISH A DEGREE OF UNIFORMITY

THAT WILL ENABLE EACH COMPANY TO MAKE SIGNIFICANT COMPARISONS OF HIS OWN COSTS WITH INDUSTRY

GROUP AVERAGES, FOR THE SAME AREA. THEY WILL ALSO MAKE IT POSSIBLE FOR THE WAREHOUSEMAN TO COM-

PARE HIS OWN COSTS FROM YEAR TO YEAR.

LOT SIZE FACTORS FOR HANDLING ARE BASED ON TIME REQUIREMENTS, WHEREAS LOT SIZES IN

STORAGE INVOLVE UNOCCUPIED SPACE. NEVERTHELESS, THE FACTORS PRESENTED IN SECTION V FOR HANDLING

ARE SIMILAR TO THOSE LISTED ABOVE. IN QUICK FREEZING LOT SIZE IS NOT REGARDED AS A MATERIAL

COST CONSIDERATION.

PARTIAL LOT DELIVERIES

IT IS STANDARD PRACTICE IN THE INDUSTRY TO MAKE PARTIAL DELIVERIES FROM A PARTICULAR LOT

IN A "DISTRIBUTION" OPERATION THIS MAY EXTEND TO ASSEMBLING SMALL QUANTITIES FROM EACH OF SEVERAL

LOTS. BOTH OF THESE SITUATIONS CREATE A SPECIAL COST ACCOUNTING PROBLEM SINCE THE LOT SIZE CLAS-

SIFICATION IS CUSTOMARILY BASED UPON THE I N I T I A L SIZE OF THE LOT. THE DIMENSIONS OF THIS PROBLEM

ARE REDUCED TO A CONSIDERABLE EXTENT BY THE FACT THAT MERCHANDISE DELIVERED IN SMALL QUANTITIES IS

RECEIVED IN SMALL LOTS.

SECTION I - PAGE 6
 TO FURTHER COMPENSATE FOR LOWER SPACE UTILIZATION RESULTING FROM PARTIAL LOTS IN STORAGE,

IT IS PROPOSED IN THIS MANUAL THAT THE LOT SIZE RANGE GROUP CLASSIFICATION FOR STORAGE DEPARTMENTS

ULTIMATELY BE BASED ON THE DECLINING BALANCE IN A LOT. IN THIS MANNER, INCREASING UNIT STORAGE

COST AS A LOT DIMINISHES IN SIZE IS RECOGNIZED IN THE SYSTEM BY APPLYING HIGHER COST ALLOCATION

FACTORS.

IN T H E CASE OF HANDLING IT APPEARS THAT THE ONLY PRACTICAL METHOD IS TO DETERMINE THE

LOT SIZE CATEGORY ON THE BASIS OF THE INITIAL SIZE OF THE LOT. THEREFORE, WE R E C O M M E N D THAT THE

ADDITIONAL COST OF PARTIAL DELIVERIES BE RECOVERED BY AN EXTRA CHARGE FOR EACH DELIVERY, OR FOR

DELIVERIES UNDER CERTAIN SIZE, OR SOME COMBINATION THEREOF. THIS AND OTHER PROBLEMS RELATING TO

LOT SIZE ARE DISCUSSED MORE FULLY IN OTHER SECTIONS OF THIS MANUAL.

MAJOR CONTRACT LABOR OPERATIONS - AND OTHER SIMILAR DEPARTMENTS

THERE ARE CERTAIN SPECIAL SERVICES OPERATIONS THAT INVOLVE A SUBSTANTIAL AMOUNT OF DIRECT

LABOR; IN EFFECT THEY ARE CONTRACT LABOR OPERATIONS, AND SHOULD BE TREATED SEPARATELY, SO THAT BOTH

COSTS AND REVENUES CAN BE SEGREGATED FROM T H E REGULAR HANDLING DEPARTMENT.

EXAMPLES OF SUCH MAJOR HANDLING SERVICES ARE:

1. LOADING AND UNLOADING CARS OR TRUCKS

2. PACKAGING OR OTHER SPECIAL HANDLING OF PRODUCTS IN CONNECTION WITH THE QUICK FREEZING
OPERATIONS

THESE ARE OPERATIONS WHICH ARE NORMALLY PERFORMED BY THE CUSTOMER, BUT SOMETIMES CON-

TRACTED TO THE WAREHOUSEMAN. THE CHARGES FOR SUCH SERVICES ARE NOT RELATED TO DENSITY, NOR TO

LOT SIZES, WHICH IS AN ADDITIONAL REASON FOR EXCLUDING THE COSTS AND REVENUES FROM THE REGULAR

HANDLING DEPARTMENT.

SOME WAREHOUSE COMPANIES MAY HAVE OTHER OPERATING DEPARTMENTS THAT ARE ONLY INCIDENTALLY

RELATED (OR NOT AT ALL RELATED) TO THE COLD STORAGE BUSINESS. IN CALIFORNIA SUCH OPERATIONS ARE

DESIGNATED "NON-UTILITY OPERATIONS." FOR EXAMPLE, MAKING AND SELLING ICE; ICING REFRIGERATED

CARS; OPERATING A FARM; RENTING UNREFRIGERATED WAREHOUSE SPACE, OR OTHER BUILDINGS. FOR VERY OB-

VIOUS REASONS ALL SUCH OPERATIONS SHOULD BE SEGREGATED (ACCOUNTINGWISE) FROM T H E NORMAL WARE-

HOUSING OPERATIONS.

INCIDENTAL SERVICES

IN ADDITION TO THE TWO SOURCES OF REVENUES DISCUSSED ABOVE, THERE ARE OTHER SERVICES TO

CUSTOMERS THAT ARE NOT RELATED TO LOT SIZE, NOR DENSITY. FOR THE MOST PART, THESE SO-CALLED

"ACCESSORIAL" CHARGES COVER EXTRA COSTS INCURRED FOR CERTAIN PARTICULAR PRODUCTS; THEY ARE NOT

COMMON TO ALL PRODUCTS. WHILE THESE INCIDENTAL ITEMS ARE AN IMPORTANT CONSIDERATION IN THE AC-

COUNTING PROBLEMS, THEY ARE RELATIVELY SMALL, REPRESENTING PERHAPS LESS THAN 10% OF THE GROSS

REVENUE. THESE EXTRA CHARGES ARE FOR SERVICES THAT ARE OVER AND ABOVE OR IN ADDITION TO THE

CHARGES THAT ARE BASED UPON LOT SIZE AND DENSITY.

SECTION I- PAGE 7
 THE DOLLAR COST or PERFORMING THESE SUNDRY SMALL SERVICES CANNOT BE READILY IDENTIFIED

AND SEGREGATED FROM THE MAJOR ELEMENTS OF COST; THE UNIT COSTS COMPUTED FOR THE MAJOR OPERATING

DEPARTMENTS WILL AUTOMATICALLY INCLUDE THE COST OF THESE INCIDENTAL SERViCES. THE FACT THAT

THESE SERVICES ARE INCIDENTAL WILL FULLY JUSTIFY THIS PRACTICAL ACCOUNTING TREATMENT. THE REVE-

NUE FROM SUCH SERVICES SHOULD BE TREATED AS A PART OF THE MAJOR DEPARTMENT REVENUES, BUT IDENTI-

FIED SO THAT THEY CAN BE SHOWN SEPARATELY FROM MAJOR DEPARTMENTAL REVENUES THAT ARE RELATED TO

LOT SIZES AND DENSITIES. THE DESCRIPTION OF AND THE COST ACCOUNTING TREATMENT FOR THESE INCIDEN-

TAL SERVICES WILL BE DISCUSSED IN MORE DETAIL IN SECTION V OF THIS MANUAL.

Section 1 -PAGE8
 SECTION I I - DEPARTMENTAL OPERATIONS

IT IS A COMMON PRACTICE TO DEPARTMENTALIZE A BUSINESS, ACCOUNTINGWISE; THE PRIMARY

PURPOSE BEING TO ENABLE MANAGEMENT TO ACHIEVE A BETTER UNDERSTANDING OF OPERATING RESULTS. THE

COLD STORAGE INDUSTRY IS NOT AN EXCEPTION TO THIS GENERAL PRACTICE.

THE ACCOUNTING SYSTEM SHOULD BE "TAILORED" TO F I T THE NEEDS OF THE COLD STORAGE INDUSTRY,

WITH RESPECT TO ITS MAJOR OPERATING DEPARTMENTS; THIS IS AN IMPORTANT PART OF A UNIFORM COST

ACCOUNTING SYSTEM. THE SYSTEM FOR AN INDUSTRY MUST BE SUFFICIENTLY FLEXIBLE TO ENABLE INDIVIDUAL

COMPANIES TO USE IT AND ACCOMPLISH UNIFORMITY IN THE FINAL UNIT COSTS, EVEN THOUGH THERE ARE

IMPORTANT VARIABLES IN THE SERVICES SOLD BY INDIVIDUAL COMPANIES WITHIN AN INDUSTRY. IN FACT,

SUCH DEPARTMENTALIZATION IS NECESSARY IN ORDER TO ACHIEVE UNIFORMITY. FOR EXAMPLE, SOME COMPANIES

MAY HAVE COOLER STORAGE ONLY; OTHERS FREEZER STORAGE ONLY; OTHERS BOTH. SOME COMPANIES WILL

OPERATE A QUICK FREEZING DEPARTMENT; OTHERS WILL NOT OWN SUCH F A C I L I T I E S . BY SEGREGATING THE

MAJOR OPERATING DEPARTMENTS, ACCOUNTINGWISE, IT WILL BE POSSIBLE FOR EACH COMPANY TO PREPARE

DEPARTMENTAL COSTS THAT WILL BE COMPARABLE WITH THE SAME DEPARTMENTS OF OTHER COMPANIES. WITHOUT

THIS DEPARTMENTALIZATION, UNIFORM AND COMPARABLE COSTS WOULD BE IMPOSSIBLE.

FURTHERMORE, DEPARTMENTALIZATION IS NECESSARY IN ORDER TO DETERMINE UNIT COSTS. AN

OPERATING STATEMENT BY DEPARTMENTS IS A PREREQUISITE IN THE PREPARATION OF A UNIT COST STATEMENT.

THE ILLUSTRATIVE STATEMENTS IN SECTION IV OF THIS MANUAL SHOW BOTH STATEMENTS ON THE SAME PAGE.

AFTER THE DOLLAR AMOUNTS HAVE BEEN SEGREGATED, AND THE QUANTITIES DETERMINED, THEN THE UNIT

COSTS ARE COMPUTED BY DIVIDING THE DOLLAR AMOUNTS BY THE NUMBER OF BASIC UNITS FLOWING THROUGH

THE DEPARTMENT FOR THE ACCOUNTING PERIOD.

THE PARAGRAPHS BELOW WILL DESCRIBE, IN GENERAL TERMS, THE MAJOR OPERATING DEPARTMENTS

WHICH ARE TO BE RECOGNIZED IN THE PREPARATION OF COST AND OPERATING STATEMENTS. THE DESCRIPTIVE

CHART OF ACCOUNTS IN THE LAST SECTION OF THIS MANUAL WILL SET FORTH IN MORE DETAIL THE ACTUAL

LEDGER ACCOUNTS THAT WILL BE NECESSARY TO PREPARE SUCH STATEMENTS.

FREEZER STORAGE OPERATIONS

SINCE FREEZER STORAGE REQUIRES LOWER TEMPERATURES AND, THEREFORE, HIGHER REFRIGERATION

COSTS, IT IS NECESSARY TO PROVIDE FOR TWO STORAGE DEPARTMENTS (1) FREEZER STORAGE AND

(2) COOLER STORAGE. IT IS MORE PROPER TO SAY THAT THESE ARE BOTH SUBDIVISIONS OF A COLD

STORAGE OPERATION. THE OPERATING STATEMENTS MAY, IN SOME INSTANCES, SHOW THE OVER-ALL OPERATING

RESULTS FOR ALL STORAGE OPERATIONS, AS WELL AS FOR EACH OF THESE TWO IMPORTANT SUBDIVISIONS.

DIRECT LABOR IS A RELATIVELY SMALL ELEMENT OF COST IN THE FREEZER STORAGE OPERATION

CONSISTING OF MOVING GOODS, CLEANING UP, AND SIMILAR WORK INSIDE THE FREEZER STORAGE ROOMS.
THE PRINCIPAL ELEMENT OF COST IN THIS DEPARTMENT, IN ADDITION TO LABOR, WILL BE (1) A SHARE OF

THE REFRIGERATION COST, INCLUDING POWER AND (2) A SHARE OF FIXED CHARGES AND OTHER INCIDENTAL
EXPENSES.

SECTION I I PAGE 1
 THE UNIT COSTS FOR THIS DEPARTMENT WILL BE SHOWN IN TERMS OF COST PER 100#, THE COMMON

DENOMINATOR UNIT OF MEASURE,AS IS MORE FULLY EXPLAINED ELSEWHERE IN THIS MANUAL. THESE UNIT

COSTS WILL BE SHOWN ALONG WITH AND AS A PART OF THE DEPARTMENTAL OPERATING STATEMENTS AS ILLUS-

TRATED IN SECTION IV OF THIS MANUAL. THE UNIT COSTS WILL BE FOR THE COMMON DENOMINATOR UNIT OF

MEASURE, RECOGNIZING BOTH DENSITY AND LOT S I Z E .

REVENUE AND EXPENSE PERTAINING TO LEASED STORAGE SPACE (FREEZER OR COOLER) IS NOT CON-

SIDERED PART OF THE REGULAR FREEZER OR COOLER STORAGE DEPARTMENTS SINCE UNIT COSTS CANNOT BE

READILY DETERMINED FOR THIS OPERATION. GOODS STORED IN SUCH SPACE BY LESSEES ARE NOT CONTROLLED

BY THE COLD STORAGE COMPANY, AND THEREFORE QUANTITATIVE DATA IS NOT AVAILABLE FOR UNIT COST DE-

TERMINATION. REVENUES ARE LIKEWISE NOT COLLECTED ON A WEIGHT STORED BASIS AND ARE NOT ADAPTABLE

TO THE COMMON DENOMINATOR UNIT COST CONCEPT. REVENUES AND EXPENSES FOR THIS SERVICE SHOULD BE

ACCUMULATED IN THE SPECIAL SERVICES DEPARTMENT AS DISCUSSED IN A LATER SECTION OF THIS MANUAL.

IF THE AMOUNTS ARE IMMATERIAL THEY MAY BE DISREGARDED FOR SEGREGATION AND INCLUDED IN THE APPRO-

PRIATE STORAGE DEPARTMENT.

COOLER STORAGE OPERATIONS

THE ACCOUNTING TREATMENT AND THE ELEMENTS OF COST WILL BE THE SAME FOR COOLER STORAGE

AS FOR FREEZER STORAGE DESCRIBED ABOVE. ONE OF THE DIFFERENCES IN THE UNIT COSTS WILL BE IN THE

REFRIGERATION EXPENSE PER U N I T . HOWEVER, THERE MAY BE OTHER IMPORTANT DIFFERENCES DUE TO THE IN-

HERENT CHARACTERISTICS OF A PARTICULAR OPERATION.

IT IS NEITHER PRACTICABLE NOR NECESSARY TO SEPARATE "PRECOOLING" FROM "COOLER STORAGE."

SOME COMPANIES DO N O T HAVE ANY PRECOOLING BUSINESS, AND FOR OTHERS IT WILL USUALLY BE A RELATiVELY

MINOR OPERATION. THE DIFFICULTY OF ALLOCATING LABOR AND O T H E R COSTS AS BETWEEN PRECOOLING AND

REGULAR COOLER STORAGE IS TOO GREAT TO JUSTIFY AN ATTEMPT TO M A I N T A I N A SUBDEPARTMENT FOR PRECOOLING.

THE PRECEDING STATEMENT MAY NOT BE APPLICABLE TO SOME COMPANIES; IF AND WHEN PRECOOLING IS

A MAJOR OPERATION, THEN A SEPARATE SUBDEPARTMENT SHOULD BE PROVIDED IN THE GENERAL LEDGER ACCOUNT

CLASSIFICATION, SO THAT BOTH REVENUES AND COSTS CAN BE SEGREGATED IN THE OPERATING STATEMENT.

IN MOST INSTANCES COLD STORAGE PLANTS ARE EQUIPPED TO USE EACH STORAGE ROOM OR CELL FOR

EITHER COOLER STORAGE TEMPERATURES OR FREEZER STORAGE TEMPERATURES. THEREFORE, IT WILL NOT BE POS-

SIBLE TO MAKE A PREDTERMINATION OF THE PRORATION OF FIXED CHARGES TO THESE DEPARTMENTS. THESE

CHARGES MUST BE PRORATED IN A SOMEWHAT FLEXIBLE MANNER, PERMITTING THE CHARGES TO FOLLOW THE PRO-

DUCTS THROUGH EACH TYPE OF STORAGE.

AS EXPLAINED ABOVE IN CONNECTION WITH "FREEZER STORAGE," THE UNIT COSTS FOR THE DEPART-

MENT WILL BE SHOWN ALONG WITH AND AS A PART OF THE DEPARTMENTAL OPERATING STATEMENT. THE UNIT

COSTS WILL BE SHOWN IN TERMS OF COST PER 100# CONVERTED TO THE COMMON DENOMINATOR UNIT OF MEASURE,

RECOGNIZING BOTH OF THE COST VARIABLES - DENSITY AND LOT S I Z E .

SECTION II - PAGE 2
HANDLING OPERATIONS

THE HANDLING DEPARTMENT WILL CONSIST MOSTLY OF LABOR OPERATIONS. IN ADDITION TO DIRECT

LABOR AND THE RELATED COSTS SUCH AS INDIRECT LABOR, PAY ROLL TAXES, AND OTHER LABOR BENEFITS,

THERE WILL BE THE FIXED CHARGES AND SUNDRY OPERATING EXPENSES APPLICABLE TO THE HANDLING EQUIPMENT

THIS EQUIPMENT WILL CONSIST OF L I F T TRUCKS, CONVEYORS, ELEVATORS, ETC.

ALL HANDLING WILL BE TREATED AS ONE MAJOR OPERATING DEPARTMENT, CONSISTING OF HANDLING

IN AND HANDLING OUT. ALSO, THIS DEPARTMENT WILL INCLUDE, WITHOUT SEGREGATION, THE HANDLING IN

AND OUT FOR BOTH COOLER STORAGE AND FREEZER STORAGE. THERE ARE NO IMPORTANT DIFFERENCES IN COST

THAT CAN BE IDENTIFIED WITH THESE VARIOUS TYPES OF HANDLING OPERATIONS AS SUCH.

THE UNIT COSTS FOR HANDLING WILL BE DETERMINED IN HE SAME MANNER AS FOR "COOLER STORAGE

AND "FREEZER STORAGE" AS DESCRIBED ABOVE, RECOGNIZING BOTH OF THE TWO IMPORTANT COST VARIABLES,

DENSITY AND LOT S I Z E , AND IN ADDITION, THE TIME PER PALLET. THE COST PER 100# WILL BE IN TERMS OF

THE SAME COMMON DENOMINATOR UNIT OF MEASURE HOWEVER, THE NUMBER OF UNITS FLOWING THROUGH THIS

DEPARTMENT WILL BE ENTIRELY DIFFERENT.

AS EXPLAINED IN SECTION 1, THE LOT SIZE CLASSIFICATION WILL BE BASED UPON THE SIZE OF

THE LOT RECEIVED. THIS ASSUMES THAT A LOT OF ANY SIZE WILL BE DELIVERED INTACT, AND THE CHARGE

TO THE CUSTOMER AT THE TIME THE MERCHANDISE IS RECEIVED, FOR HANDLING IN AND HANDLING OUT, IS

PREDICATED ON THIS SAME ASSUMPTON. IN ACTUAL PRACTICE THIS IS NOT SO; THEREFORE, IT WILL BE NECES

SARY TO RECOVER THE ADDITIONAL COST ATTRIBUTABLE TO DELIVERING PARTIAL LOTS BY AN EXTRA CHARGE AT

THE TIME OF DELIVERY. THIS COULD BE IN THE FORM OF A FLAT CHARGE PER DELIVERY FROM EACH LOT AL-

THOUGH, IN THEORY, THE CUSTOMER WOULD BE ENTITLED TO ONE DELIVERY FROM EACH LOT WITHOUT AN EXTRA

CHARGE. IN ANY EVENT, IT WILL NOT BE NECESSARY TO ANALYZE THE DELIVERY TAGS AS TO DENSITIES OR

LOT S I Z E S . THE EXTRA REVENUE FOR PARTIAL LOT DELIVERIES, HOWEVER DETERMINED, WILL BE CREDITED TO

THE HANDLING DEPARTMENT IN THE SAME MANNER AND AS A PART OF OTHER INCIDENTAL REVENUES THAT ARE NOW

DESIGNATED "ACCESSORIAL SERVICES" IN THE PRESENT CALIFORNIA P . U. C . T A R I F F .

QUICK FREEZING OPERATIONS

THE QUICK FREEZING OPERATIONS WILL VARY SUBSTANTIALLY BETWEEN COMPANIES, DEPENDING ON

THE ARRANGEMENTS BETWEEN THE COLD STORAGE COMPANY AND THE CUSTOMER. NORMALLY, THE WAREHOUSE COM-

PANY OPERATES THE FREEZING TUNNELS ONLY. THE CUSTOMER PREPARES AND PACKAGES THE GOODS EITHER BE-

FORE OR AFTER THE QUICK FREEZING. ONLY THE LABOR OF OPERATING THE QUICK FREEZING DEPARTMENT AND

OTHER LABOR INCIDENT THERETO IS CHARGEABLE TO THIS DEPARTMENT. THIS IS THE ONLY LABOR COST

COVERED BY THE TARIFF RATES IN CALIFORNIA.

WHEN THE COLD STORAGE COMPANY PROVIDES LABOR OPERATIONS WHCH INVOLVE PREPARATION AND/OR
PACKAGING (OR HANDLING OTHER THAN THE FREEZING DESCRIBED ABOVE) THERE WILL BE AN ADDITIONAL

CHARGE. SUCH ADDITIONAL COSTS WILL BE SEGREGATED AND IDENTIFIED WITH THE "SPECIAL SERVICES"

DEPARTMENT. LIKEWISE, THE REVENUE FROM THESE EXTRA LABOR SERVICE CHARGES WILL BE IDENTIFIED

SECTION I I - PAGE 3
SEPARTELY, AS A SUBDIVISION OF THE SPECIAL SERVICES OPERATION. THIS ACCOUNTING TREATMENT IS NECES-

SARY BECAUSE, AS STATED ABOVE, THE P . U. C . TARIFF RATES DO NOT ANTICIPATE NOR INCLUDE THESE EXTRA

LABOR COSTS, AND FOR THE FURTHER REASON THAT THESE OPERATIONS DO NOT INVOLVE COST VARIABLES DUE

TO DENSITIES.

AT THE POINT WHERE THE OUTPUT OF THE QUICK FREEZER IS STACKED ON PALLETS, READY TO BE

DELIVERED TO THE FREEZER STORAGE ROOMS, THE QUICK FREEZING DEPARTMENT OPERATION ENDS. THE DELIV-

ERY OF THE PRODUCT TO THE FREEZER STORAGE ROOMS IS A "HANDLING" OPERATION.

WITH RESPECT TO THE QUICK FREEZING OPERATION ITSELF, THE WAREHOUSEMAN IS IN THE BUSI-

NESS OF SELLING SPACE IN THE FREEZING TUNNELS, WHICH MAKES THE PROBLEM OF DENSITIES THE SAME OR

SIMILAR TO THAT OF STORAGE. LOT SIZE VARIABLES ARE INVOLVED TO A LESSER EXTENT IN THE QUICK

FREEZING OPERATION.

PACKAGES, AND THERE ARE OTHERS, SOME OF WHICH ARE OFFSETTING. DUE TO THE COMPLEX NATURE OF THE

QUICK FREEZING OPERATION IT IS SUGGESTED THAT UNIT COSTS FOR THIS DEPARTMENT BE FIGURED ON A FLAT

PER HUNDRED POUND BASIS PENDING FURTHER STUDY.

REFRIGERATION - (SERVICE DEPARTMENT)

THIS IS A SERVICE DEPARTMENT, AND NOT AN OPERATING DEPARTMENT. THE COSTS WILL INCLUDE

POWER, DIRECT LABOR, INCIDENTAL LABOR COSTS, DIRECT SUPPLIES AND EXPENSES, AND FIXED CHARGES.

BEING A SERVICE DEPARTMENT, THE TOTAL AMOUNT OF THE REFRIGERATION COSTS WILL BE ALLO-

CATED TO THE VARIOUS OPERATING DEPARTMENTS, SUCH AS: FREEZER STORAGE, COOLER STORAGE, QUICK

FREEZING, ETC. THIS ALLOCATION SHOULD BE MADE MONTHLY THROUGHOUT THE YEAR, AND RECORDED IN A

MANNER THAT WILL BE CONVENIENT FOR SHOWING THE CHARGES TO DEPARTMENTS IN THE OPERATING STATEMENTS,

CUMULATIVELY, DURING THE YEAR. THIS WILL MAKE IT UNNECESSARY TO CLOSE THE REFGIERATION COST AC-

COUNTS EXCEPT AT THE END OF THE YEAR.

IT IS NOT POSSIBLE TO MAKE A STRICTLY ACCURATE DETERMINATION OF POWER AND REFRIGERATION

USAGE, BUT THE PROCEDURES SUGGESTED HEREIN SHOULD RESULT IN A SUBSTANTIALLY ACCURATE PRORATION,

AND AT THE SAME TIME IT WILL BE SIMPLE TO APPLY. FURTHERMORE, THE PROCEDURE IS ONE THAT CAN, WITH

SOME MODIFICATIONS, BE USED BY ALL MEMBERS OF THE INDUSTRY IN ORDER TO ACCOMPLISH A REASONABLE

DEGREE OF UNIFORMITY IN ACCOUNTING TREATMENT.

THAT PART OF POWER WHICH IS CHARGED TO REFRIGERATION WILL BE REALLOCATED TO OPERATING

DEPARTMENTS ALONG WITH AND AS A PART OF REFRIGERATION USAGE. THE PROBLEMS WILL BE SOMEWHAT D I F -

FERENT AT EACH PLANT, BUT THE RECOMMENDED PROCEDURE IS FLEXIBLE ENOUGH TO BE ADAPTABLE, AND AT

THE SAME TIME IT WILL ACOOMPLISH A REASONABLE DEGREE OF ACCURACY AND UNIFORMITY. MORE WILL BE

SAID ABOUT THIS PROBLEM IN SECTION IV OF THIS MANUAL, IN WHICH THE PROCEDURE IS ILLUSTRATED.

SECTION II - PAGE 4
SPECIAL SERVICES OPERATIONS

IT WILL BE NECESSARY TO PROVIDE A SPECIAL REVENUE ACCOUNT AND A SPECIAL LABOR COST AC-

COUNT FOR THESE OPERATIONS. THEY WILL CONSIST OF SUCH SERVICES AS LEASED STORAGE SPACE, LOADING

AND UNLOADING CARS AND TRUCKS, SPECIAL CONTRACT PREPARATION, OR HANDLING OF PRODUCTS IN THE

QUICK FREEZING DEPARTMENT. WHEN THE REVENUES AND THE EXPENSES APPLICABLE TO THESE UNUSUAL OPERA-

TIONS ARE SMALL AND INSIGNIFICANT, THESE SEGREGATIONS MAY BE IGNORED AND INCLUDED WITH THE

REGULAR STORAGE OR HANDLING OPERATION AS APPROPRIATE, ( E . G . , L E A S I N G OF STORAGE SPACE - TO COOLER

OR FREEZER STORAGE; SPECIAL LABOR OPERATION - TO HANDLING DEPARTMENT, E T C . ) . ON THE OTHER HAND,

WHEN SUCH OPERATIONS ARE SUBSTANTIAL, THESE SEGREGATIONS SHOULD BE MADE BECAUSE THEY ARE NOT

COVERED BY THE REGULAR TARIFF RATES. FURTHERMORE, THE COSTS OF SUCH SERVICES ARE NOT RELATED TO

DENSITIES, NOR TO LOT SIZES, AND FOR THIS REASON ALONE THEY SHOULD BE EXCLUDED AND SHOWN AS A

SEPARATE DEPARTMENT WHEN THEY ARE OF ANY MATERIAL CONSEQUENCE.

THE OPERATING STATEMENT WILL PROVIDE A SEPARATE COLUMN AND SHOW THE OPERATING RESULTS

FOR THIS DEPARTMENT, AS ILLUSTRATED IN SECTION IV OF THIS MANUAL. HOWEVER, SINCE THERE IS NO

PRACTICAL COMMON UNIT OF MEASURE, NO UNIT COSTS WILL BE SHOWN.

ASSEMBLY LINE OPERATIONS

SOME DISTRIBUTION WAREHOUSES RENT REFRIGERATED SPACE TO CUSTOMERS FOR THE PURPOSE OF

PACKAGING, REPACKAGING, AND ASSEMBLING MERCHANDISE FROM NUMEROUS "IN-STORAGE" LOTS, FOR DELIVERY

TO ITS CUSTOMERS. THIS IS AN IMPORTANT FUNCTIONAL OPERATION WHICH IS USUALLY HANDLED BY THE

WAREHOUSEMAN'S STORAGE CUSTOMER. HOWEVER, THERE ARE SOME INSTANCES IN WHICH THE WAREHOUSEMAN

MAKES A CONTRACTUAL ARRANGEMENT WITH HIS CUSTOMER FOR AN ASSEMBLY LINE OPERATION. WHEN THIS IS

DONE, THE DELIVERY OF THE MERCHANDISE FROM THE STORAGE ROOM TO THE HOLDING ROOM, OR THE ASSEMBLY

LINE ROOM, IS A "HANDLING" OPERATION, AND THERE WILL BE A CHARGE TO THE CUSTOMER IN THE SAME MAN-

NER, AND SUBJECT TO THE SAME SMALL LOT DELIVERY CHARGE AS IF THE GOODS WERE BEING DELIVERED TO

THE PLATFORM FOR THE CUSTOMER.

A SPECIAL OPERATING DEPARTMENT SHOULD BE PROVIDED FOR "ASSEMBLY LLNE OPERATIONS."

ACCOUNTINGWISE, THIS MEANS A SEPARATE REVENUE ACCOUNT, AND A NUMBER OF SEPARATE OPERATING COST

ACCOUNTS. THE ILLUSTRATIVE OPERATING STATEMENTS IN SECTION IV OF THIS MANUAL DO NOT SHOW THIS

DEPARTMENT. WHEN SUCH A DEPARTMENT IS NECESSARY, THEN THE ADDITIONAL LEDGER ACCOUNTS WILL BE

PROVIDED. IN CALIFORNIA THIS DEPARTMENT WILL BE A NON-UTILITY DEPARTMENT, THE ACCOUNTING TREAT-

MENT BEING THE SAME AS DESCRIBED ABOVE UNDER THE CAPTION "SPECIAL SERVICES OPERATIONS."

OTHER NON-UTILITY OPERATIONS

IN CALIFORNIA THE RATES OF PUBLIC WAREHOUSES ARE SUBJECT TO APPROVAL OF THE PUBLIC

U T I L I T I E S COMMISSION. HOWEVER, MANY OF THE WAREHOUSE COMPANIES HAVE OPERATIONS OR BUSINESS

A C T I V I T I E S THAT ARE OUTSIDE THE JURISDICTION OF THE P. U. C . THE QUESTION AS TO WHAT IS

"NON-UTILITY" BUSINESS IS NOT ENTIRELY CLEAR, EVEN TO THE WAREHOUSE OPERATORS THEMSELVES.

SECTION - PAGE 5
THERE IS A DIFFERENCE OF OPINION AMONG WAREHOUSE EXECUTIVES AS TO EXACTLY WHERE THE LINE SHOULD

BE DRAWN BETWEEN U T I L I T Y OPERATIONS AND NON-UTILITY OPERATIONS. HOWEVER, THE RULE OF THUMB

GENERALLY FOLLOWED IS THAT THE A C T I V I T Y FOR WHICH CHARGES ARE SPECIFIED IN THE P. U. C . TARIFF

SCHEDULES ARE " U T I L I T Y " OPERATIONS.

ONE OF THE MOST DIFFICULT PROBLEMS ARISES OUT OF THE FACT THAT THERE ARE SOME OPERA-

TIONS WHICH ARE VERY CLOSELY RELATED TO THE WAREHOUSE AND COLD STORAGE BUSINESS,, FOR WHICH NO

RATES HAVE BEEN PROVIDED BY THE P. U. C . THESE VERY CLOSELY RELATED OPERATIONS SHOULD, FOR AC-

COUNTING PURPOSES, BE SEPARATELY ACCOUNTED FOR BUT INCLUDED WITH THE WAREHOUSE COMPANY'S PUBLIC

U T I L I T Y OPERATIONS.

IN AN EFFORT TO ACCOMPLISH UNIFORMITY FOR ACCOUNTING PURPOSES, THE FOLLOWING A C T I V I T I E S

ARE ASSUMED TO BE NON-UTILITY :

1. RENTAL OF LAND, BUILDINGS, OR EQUIPMENT, TO A TENANT FOR PURPOSES OTHER THAN

COLD STORAGE OPERATIONS.

2. SALES OF REFRIGERATION (NOT REFRIGERATED SPACE) TO A PROCESSOR OR OTHER USERS WHOSE

PRIMARY BUSINESS IS NOT REFRIGERATION, AND WHOSE PREMISES ARE NOT OWNED BY THE
COLD STORAGE COMPANY.

3. MAKING AND SELLING ICE, ICING REFRIGERATED CARS, AND PRECOOLING OF FRUITS AND
VEGETABLES IN THE F I E L D .

DIVIDENDS AND OTHER SIMILAR REVENUES FROM INVESTMENTS THAT ARE NOT AN ESSENTIAL
PART OF THE COLD STORAGE OPERATIONS.

5. ANY OTHER GROSS REVENUES (LESS THE COSTS APPLICABLE THERETO) FROM A C T I V I T I E S THAT
ARE CLEARLY NOT AN ORDINARY AND NECESSARY PART OF THE COLD STORAGE BUSINESS.

6. CAPITAL GAINS OR LOSSES FROM THE SALE OF ASSETS, WHETHER OR NOT USED IN THE COLD
STORAGE BUSINESS.

IT WILL NOT BE PRACTICABLE TO COMPUTE UNIT COSTS FOR NON-UTILITY OPERATIONS AS A WHOLE,

BECAUSE THERE WILL NOT BE A COMMON UNIT OF MEASURE. IT MAY BE FEASIBLE TO PREPARE A SUBSIDIARY

STATEMENT FOR SOME OF THESE MAJOR OPERATIONS. IF UNIT COSTS ARE DESIRABLE FOR ANY OF THESE

OPERATIONS, THE UNIT OF MEASURE WILL NOT BE THE 100# COMMON DENOMINATOR ITEM WHICH HAS BEEN PRO-

VIDED FOR THE MAJOR OPERATING DEPARTMENTS, SUCH AS FREEZER STORAGE.

SECTION I - PAGE 6
 SECTION I I I - COST ALLOCATION PROBLEMS AND PROCEPURES

SINCE DEPARTMENTALIZATION OF A COLD STORAGE WAREHOUSE OPERATION IS AN ESSENTIAL FEATURE

OF A UNIFORM COST ACCOUNTING SYSTEM IT WILL BE NECESSARY TO PROVIDE UNIFORM PROCEDURES FOR SOLVING

THE PROBLEM OF COST ALLOCATIONS AND/OR PRORATIONS. TO THE GREATEST EXTENT POSSIBLE, COSTS SHOULD

BE ACTUALLY IDENTIFIED BY DEPARTMENTS; THESE ARE THE DIRECT COSTS, AND ARE SO DESIGNATED IN THE

GENERAL LEDGER ACCOUNTS.

THERE ARE SOME ELEMENTS OF COST THAT CANNOT BE DIRECTLY IDENTIFIED WITH A DEPARTMENTAL

OPERATION. FOR THESE INDIRECT COSTS IT IS NECESSARY TO FORMULATE RULES FOR ALLOCATING OR PRORAT-

ING; THESE ARE THE RULES THAT ARE SO NECESSARY IF UNIFORMITY IS TO BE ACHIEVED. SUCH RULES ARE,

TO AN EXTENT, ARBITRARY AND THEREFORE THE RESULTS ARE NOT PROVABLE AS TO ACCURACY. SINCE ABSOLUTE

ACCURACY IS IMPOSSIBLE, ARBITRARY RULES ARE SUBSTITUTED. IF EVERY MEMBER OF THE COLD STORAGE

INDUSTRY WERE TO USE THESE ARBITRARY RULES THE OPERATING RESULTS WOULD BE COMPARABLE. THEREFORE,

A CERTAIN KIND AND DEGREE OF ACCURACY IS ACHIEVED, FOR DETERMINING INDUSTRY AVERAGE COSTS. THE

PROBLEMS OUTLINED IN THE PARAGRAPHS HEREIN. BELOW PERTAIN TO THOSE ELEMENTS OF COST WHICH REQUIRE

RULES IN ORDER TO ACCOMPLISH UNIFORMITY.

POWER AND REFRIGERATION COSTS - ALLOCATION PROBLEMS

THE TERM "POWER" MEANS THE COST OF THE KWH USED. THE TERM "REFRIGERATION" MEANS THE

DEPARTMENT WHICH CREATES REFRIGERATION FOR USE IN THE VARIOUS OPERATING DEPARTMENTS, AND THE COST

OF SUCH REFRIGERATION WILL INCLUDE LABOR, MATERIALS, FIXED CHARGES, AND POWER.

TO THE GREATEST EXTENT POSSIBLE, POWER COSTS SHOULD BE ALLOCATED DIRECTLY TO OPERATING

DEPARTMENTS OR FUNCTIONS. THIS CAN BE DONE BY THE USE OF REASONABLY S C I E N T I F I C ESTIMATES OF

POWER USAGE IN TERMS OF KWH. THE ILLUSTRATIVE FORM (SCHEDULE C - 2 ) WILL INDICATE THE TYPE OF

POWER USAGE THAT CAN ORDINARILY BE CHARGED DIRECTLY, SUCH AS FOR THE OPERATION OF EQUIPMENT IN THE

HANDLING DEPARTMENT, ETC. IT WILL BE OBVIOUS, OF COURSE, THAT THESE DIRECT CHARGES WILL COVER

CERTAIN POWER USAGE THAT DOES NOT INVOLVE THE MANUFACTURE OF REFRIGERATION. IF THE DIRECT POWER

USAGE CAN BE MEASURED, OR ESTIMATED IN A SUBSTANTIALLY ACCURATE MANNER, THEN THE REMAINING AMOUNT,

WHICH IS CHARGEABLE TO REFRIGERATION, WILL ALSO BE SUBSTANTIALLY ACCURATE.

AFTER THE DIRECT POWER CHARGES HAVE BEEN DETERMINED, AND THE BALANCE CHARGED TO REFRIGER-

ATION, THE MOST DIFFICULT PROBLEM OF ALLOCATION STILL REMAINS; THIS IS TO ALLOCATE THE TOTAL COST

OF REFRIGERATION, INCLUDING POWER, TO THE MAJOR OPERATING DEPARTMENTS THAT USE REFRIGERATION.

REFRIGERATION IS COMMONLY MEASURED IN TERMS OF "TONS," BUT THE TOTAL, TONS OF REFRIGERATION USED

ARE ALSO DIRECTLY RELATED TO THE KWH USED TO MANUFACTURE THE REFRIGERATION; THEREFORE, THE BASIS

FOR ALLOCATING REFRIGERATION COSTS IS THE KWH OF POWER USED TO SUPPLY THE REFRIGERATION TO EACH

SEPARATE UNIT OF REFRIGERATED SPACE. A UNIT OF REFRIGERATED SPACE IS A COLD STORAGE ROOM, A

FREEZER STORAGE ROOM, OR THE QUICK FREEZING F A C I L I T Y , ETC.

SECTION I I I - PAGE 1
 THE AMOUNT OF REFRIGERATION (OR POWER) REQUIRED TO OPERATE A UNIT OF REFRIGERATED SPACE

IS AN ELUSIVE AND DIFFICULT COMPUTATION. AN EXACTLY ACCURATE COMPUTATION IS NOT POSSIBLE, BECAUSE

OF THE MANY VARIABLES INVOLVED, SUCH AS: THE OUTSIDE TEMPERATURE, THE HEAT TO BE REMOVED FROM

THE INCOMING PRODUCTS, THE EFFICIENCY OF THE INSULATION IN THE REFRIGERATED UNITS, THE STORAGE

ROOM TEMPERATURE, E T C . , ETC. It IS POSSIBLE, HOWEVER, TO MAKE A REASONABLY ACCURATE ESTIMATE

WITH RESPECT TO THE POWER (OR TONS OF REFRIGERATION) NECESSARY TO OPERATE EACH UNIT OF REFRIGER-

ATED SPACE (ROOM) UNDER CERTAIN DEFINED CONDITIONS (WHICH INCLUDES THE TEMPERATURE) FOR A GIVEN

PERIOD OF TIME.

THE MOST IMPORTANT FACTORS THAT WILL BE INVOLVED IN MAKING THESE ESTIMATES (FOR EACH

UNIT OF REFRIGERATED SPACE) WILL BE (1) THE CUBIC FOOTAGE OF SPACE, (2) THE TEMPERATURE,

(3) THE TIME, AND (4) DIRECT POWER FOR OPERATING AUXILIARY EQUIPMENT SUCH AS FANS, DOOR HEATERS,

ETC. THERE ARE OTHER FACTORS TO BE CONSIDERED, BUT SINCE THIS IS NOT AN ENGINEERING TREATISE

IT WILL NOT BE NECESSARY TO EXTEND THIS EXPLANATION BEYOND THE BASIC PRINCIPLES INVOLVED. IT WILL

BE SUFFICIENT TO SAY HERE THAT BY THE MOST ACCURATE ENGINEERING METHODS AVAILABLE TO EACH COMPANY,

THE THEORETICAL POWER USAGE SHOULD BE COMPUTED FOR EACH UNIT OF REFRIGERATED SPACE FOR ONE DAY.

THEN, BY MULTIPLYING THE THEORETICAL DAILY USAGE BY THE NUMBER OF DAYS, THE THEORETICAL POWER

CONSUMPTION CAN BE COMPUTED FOR A MONTH OR PART OF A MONTH. AFTER THE TOTAL THEORETICAL KWH HAS

BEEN COMPUTED, THIS TOTAL IS THEN COMPARED WITH THE ACTUAL TOTAL KWH USAGE. FINALLY, THE PERCENTAGE

RELATIONSHIP OF THE TOTAL THEORETICAL TO THE ACTUAL USAGE CAN BE USED TO COMPUTE THE ALLOCATION TO

EACH UNIT OF REFRIGERATED SPACE. THIS PROCEDURE IS ILLUSTRATED IN THE "REFRIGERATION ALLOCATION

SCHEDULE" (SCHEDULE C - 1 ) IN SECTION IV OF THE MANUAL.

THE ALLOCATION PROCEDURE DESCRIBED IN THE FOREGOING PARAGRAPHS WILL BE SIMPLIFIED IF

IT IS ASSUMED THAT THE TERM "REFRIGERATION COST" MEANS THE COST "DELIVERED" TO THE POINTS (ROOMS)

WHERE IT IS USED. IN COMPUTING THE THEORETICAL POWER USAGE FOR EACH UNIT OF REFRIGERATED SPACE

THE ESTIMATE WILL INCLUDE THE POWER USED TO OPERATE ROOM FANS, DOOR HEATERS, AND ALL OTHER SIMILAR

AUXILIARY EQUIPMENT REQUIRING POWER TO OPERATE. ALL SUCH ADDITIONAL POWER IS DIRECTLY RELATED TO

EACH PARTICULAR UNIT OF REFRIGERATED SPACE WHILE THE UNIT IS IN OPERATION. IN THE ILLUSTRATIVE

STATEMENT IN THIS SECTION (SCHEDULE C - 1 ) THE KWH USAGE INCLUDES NOT ONLY THE POWER USED TO PRODUCE

THE REFRIGERATION, BUT ALSO THE ADDITIONAL POWER FOR OPERATING SUCH AUXILIARY REFRIGERATION

EQUIPMENT.

IT WILL BE OBVIOUS, OF COURSE, THAT THE THEORETICAL KWH USAGE FOR A PARTICULAR UNIT OF

REFRIGERATED SPACE WILL DEPEND UPON THE TEMPERATURE. THIS IS IMPORTANT BECAUSE THE SAME UNIT OF

REFRIGERATED SPACE MAY BE USED FOR EITHER COLD STORAGE, OR FOR FREEZER STORAGE, WHICH ARE TWO

SEPARATE OPERATING DEPARTMENTS.

THE WAREHOUSEMAN'S EXPERIENCE OVER A PERIOD OF TIME WILL ENABLE HIM TO DEVELOP MORE

ACCURATE TABLES OF THEORETICAL USAGE FOR EACH SPACE UNIT. FOR EXAMPLE, THERE WILL BE CERTAIN

PERIODS OF TIME IN WHICH ONLY CERTAIN SPACE UNITS WILL BE USED, AND THE ACTUAL POWER USAGE DURING

SECTION I I I - PAGE 2
THAT PERIOD CAN BE USED AS A RELIABLE INDICATION OF THE THEORETICAL USAGE FACTOR TO BE USED THERE-

AFTER IN ALLOCATING THE COST. IF THE TOTAL THEORETICAL USAGE COMPUTATION FOR A MONTHLY PERIOD IS,

FOR INSTANCE, WITHIN 5 TO 10% OF THE ACTUAL USAGE, THEN THE THEORETICAL SPACE UNIT RATE MAY BE

CONSIDERED QUITE SATISFACTORY. IF NOT, THEN A MORE ACCURATE THEORETICAL SPACE UNIT RATE SHOULD

BE ATTEMPTED.

ALLOCATION AND PRORATION OF FIXED CHARGED

THE TERM "FIXED CHARGES" MEANS OWNERSHIP EXPENSES SUCH AS TAXES, INSURANCE AND DEPRECIA-

TION. MOST OF THESE EXPENSES CAN BE PRORATED OR ALLOCATED TO THE VARIOUS OPERATING DEPARTMENTS,

SOMEWHAT IN RELATION TO THE COST VALUE OF THE F A C I L I T I E S USED BY EACH DEPARTMENT. THE ALLOCATION

SCHEDULES CAN BE PREPARED IN CONNECTION WITH AND AS A PART OF AN INVESTMENT SCHEDULE IN THE SAME

MANNER AS IS SHOWN HEREIN, WHICH WILL ILLUSTRATE THIS PROCEDURE. WHILE THE COST VALUE IS THE

BASIC PRINCIPLE TO BE USED IN PRORATING THESE COSTS, IT WILL BE DESIRABLE TO MAKE SOME OF THESE

CHARGES IN A MORE DIRECT MANNER. THE FOLLOWING PARAGRAPHS WILL MORE FULLY EXPLAIN:

DEPRECIATION - MOST OF THE DEPRECIATION CHARGES CAN BE IDENTIFIED WITH THE PROPERTY

ACTUALLY USED IN EACH DEPARTMENT. FOR EXAMPLE, THE QUICK FREEZING F A C I L I T I E S ARE USUALLY IDENTI-

FIED AS TO COST, AND THEREFORE THE DEPRECIATION CHARGES ARE READILY IDENTIFIED. THE SAME IS TRUE

OF HANDLING EQUIPMENT, REFRIGERATION EQUIPMENT, AND NON-UTILITY OPERATING EQUIPMENT.

ON THE OTHER HAND, DEPRECIATION ON THE STORAGE BUILDINGS MUST BE PRORATED TO THE COOLER

STORAGE DEPARTMENT AND TO FREEZER STORAGE DEPARTMENT BY SOME EQUITABLE METHOD, BECAUSE THE STOR-

AGE ROOMS ARE OFTEN USED ALTERNATELY FOR EITHER LOW OR HIGH TEMPERATURE STORAGE. THE METHOD

SUGGESTED FOR THIS ALLOCATION IS THE USAGE (FOR EACH MONTH) AS DETERMINED BY THE NUMBER OF BASIC

UNITS STORED IN EACH OF THE TWO STORAGE DEPARTMENTS, COOLER STORAGE AND FREEZER STORAGE. THE

TERM "BASIC UNITS" MEANS THE NUMBER OF 100# UNITS CONVERTED TO A COMMON UNIT OF MEASURE, AS

EXPLAINED AND ILLUSTRATED ELSEWHERE IN THIS MANUAL.

PROPERTY TAXES AND INSURANCE -BOTH OF THESE EXPENSES SHOULD BE PRORATED TO DEPARTMENTS

IN RELATION TO THE INVESTMENT (BEFORE DEPRECIATION) IN THE F A C I L I T I E S USED IN EACH DEPARTMENT.

IN DOING T H I S , HOWEVER, STORAGE SHOULD BE TREATED AS ONE DEPARTMENT AND THE TOTAL REDISTRIBUTED

TO THE COOLER STORAGE AND THE FREEZER STORAGE DEPARTMENTS IN THE SAME MANNER AS DESCRIBED ABOVE

FOR DEPRECIATION; I.E., IN RELATION TO THE NUMBER OF BASIC UNITS STORED IN EACH DEPARTMENT.

RENT - WHEN PROPERTY IS RENTED, THE RENTAL CHARGE SHOULD BE MADE TO THE DEPARTMENT
USING THE RENTED F A C I L I T I E S . WHEN THE RENTED F A C I L I T I E S ARE USED BY MORE THAN ONE DEPARTMENT,

AN EQUITABLE ALLOCATION SHOULD BE DETERMINED USING THE BASIC PRINCIPLES DESCRIBED ABOVE FOR

OWNERSHIP COSTS.

MAINTENANCE AND REPAIRS - (DIRECT CHARGES)

LABOR AND MATERIAL COSTS FOR REPAIRS AND MAINTENANCE SHOULD BE TREATED AS DIRECT

DEPARTMENTAL CHARGES. IN MOST INSTANCES THIS WILL NOT BE D I F F I C U L T , IF IT IS DONE AT THE TIME

THE EXPENSE IS INCURRED. WHEN THE CHARGE I S , IN EFFECT, AN INDIRECT COST, IT WILL BE

SECTION III - PAGE 3

N E C E S S A R Y T O MAKE AN E S T I M A T E OR AN A P P R O X I M A T I O N OF THE A L L O C A T I O N A T THE T I M E THE E X P E N S E IS

I N C U R R E D . T H I S PROCEDURE W I L L BE S A T I S F A C T O R Y FOR P R A C T I C A L COST A C C O U N T I N G P U R P O S E S B E C A U S E THE

T O T A L AMOUNT OF R E P A I R S AND M A I N T E N A N C E IS A R E L A T I V E L Y SMALL ELEMENT OF C O S T ; A N D , F U R T H E R M O R E ,

THE ITEMS W H I C H MUST BE A L L O C A T E D TO D E P A R T M E N T S BY MEANS OF AN E S T I M A T E W I L L BE O N L Y A SMALL P A R T

OF T H I S SMALL E L E M E N T OF C O S T .

T H E R E P A I R S AND M A I N T E N A N C E E X P E N S E A P P L I C A B L E TO S T O R A G E F A C I L I T I E S SHOULD BE RE-

A L L O C A T E D TO THE C O O L E R S T O R A G E AND THE F R E E Z E R S T O R A G E D E P A R T M E N T S IN R E L A T I O N T O THE B A S I C U N I T S

S T O R E D , A S E X P L A I N E D ABOVE IN C O N N E C T I O N W I T H T H E SAME P R O B L E M FOR D E P R E C I A T I O N AND FOR T A X E S AND

I N S U R A N C E .

SUPERINTENDENCE, INDIRECT LABOR, AND LABOR BENEFITS

FOR COLD S T O R A G E WAREHOUSE C O M P A N I E S T H E S E I N D I R E C T L A B O R C O S T S W I L L BE A H I G H P E R C E N T A G E

R E L A T I O N S H I P TO D I R E C T LABOR; T H I S IS FOR THE REASON T H A T D I R E C T L A B O R IS A R E L A T I V E L Y SMALL P A R T

OF THE O P E R A T I N G C O S T . FOR A D E F I N I T I O N OF THE A C C O U N T " S U P E R I N T E N D E N C E AND I N D I R E C T LABOR" R E F E R

TO THE D E S C R I P T I V E C H A R T OF A C C O U N T S IN THE L A S T S E C T I O N OF T H I S M A N U A L . T H E A C C O U N T FOR

"LABOR BENEFITS" IS ALSO DEFINED IN THE DESCRIPTIVE CHART OF ACCOUNTS.

BOTH OF THE ABOVE-DESCRIBED LABOR COSTS WILL BE PRORATED TO DEPARTMENTS i n RELATION TO

D I R E C T L A B O R . T H I S METHOD IS B A S E D ON THE A S S U M P T I O N T H A T THE T I M E OF THE S U P E R I N T E N D E N T , H I S

A S S I S T A N T , IF A N Y , AND O T H E R I N C I D E N T A L I N D I R E C T L A B O R , W I L L BE SOMEWHAT R E L A T E D TO THE NUMBER OF

E M P L O Y E E S W O R K I N G IN EACH D E P A R T M E N T . W L T H R E S P E C T TO " L A B O R B E N E F I T S , " MOST OF T H E S E C O S T S ARE

A C T U A L L Y INCURRED IN R E L A T I O N TO THE PAY ROLL C O S T S FOR D I R E C T L A B O R .

THE SUPERINTENDENCE AND INDIRECT LABOR FOR THE REFRIGERATION D E P A R T M E N T WILL BE CHARGED

D I R E C T L Y TO T H A T D E P A R T M E N T AND W I L L , T H E R E F O R E , BE T R E A T E D AS A D I R E C T LABOR I T E M . H O W E V E R , THE

AMOUNT P A I D FOR S U P E R I N T E N D E N C E MAY BE I D E N T I F I E D AS S U C H , IN THE R E F R I G E R A T I O N L A B O R A C C O U N T .

GENERAL OVERHEAD

IN THE D E S C R I P T I V E C H A R T OF A C C O U N T S IN THE L A S T S E C T I O N OF T H I S MANUAL THERE ARE E I G H T

S E P A R A T E GENERAL O V E R H E A D A C C O U N T S . T H E R E CAN BE A G R E A T DEAL OF F L E X I B I L I T Y AS TO T H E NUMBER OF

A C C O U N T S , A C C O U N T T I T L E S , AND S U B D I V I S I O N S OF A C C O U N T S , D E P E N D I N G UPON THE P R E F E R E N C E OF THE

I N D I V I D U A L COMPANY. H O W E V E R , THERE SHOULD NOT BE ANY D E V I A T I O N A S TO THE F U N C T I O N A L G R O U P I N G .

THIS IS A WELL-DEFINED GROUP OF COSTS, ALL OF WHICH CAN BE PROPERLY DESCRIBED BY THE TERMS OF

"GENERAL OVERHEAD," OR "GENERAL ADMINISTRATIVE." ALL OF THESE ACCOUNTS COVER MANAGEMENT, SELLING,

AND F I N A N C I A L E X P E N S E S .

WHILE EACH OF THE GENERAL LEDGER ACCOUNTS MIGHT APPEAR SEPARATELY IN AN OVERALL

O P E R A T I N G S T A T E M E N T , OR P R O F I T AND L O S S S T A T E M E N T , THE D E P A R T M E N T A L O P E R A T I N G S T A T E M E N T SHOULD

COMBINE A L L OF T H E S E A C C O U N T S I N T O ONE S I N G L E ELEMENT OF C O S T . T H E SAME IS T R U E OF THE U N I T

COST S T A T E M E N T . T H I S A C C O U N T I N G PROCEDURE IS SHOWN IN THE I L L U S T R A T I V E O P E R A T I N G S T A T E M E N T IN

SECTION IV OF THIS MANUAL.

S E C T ION I I I - PAGE 4
 THE TOTAL AMOUNT OF THIS FUNCTIONAL GROUP OF EXPENSES SHOULD BE PRORATED TO THE MAJOR

OPERATING DEPARTMENTS IN RELATION TO THE OPERATING COST, BEFORE GENERAL OVERHEAD, FOR EACH

DEPARTMENT. THIS METHOD RECOGNIZES THE "COST-FOLLOWS-COST" APPROACH RECOGNIZED BY THE P. U. C .

THE ABOVE-DESCRIBED PROCEDURE FOR MAKING EACH DEPARTMENT CARRY A PRO RATA SHARE OF THIS

IMPORTANT ELEMENT OF COST IS ILLUSTRATED IN SECTION IV OF THIS MANUAL. THE PRORATION IS MADE IN

THE DEPARTMENTAL OPERATING STATEMENT ONLY. THERE ARE NO ACCOUNTING PROCEDURES INVOLVED, EXCEPT

IN THE PREPARATION OF THE STATEMENT ITSELF.

SECTION III - PAGE 5

 SECTION IV - OPERATING STATEMENTS AND GENERAL ACCOUNTING PROBLEMS

THIS MANUAL IS PRIMARILY CONCERNED WITH COST ACCOUNTING, BUT IN ORDER TO BE EFFECTIVE,

UNIT COST FINDING MUST BE PROPERLY CORRELATED WITH GENERAL ACCOUNTING PROCEDURES. IT IS TRUE

THAT GENERAL ACCOUNTING PROCEDURES EMBRACE "GOOD ACCOUNTING PRACTICES," IN THE PREPARATION OF THE

BALANCE SHEET AND THE INCOME STATEMENT; AND THESE ACCOUNTING PRINCIPLES ARE SO WELL KNOWN THAT

THEY NEED NOT BE TREATED IN THIS MANUAL. ON THE OTHER HAND, THERE ARE SOME ACCOUNTING PROBLEMS

THAT ARE PECULIAR TO THIS INDUSTRY. THE SUGGESTED SOLUTIONS FOR THESE INDUSTRY PROBLEMS ARE

DESIGNED TO CORRELATE THE GENERAL ACCOUNTING PROBLEMS WITH THE UNIT COST FINDING PROCEDURES, ALL

WITHIN THE FRAMEWORK OF GOOD ACCOUNTING PRACTICE.

SEASONAL OPERATIONS

THE COLD STORAGE INDUSTRY HAS ALWAYS BEEN AND WILL ALWAYS BE A SEASONAL BUSINESS; THIS

IS so BECAUSE NATURE PRODUCES MANY OF THE PRODUCTS WHICH ARE STORED IN ONLY CERTAIN SEASONS OF

THE YEAR. THIS PROBLEM IS MADE SOMEWHAT MORE COMPLEX BY THE FACT THAT EACH OF THE SEVERAL

OPERATING DEPARTMENTS HAS ITS OWN INDIVIDUAL SEASONS OF A C T I V I T Y . FOR EXAMPLE, MANY COMPANIES

WILL HAVE A COMPARATIVELY SHORT SEASON FOR COOLER STORAGE FRUITS, AND THIS A C T I V I T Y MAY NOT BE

IN THE SAME PERIOD AS THE QUICK FREEZING OPERATION. FREEZER STORAGE IS USUALLY A YEAR-ROUND

A C T I V I T Y , BUT THE VOLUME OF FREEZER STORAGE IS ALSO SUBJECT TO WIDE FLUCTUATIONS IN DIFFERENT

SEASONS OF THE YEAR.

THE SUGGESTED ADJUSTMENTS DESCRIBED IN THE PARAGRAPHS BELOW ARE ALL NECESSARY TO BRING

THE REVENUES AND EXPENSES FOR ANY INTERIM ACCOUNTING PERIOD INTO THEIR NORMAL OR ANNUALIZED RE-

LATIONSHIP TO EACH OTHER. WHILE THIS CANNOT BE DONE IN A STRICTLY ACCURATE MANNER, THESE SUG-

GESTED ADJUSTMENTS WILL AVOID DISTORTIONS THAT WOULD OTHERWISE APPEAR IN THE DEPARTMENTAL OPERAT-

ING STATEMENTS AND UNIT COST STATEMENTS, DUE TO THE SEASONAL NATURE OF THE BUSINESS. THESE SUG-

GESTED ANNUALIZATION ADJUSTMENTS WILL BE SUFFICIENTLY ACCURATE FOR ALL PRACTICAL ACCOUNTING PUR-

POSES. FURTHERMORE, THE PROCEDURES FOR MAKING THESE ADJUSTEMENTS ARE SIMPLE.

DIRECT COSTS NOT ANNUALIZED - LABOR

IT SHOULD BE AND HAS BEEN ASSUMED THAT ONLY THOSE EXPENSES WHICH ARE MORE OR LESS FIXED

SHOULD BE ANNUALIZED. THE DIRECT CHARGES ARE AUTOMATICALLY INCURRED SOMEWHAT IN RELATION TO THE

VOLUME HANDLED. FOR EXAMPLE, DIRECT LABOR IS QUITE CLOSELY RELATED TO THE NUMBER OF UNITS BEING

HANDLED IN EACH OF THE SEVERAL OPERATING DEPARTMENTS. WHEN THE QUICK FREEZER IS CLOSED DOWN

THERE ARE NO DIRECT LABOR CHARGES.

THE ABOVE STATEMENT DOES NOT APPLY TO THAT PART OF THE LABOR WHICH REPRESENTS SUPER-

INTENDENCE, BECAUSE THE SUPERINTENDENT HIMSELF AND HIS ASSISTANTS ARE EMPLOYED ON A YEAR-ROUND
BASIS. HOWEVER, SINCE THIS ACCOUNT IS PRORATED TO ALL DEPARTMENTS IN RELATION TO THE DIRECT

LABOR THERE WILL NOT BE ANY SERIOUS DISTORTIONS BY OPERATING DEPARTMENTS. EXCEPT IN VERY

SECTION IV - PAGE 1
UNUSUAL SITUATIONS, IT WILL PROBABLY BE SATISFACTORY NOT TO ANNUALIZE SUPERINTENDENCE AND INDIRECT

LABOR. THE TEST WILL BE WHETHER OR NOT FAILURE TO ANNUALIZE CREATES A DISTORTED COST FOR THE CUM-

ULATIVE PERIOD TO DATE.

ANNUALIZING FIXED CHARGES

IT IS A COMMON PRACTICE TO CHARGE TO OPERATING EXPENSES EACH MONTH APPROXIMATELY 1/12 OF

THE TOTAL ESTIMATED ANNUAL COST FOR EACH OF THE ACCOUNTS WHICH ARE HEREIN DESIGNATED AS FIXED

CHARGES, SUCH AS PROPERTY TAXES, PROPERTY INSURANCE, DEPRECIATION, REPAIRS AND MAINTENANCE, AND

RENT. IF THIS WERE NOT DONE THERE WOULD BE A TENDENCY TO DISTORT THE OPERATING EXPENSES. FOR

EXAMPLE, "PROPERTY TAXES" ARE PAID ONLY ONCE OR TWICE EACH YEAR, AND IN ORDER TO AVOID A DISTORTION

FOR THE MONTH IN WHICH TAXES ARE P A I D , THEY ARE ACCRUED MONTHLY AT THE RATE OF 1/12TH OF THE

ESTIMATED ANNUAL AMOUNT.

IT WILL BE OBVIOUS THAT SPREADING THESE CHARGES OUT EVENLY FOR THE 12 MONTHS DOES NOT

FULLY SOLVE THE PROBLEM BECAUSE THE VOLUME OF BUSINESS IS NOT EVENLY DISTRIBUTED OVER EACH OF THE

12 MONTHS. IN ORDER TO MINIMIZE DISTORTIONS IN MONTHLY OR OTHER PERIODIC OPERATING AND COST

STATEMENTS, IT IS NECESSARY TO ACCRUE OR CHARGE THESE EXPENSES TO OPERATIONS IN RELATION TO THE

VOLUME OF BUSINESS. IN ORDER TO DO T H I S , IT IS NECESSARY TO (1) ESTIMATE THE TOTAL ANNUAL DOLLAR

COST FOR EACH OF THESE ACCOUNTS AND (2) ESTIMATE THE TOTAL ANNUAL BUSINESS FOR EACH OF THE MAJOR

OPERATING DEPARTMENTS IN TERMS OF THE NUMBER OF UNITS. THESE ESTIMATES WILL RESULT IN AN

ESTIMATED RATE PER UNIT. THE MONTHLY CHARGE CAN THEN BE COMPUTED BY MULTIPLYING THE ACTUAL NUMBER

OF UNITS HANDLED DURING THE MONTH BY THE ESTIMATED ANNUAL RATE.

THE ABOVE-DESCRIBED PROCEDURES ARE ILLUSTRATED IN THIS SECTION BY THE USE OF TWO ACCOUNT-

ING FORMS. THE FIRST ONE WILL SHOW THE DETERMINATION OF THE ANNUAL RATE. THE SECONO WILL SHOW

THE COMPUTATION OF THE CUMULATIVE CHARGE FOR THE PERIOD COVERED BY THE STATEMENT. THESE COMPUTA-

TIONS SHOULD ALWAYS BE MADE CUMULATIVELY; THIS IS FOR THE REASON THAT IT MAY BE NECESSARY, DURING

THE YEAR, TO REVISE THE ESTIMATES WHICH ENTER INTO THE COMPUTATION OF THE ANNUAL RATE FOR EACH

SEPARATE DEPARTMENT. FOR THIS AND OTHER REASONS, THE CUMULATIVE OPERATING RESULTS WILL ALWAYS

BE MORE RELIABLE AND MORE SIGNIFICANT THAN FOR A SINGLE MONTH. MANAGEMENT WILL USUALLY BE WELL

SATISFIED WITH CUMULATIVE STATEMENTS IF THEY ARE PREPARED FREQUENTLY AND IN A RELIABLE MANNER.

THE PREPARATION OF THESE SCHEDULES RELATING TO THE ANNUALIZATION OF FIXED CHARGES IS

FULLY JUSTIFIED BECAUSE THE TOTAL AMOUNT OF THESE ACCOUNTS REPRESENTS A VERY IMPORTANT ELEMENT OF

COST. THE PROCEDURE IS VERY SIMPLE. IT IS TRUE THAT THE ACCURACY OF THE COMPUTATIONS IS

DEPENDENT UPON THE JUDGMENT OF THE PERSON MAKING THE ESTIMATES. HOWEVER, ACTUAL RESULTS FOR THE

PREVIOUS YEARS, MODIFIED BY ANY KNOWN DIFFERENCES FOR THE CURRENT YEAR, WILL ENABLE THE MANAGEMENT

TO MAKE AN INTELLIGENT GUESS. FURTHERMORE, THESE ESTIMATES CAN AND SHOULD BE REVISED AS OFTEN

AS NECESSARY THROUGHOUT THE YEAR. ALL ESTIMATES AND ALL REVISIONS OF ESTIMATES SHOULD BE

SECTION IV - PAGE 2
REVIEWED AND APPROVED BY MANAGEMENT BECAUSE THEY ENTER IMPORTANTLY INTO THE PREPARATION OF THE
INTERIM STATEMENTS WHICH ARE MADE FOR THE MANAGEMENT.

REFRIGERATION COSTS ANNUALIZED

THE COST OF POWER USED WILL BE SOMEWHAT DIRECTLY RELATED TO THE VOLUME OF THE PRODUCTS

BEING STORED AND/OR QUICK FROZEN. HOWEVER, POWER ITSELF IS ONLY ABOUT ONE-HALF OF THE REFRIGERA-

TION COST. THE OTHER HALF REPRESENTS FIXED CHARGES. IN THIS CASE, EVEN THE LABOR IS A FIXED

CHARGE BECAUSE THE LABOR CREW IS THE SAME REGARDLESS OF THE AMOUNT OF REFRIGERATION BEING PRO-

DUCED. THIS MAKES IT NECESSARY AT TIMES TO ANNUALIZE THE REFRIGERATION COSTS.

THE PROCEDURE IS VERY SIMPLE. AFTER REFRIGERATION COSTS PER KWH HAVE BEEN COMPUTED,

AS SHOWN IN THE SPECIAL FORM FOR THIS PURPOSE, IT WILL BE POSSIBLE TO DETERMINE WHETHER THE KWH

COST TO DATE IS ABNORMAL. FOR EXAMPLE, THE ANNUAL RATE MAY BE ESTIMATED AT 2-1/2¢ PER KWH. IF

THE CUMULATIVE COST TO DATE IS PER KWH, IT WILL ALMOST CERTAINLY BE DUE TO A LOWER THAN

NORMAL DEMAND FOR REFRIGERATION, CAUSED BY A LOW VOLUME OF BUSINESS. THE ADJUSTMENT TO ANNUALIZE,

IN THIS CASE, WOULD BE A WORKSHEET JOURNAL ENTRY TO PREPAY REFRIGERATION COSTS, COMPUTED BY MULTI-

PLYING THE USAGE TO DATE BY THE EXCESSIVE COST OF PER KWH. IN EFFECT, THE ADJUSTING JOURNAL

ENTRY WILL BE

DR. PREPAID REFRIGERATION COSTS $

CR. REFRIGERATION COSTS $

OR, THIS ENTRY WOULD BE REVERSED IF THE CUMULATIVE CHARGES TO DATE PRODUCE LESS THAN THE A N T I C I -

PATED ANNUAL RATE.

GENERAL OVERHEAD ANNUALIZED

THIS GROUP OF EXPENSES, IN TOTAL, REPRESENTS A VERY IMPORTANT ELEMENT OF COST, AND

SHOULD BE ANNUALIZED WHEN NECESSARY. SUBSTANTIALLY ALL OF THESE EXPENSES ARE FIXED, AND FURTHER-

MORE, THEY ARE ACTUALLY INCURRED AT THE RATE OF ABOUT 1/12TH OF THE TOTAL IN EACH OF THE 12 MONTHS.

THE TOTAL AMOUNT OF THIS GROUP OF EXPENSES IS RELATED, PERCENTAGEWISE, TO THE OPERATING COSTS BE-
FORE GENERAL OVERHEAD, FOR THE PURPOSE OF PRORATING TO THE OPERATING DEPARTMENTS. THIS PERCENTAGE

RELATIONSHIP WILL BE A CONVENIENT METHOD FOR DETERMINING THE NECESSITY FOR AND AMOUNT OF THE AN-

NUALIZATION ADJUSTMENT FOR ANY INTERIM ACCOUNTING PERIOD.

FOREXAMPLE, ASSUME THAT THE ANNUAL BUDGET INDICATES THAT THE NORMAL RATE FOR GENERAL OVER-

HEAD IS 25% OF OPERATING COST BEFORE GENERAL OVERHEAD. IF THE TOTAL AMOUNT OF THESE EXPENSES AT

THE END OF AN INTERIM ACCOUNTING PERIOD REPRESENTS OF THE COST BEFORE GENERAL OVERHEAD, THEN

AN AMOUNT EQUAL TO 5% OF THIS COST SHOULD BE PREPAID, AND ONLY CHARGED TO THE PERIOD TO DATE.
THERE WILL BE NO NEED FOR A SPECIAL FORM OR WORKSHEET FOR THIS PURPOSE. IN EFFECT, THE JOURNAL
ENTRY ADJUSTMENT (ON THE WORKSHEET ONLY) WILL BE AS FOLLOWS;

DR. PREPAID GENERAL OVERHEAD $

CR. GENERAL OVERHEAD EXPENSES $

SECTION IV - PAGE 3
OR, THIS ENTRY WOULD BE REVERSED IF THE ACTUAL EXPENSES FOR THE CUMULATIVE PERIOD TO DATE WERE

LESS THAN THE AMOUNT APPLICABLE TO THE COST VOLUME FOR THE SAME PERIOD.

DEFERRED INCOME

CHARGES TO CUSTOMERS FOR STORAGE COVER A PERIOD OF 30 DAYS IN ADVANCE, FROM THE DATE OF

B I L L I N G , WHICH IS USUALLY THE DATE THE GOODS ARE RECEIVED. THIS MEANS THAT AS AT THE CLOSE OF ANY

CALENDAR MONTH, OR CALENDAR YEAR, THERE ARE SOME UNEARNED REVENUES. SOME WAREHOUSE COMPANIES

RECOGNIZE THIS FACT BY ESTIMATING THE AMOUNT OF UNEARNED STORAGE REVENUE AND MAKING AN ADJUSTMENT

AT THE END OF EACH ACCOUNTING PERIOD. THE MOST COMMON PRACTICE, HOWEVER, IS TO IGNORE THIS AD-

JUSTMENT; THE JUSTIFICATION FOR THIS ACCOUNTING TREATMENT IS THAT THERE ARE OVERLAPPING AND OFF-

SETTING UNEARNED REVENUES, AT THE BEGINNING AND AT THE END OF EACH MONTH, OR OTHER ACCOUNTING

PERIOD. THIS IS THE MOST PRACTICAL ACCOUNTING APPROACH, AND SHOULD BE SATISFACTORY TO ANY WARE-

HOUSE COMPANY.

THE PROBLEM OF UNEARNED-REVENUES IN THE HANDLING DEPARTMENT IS SOMEWHAT DIFFERENT. IN

MANY CASES THIS PROBLEM CAN BE HANDLED BY NEGLECT IN THE SAME MANNER AND FOR THE SAME REASONS DES-

CRIBED ABOVE IN CONNECTION WITH STORAGE REVENUES. HOWEVER, THERE MAY BE SOME SITUATIONS IN WHICH

THE REVENUES FOR THE PERIOD WOULD BE DISTORTED IF AN ADJUSTMENT WERE NOT MADE. THIS COMES ABOUT

BY REASON OF THE FACT THAT WHEN THE CUSTOMER IS BILLED FOR HANDLING, THE CHARGE COVERS BOTH

HANDLING IN AND HANDLING OUT. THIS SIMPLY MEANS THAT AS AT THE END OF ANY ACCOUNTING PERIOD THE

HANDLING REVENUES APPLICABLE TO ALL OF THE GOODS STILL IN THE WAREHOUSE ARE APPROXIMATELY 50%

UNEARNED.

THE SITUATIONS WHICH MAY REQUIRE AN ADJUSTMENT ARE THOSE IN WHICH THE END OF THE AC-

COUNTING PERIOD WOULD FIND THE WAREHOUSE LOADED WITH A VERY HEAVY INVENTORY OF GOODS, BUT WITH

A VERY SMALL INVENTORY AT THE BEGINNING OF THE PERIOD. THE SITUATION WOULD MAKE IT NECESSARY TO

DEFER HANDLING REVENUE TO THE EXTENT OF APPROXIMATELY 50% OF THE HANDLING CHARGES APPLICABLE TO

THE GOODS ON HAND AT THE END OF THE PERIOD. WHETHER OR NOT AN ADJUSTMENT IS NECESSARY WILL DE-

PEND UPON THE CIRCUMSTANCES IN EACH CASE. NO SUCH ANNUALIZATION ADJUSTMENT SHOULD BE MADE EX-

CEPT FOR THE PURPOSE OF AVOIDING A MATERIAL DISTORTION OF THE OPERATING STATEMENTS.

SECTION IV - PAGE 4
 OVER-ALL OPERATING STATEMENT

FOR MANY COLD STORAGE COMPANIES IT WILL BE DESIRABLE TO PREPARE TWO TYPES OF OPERATING

STATEMENTS - (1) AN OVER-ALL OPERATING OR PROFIT AND LOSS STATEMENT, PREPARED WITHOUT REGARD TO

DEPARTMENTAL DETAILS OR COSTS, AND (2) A DEPARTMENTAL OPERATING STATEMENT SUPPLEMENTED BY A UNIT

COST STATEMENT. BOTH TYPES OF STATEMENTS ARE ILLUSTRATED IN THIS SECTION AND DESIGNATED

EXHIBITS B AND C .

THE VALUE OF THE OVER-ALL STATEMENT LIES IN THE FACT THAT IT ENABLES MANAGEMENT TO

LOOK AT THE OPERATIONS AS A COMPOSITE WHOLE, AND TO EXAMINE THE PERCENTAGE RELATIONSHIPS OF THE

PRINCIPAL ELEMENTS OF COST TO THE GROSS REVENUE. THESE PERCENTAGE FIGURES ARE VERY S I G N I F I C A N T ;

THIS WILL BE PARTICULARLY TRUE AFTER THEY HAVE BEEN USED FOR A FEW YEARS. THE EXAMPLE STATEMENT

ON THE OPPOSITE PAGE INCLUDES OPERATING RESULTS FOR THE CURRENT MONTH IN ADDITION TO CUMULATIVE

OPERATIONS FOR THE YEAR TO DATE. THIS TYPE OF STATEMENT LENDS ITSELF TO COMPARISONS WITH PREVIOUS

PERIODS, AND THIS ENABLES THE MANAGEMENT TO DISCOVER SIGNIFICANT TRENDS IN THE OVER-ALL OPERATING

RESULTS. IT IS TRUE, OF COURSE, THAT ALL OF THE ANSWERS ARE NOT AVAILABLE TO MANAGEMENT FROM SUCH

STATEMENTS; THE DEPARTMENTAL STATEMENTS WILL USUALLY SERVE TO MORE FULLY EXPLAIN OR INTERPRET THE

OVER-ALL PROFIT AND LOSS STATEMENT.

SINCE THE DETAILS OF OPERATING COSTS ARE SHOWN IN THE DEPARTMENTAL STATEMENT AND IN SUP-

PLEMENTAL SCHEDULES, IT WILL BE UNNECESSARY TO REPEAT THESE DETAILS IN EXHIBIT B . ON THE OTHER

HAND, THE GENERAL OVERHEAD ACCOUNTS SHOULD BE SHOWN IN SOME DETAIL IN THIS STATEMENT BECAUSE THESE

ACCOUNTS ARE TREATED AS ONE SINGLE ELEMENT OF COST IN THE DEPARTMENTAL STATEMENT. THERE CAN BE A

GOOD DEAL OF F L E X I B I L I T Y IN THE MANNER OF ARRANGING AND DETAILING THESE ACCOUNTS IN E X H I B I T B, DE-

PENDING UPON THE NEEDS OR THE PREFERENCES OF THE INDIVIDUAL COMPANY. IT WILL F A C I L I T A T E THE PREPA-

RATION OF PERIODIC STATEMENTS IF THE ITEMIZATION OF THESE ACCOUNTS IN E X H I B I T B IS THE SAME AS IN

THE GENERAL LEDGER ACCOUNTS.

THE ADJUSTMENT TO ANNUALIZE GENERAL OVERHEAD EXPENSE, AS DISCUSSED PREVIOUSLY IN THIS

SECTION, SHOULD BE SHOWN IN THE FACE OF THE OVER-ALL OPERATING STATEMENT AS IS ILLUSTRATED IN

E X H I B I T B. THIS IS THE VERY BEST PLACE TO SHOW THIS ADJUSTMENT TO MANAGEMENT, BECAUSE IT WILL SO

CLEARLY REFLECT ITS EFFECT ON THE OPERATING RESULTS FOR THE PERIOD. IT ENABLES THE MANAGEMENT TO
SEE THE OPERATING RESULTS BOTH BEFORE AND AFTER THE GENERAL OVERHEAD ANNUALIZATION ADJUSTMENT.

SECTION IV - PAGE 5
 EXHIBIT B

EXAMPLE COLD STORAGE CO.

STATEMENT OF NET EARNINGS

S i x MONTHS ENDED JUNE 30, 1959

CURRENT YEAR TO
MONTH DATE
% %
REVENUES:
REFRIGERATION - % $ - $ - - %
NON-UTILITY 6.6 1,429 9,078 7.2
FREEZER STORAGE 46.2 10,047 56,276 44.8
COOLER STORAGE 971 5,088 4.0
HANDLING 11.5 2,504 12,649 10.1
SPECIAL SERVICES 3.5 759 4,437 3.5
QUICK FREEZING 27.7 6,014 38,190 30.4

100.0% $21,724 $125,718 100.0%

OPERATING COSTS 67.7% $14,712 $ 82,141 65.3%

GENERAL AND ADMINISTRATIVE EXPENSES:
ADMINISTRATIVE AND SELLING SALARIES $ 1,704 $ 9,779
GENERAL OFFICE SALARIES 1,401 8,190
EMPLOYEE LABOR BENEFITS 679 4,025
OFFICE SUPPLIES AND EXPENSE 471 2,704
GENERAL AND SELLING EXPENSE 509 2,604
TAXES, LICENSES AND PERMITS - 15
Loss AND DAMAGE CLAIMS - 2
FINANCIAL EXPENSE 703 703

25.2% $ 5,467 $ 28,022 22.3%

ADJUSTMENT TO ANNUALIZE 2.8 616 7,146 5.7

28.0% $ 6,083 $ 35,168 28.0%

TOTAL COSTS AND EXPENSES 95.7% $20,795 $117,309

PROFIT FROM OPERATIONS 4.3% $ 929 $ 8,409 6.7%

OTHER INCOME - NET - 525

EARNINGS BEFORE TAXES ON INCOME $ 929 $ 8,934

FEDERAL AND STATE TAXES ON INCOME 483 4,646

NET EARNINGS $ 446 $ 4,288

ANNUAL % TO
BUDGET CWT CWT BUDGET
BASIC UNITS:
FREEZER STORAGE 504,900 53,892 321,884 64
COOLER STORAGE 56,100 5,205 35,762 64
HANDLING 165,200 12,981 71,381 43

QUICK FREEZING 162,300 14,092 67,620 42

SECTION IV - PAGE 6
 DEPARTMENTAL OPERATING STATEMENT

THE PRIMARY PURPOSE OF THIS STATEMENT IS, OF COURSE, TO SHOW T H E FINAL NET OPERATING

RESULTS BY DEPARTMENTS. THESE OPERATING RESULTS WILL BE SIGNIFICANT TO THE EXTENT THAT GOOD JUDG-

MENT IS EXERCISED IN MAKING THE DEPARTMENTAL ALLOCATIONS, AND IN MAKING THE ANNUALIZATION ADJUSTMENTS

FOR INTERIM PERIOD STATEMENTS. THIS IS THE ULTIMATE OBJECTIVE OF A SATISFACTORY ACCOUNTING SYSTEM.

MANY OF THE ELEMENTS OF COST SHOWN IN THIS STATEMENT WILL COME FROM A GENERAL LEDGER

ACCOUNT, WITHOUT ANY ADJUSTMENT. In SOME INSTANCES, THERE WILL BE SUBSIDIARY SCHEDULES THAT WILL

CONTAIN ADDITIONAL DETAILS AND/oR THE ALLOCATION TO DEPARTMENTS, OR EXPLANATIONS OF THE COMPUTATION

OF THE ADJUSTMENTS TO ANNUALIZE. THE GENERAL LEDGER TRIAL BALANCE, TOGETHER WITH THESE SUBSIDIARY

SCHEDULES, WILL BE THE SOURCE FROM W H I C H EXHIBIT C WILL BE PREPARED.

ORDINARILY, THE DEPARTMENTAL OPERATING STATEMENTS SHOULD BE PREPARED CUMULATIVELY ONLY,

BUT OCCASIONALLY IT MAY BE DESIRABLE TO PREPARE SUCH STATEMENTS FOR A SINGLE MONTH. THIS CAN BE

DONE VERY CONVENIENTLY BY SUBTRACTING FROM T H E CUMULATIVE TOTALS THE TOTALS SHOWN IN THE SAME STATE-

MENT AT THE END OF THE PREVIOUS MONTH; THE DIFFERENCES IN THESE CUMULATIVE TOTALS WILL REPRESENT THE

RESULTS FOR THE CURRENT MONTH.

EXHIBIT C IS A DUAL STATEMENT. IT SHOWS THE DOLLAR AMOUNTS BY DEPARTMENTS IN THE TOP

SECTION AND THE UNIT COSTS IN THE BOTTOM SECTION. THE UNIT COSTS ARE DETERMINED SIMPLY BY DIVIDING

THE DOLLAR AMOUNTS (FOR EACH ELEMENT OF COST) BY THE NUMBER OF UNITS FLOWING THROUGH THE DEPARTMENT

FOR THE CUMULATIVE PERIOD. THE JUXTAPOSITION OF DOLLAR AMOUNTS AND UNIT COSTS IN THE SAME STATEMENT

IS A VERY EFFECTIVE WAY OF REPORTING OPERATING RESULTS TO MANAGEMENT. It MUST BE KEPT IN MIND, OF

COURSE, THAT THESE UNIT COSTS ARE AFTER THE ANNUALIZATION ADJUSTMENTS DISCUSSED ABOVE. THIS ALSO

APPLIES TO THE ADJUSTMENT FOR DEFERRED INCOME, IF ANY.

S E C T ION IV - PAGE 7
 E X H I B I TC

TOTAL REVENUE 125,718 125,718 9,078 56,276 5,088 12,649 38,190 4,437
COSTS:

DIRECT LABOR 22,545 9,134 13,411 4o4 1,588 176 4,823 4,123 2,297
SUPT. & IND. LABOR 6.667 6,667 201 790 88 2,397 2,050 1,141
EMPLOYEE LABOR BENEFITS 7,393 794 6,599 199 781 87 2,373 2,029 1,130

SUBTOTAL LABOR 36,605 9,928 26,677 8o4 3,159 351 9,593 8,202 4,568

POWER 9,643 865 865 - -

8,778
SUPPLIES AND EXPENSE 3,867 2,872 995 103 127 14 241 238 272

M A I N T .& F I X E D CHARGES 34.382 4,962 29,420 5,802 11.794 1,120 4,790 5,734 180
REFRIGERATION ALLOCATED 2,356* (26,540) 24,184 354 12,277 619 10,914 20
-
SUBTOTAL 82,141 82,141 7,063 27,357 2,104 15,489 25,088 5,040
35,168
GENERAL & ADMIN. EXPENSE - 35,168 3,024 11,713 901 6,631 10,741 2,158
TOTAL COST 117,309 117,309 10,087 39,070 3,005 22,120 35,829 7,198
-
OPERATING PROFIT ( L O S S ) 8,409 8,409 (1,009) 17,206 2,083 (9,471) 2,361 (2,761)

- 321,884 35,762 71,381 67,620

.1748 .1423 .1772 .5648

COSTS PER UNIT

DIRECT LABOR $.0049 $.0049 $.0676 $ .0 6 1 0

.0025 .0025 .0336 .0303

EMPLOYEE LAB. BENEFITS .0024 .0024 .0332 .0300

SUBTOTAL LABOR $.0098 $.0098 $.1344 $.1213
FOR T H E 6 MONTHS T O JUNE 30, 1959
POWER - - .0121 -

SUPPLIES AND EXPENSE .0004 .0004 . 0034 .0035

REMARKS: MAINT. & FIXED CHARGES .0366 .0671 .0848

.0313

*ADJUSTMENT TO ANNUALIZE REFRIGERATION REFRIG. ALLOCATED .0382 .0173 .1614

(PREPAID) GENERAL & ADMIN. EXP.

.0364 .0252 .0929 .1588
TOTAL COST $.1214 $.0840 $.3099 $.5298

PROFIT (LOSS) FROM

$.0534 $.0583 ($.1327) OPERATIONS
$.0350
SECTION I V - PAGE 8
 REFRIGERATION USAGE

SUBSIDIARY SCHEDULE C-1 ON THE OPPOSITE PAGE IS DESIGNED TO BE A CONVENIENT TOOL OR WORK
SHEET IN COMPUTING THE KWH OF POWER USED IN THE MANUFACTURE OF REFRIGERATION. THE PROCEDURES ARE

FULLY EXPLAINED IN SECTION I I I . IT IS SUFFICIENT TO STATE AT THIS POINT THAT BY THE MOST

ACCURATE ENGINEERING METHODS AVAILABLE TO EACH COMPANY, THE THEORETICAL POWER REQUIRED TO SUPPLY

REFRIGERATION TO EACH AREA OF REFRIGERATED SPACE IS DETERMINED AND INSERTED IN THE COLUMN HEADED

"KWH PER DAY."

THE THEORETICAL POWER USAGE TABLE SHOULD BE REVIEWED FROM TIME TO TIME AND REVISED AS

NECESSARY. THE MARGIN OF ERROR INVOLVED IN THE COMPUTATIONS IS INDICATED BY THE PER CENT OF

ACTUAL USAGE TO COMPUTED USAGE SHOWN AT THE BOTTOM OF THE FORM. THIS DIFFERENCE COVERS A NUMBER

OF VARIABLES AND A SMALLER OR LARGER DIFFERENCE WOULD NOT NECESSARILY CHANGE THE ALLOCATION OF

REFRIGERATION COST TO DEPARTMENTS. ANY DIFFERENCE DEFINITELY DOES NOT AFFECT THE TOTAL AMOUNT

CHARGED TO OPERATIONS SINCE THE ACTUAL OR ANNUALIZED COST OF REFRIGERATION IS USED.

S E C T ION IV - PAGE 9
 SCHEDULE C-1

EXAMPLE COLD STORAGE CO.

REFRIGERATION USAGE SCHEDULE
FOR THE PERIOD 30 DAYS - ENDED JUNE 30, 1959

K.W.H. K.W.H. K.W.H.

REFRIGERATION ROOM OR F A C I L I T Y PER DAYS USAGE USAGE DEPARTMENT
DAY OPERATED COMPUTED ADJUSTED CHARGED

REFRIG. ROOM NO. 1 141 30 4 230 4 697 CS

REFRIG. ROOM NO. 2 317 30 9 517 10 569 FS

REFRIG. ROOM NO. 3 146 30 4 380 4 864 FS

REFRIG. ROOM NO. 4 146 30 4 380 4 864 FS

REFRIG. ROOM NO. 5 267 30 8 010 8 895 FS

REFRIG. ROOM NO. 6 267 30 8 010 8 895 FS

REFRIG. ROOM NO. 7 267 30 8 010 8 895 FS

REFRIG. ROOM NO. 8 365 30 10 950 12 160 FS

REFRIG. ROOM NO . 9 365 30 10 950 12 160 FS

REFRIG. ROOM No.10 267 30 8 010 8 895 FS

QUICK FREEZING TUNNEL #1 757 30 21 710 24 109 QF

QUICK FREEZING TUNNEL #2 796 30 23 468 26 061 QF

QUICK FREEZING TUNNEL #3 958 30 28 745 31 922 QF

LOCKERS 52 30 1 560 1 732 NU

RENTED SPACE 24 30 720 800 SS

ICE NU

TOTAL COMPUTED USAGE XXX XX 152 650 XX

ADJUSTED USAGE 111.05% ( S C H . C - 2 ) XXX XX XX 169 518

REMARKS SUMMARY

80,197 FS
4,697 CS

82,092 QF
1.732 NU

800 SS

169,518 TOTAL
SECTION IV - PAGE 10
 ALLOCATION OF POWER AND REFRIGERATION COSTS

SUBSIDIARY SCHEDULE C-2 ON T H E OPPOSITE PAGE IS A SUBSIDIARY SCHEDULE IN WHICH A

PART OF THE POWER CONSUMPTION IS ALLOCATED DIRECTLY TO OPERATING DEPARTMENTS AND TO CERTAIN

OTHER LEDGER ACCOUNTS. THE REMAINING POWER USAGE IS CHARGED TO THE REFRIGERATION DEPARTMENT.

REFRIGERATION COSTS FOR THE MONTH, INCLUDING POWER, ARE DETAILED IN THE UPPER BLOCK

AT THE RIGHT. THE COST OF REFRIGERATION PER KWH IS ALSO SHOWN. A COMPARISON OF THESE UNIT

COSTS FROM MONTH TO MONTH W I L L BE VERY SIGNIFICANT.

THIS SCHEDULE ALSO SHOWS THE ALLOCATION OF REFRIGERATION COSTS TO DEPARTMENTS FOR

THE CURRENT MONTH ONLY. THE BASES OF ALLOCATION IS KWH, WHICH ARE OBTAINED FROM

SCHEDULE C-1 .

S e c t ion IV - P a g e 11
 EXAMPLE COLD S GE CO.
SCHEDULE

POWER COST AND ALLOCATION REFRIGERATION COST AND ALLOCATION

FOR T H E MONTH OF JUNE 1959 SECTION I V - PAGE 12

PER COST PER

DETAILS K.W.H. AMOUNT K.W.H. DETAILS K.W.H. AMOUNT

POWER COST - ALL METERS 184 340 1,923 05 .0104 DIRECT LABOR .0096 1,617 91
LESS SOLD TO OTHERS EMPLOYEE LABOR BENEFITS .0001 122 41

NET POWER USED 184 340 1,923 05 .0104 TOTAL LABOR .0103 1,740 32
POWER COST (SEE LEFT) .0104 1,768 86

LESS DIRECT CHARGES (BELOW) 14 822 154 19 .0104 SUPPLIES .0005 81 . 0 4

MAINTENANCE AND FIXED CHARGES .0049 827 00

NET CHG.-REFRIGERATION 169 518 1,768 86 .0104

(SEE SCHEDULE RIGHT)

TOTAL REFRIG. COST .0261 4,417 22

(SEE ALLOCATION BELOW)

DEPT.
DIRECT POWER ALLOCATION K.W.H. AMOUNT ACCOUNT ALLOCATION - REFRIG. COSTS K.W.H. AMOUNT

BATTERY CHARGING 454 46 FREEZER STORAGE 80 197 2,091 61

LIGHT-PLATFORM AND ROOMS 9 012 93 73 COOLER STORAGE 4 697 122 59
ELEVATORS 4
454 QUICK FREEZING 82 092 2,136
72 93
13 920 144 78 HANDLING SPECIAL SERVICES (LEASED SPACE) 800 20 88
LOCKERS ( N O N - U T I L I T Y ) 1 732 21

LIGHT AND HEAT - OFFICE 9 41 930 ICE (NON-UTILITY)

902
QUICK FREEZING EQUIPMENT
RENTED SPACE

NON-UTILITY

TOTAL DIRECT CHARGES 14 822 154 19 TOTAL REFRIG. COSTS 169 518 4,417 22
 ANNUALIZATION OF REFRIGERATION

SUBSIDIARY SCHEDULE C - 3 ON THE OPPOSITE PAGE IS PRIMARILY FOR THE PURPOSE OF DETERMINING

THE CUMULATIVE COST OF REFRIGERATION CHARGEABLE TO OPERATIONS FOR THE YEAR TO DATE BY DEPARTMENTS.

AS EXPLAINED IN SECTION IV THE SEASONAL NATURE OF THE COLD STORAGE BUSINESS MAKES IT

NECESSARY TO CHARGE REFRIGERATION COST TO OPERATIONS ON THE BASIS OF THE ANNUALIZED RATE APPLIED

TO THE KWH CONSUMED DURING THE ACCOUNTING PERIOD.

BOTH THE KWH TO DATE AND THE ACTUAL ALLOCATED REFRIGERATION COSTS TO DATE ARE ACCUMU-

LATED FROM THE MONTHLY ALLOCATION SCHEDULES (C-2).

THE DIFFERENCE BETWEEN THE AMOUNT CHARGED TO OPERATIONS AND THE ACTUAL COST IS THE

ADJUSTMENT TO ANNUALIZE. BY WORKSHEET ENTRY THE ADJUSTMENT, WHICH MAY BE EITHER A PREPAYMENT

OR ACCRUAL, IS CARRIED TO THE BALANCE SHEET.

SINCE THE COST OF REFRIGERATION IS ALLOCATED MONTHLY AND FLUCTUATES DURING THE YEAR,

THE CUMULATIVE ACTUAL RATE PER KWH IS DIFFERENT FOR EACH DEPARTMENT, AS INDICATED ON THE SCHEDULE.

THESE ACTUAL RATES AND THE PERCENTAGE RELATIONSHIPS TO ANNUAL RATES SHOULD BE OBSERVED CLOSELY

FROM MONTH TO MONTH.

SECTION IV - P A G E 13
 SCHEDULE

EXAMPLE COLD STORAGE CO.

ANNUALIZATION OF REFRIGERATION COST

FOR SIX MONTHS ENDED JUNE 30, 1959

EST. ANNUAL KWH 2,100,000

K.W.H. ANNUALIZED AMOUNT
EST. REFRIG. COST $52,700
TO DATE RATE TO DATE
EST. ANNUAL RATE $ .0251

CHARGED TO OPERATIONS (EXHIBIT C):

FREEZER STORAGE 489,130 $.0251 $12,277.16
COOLER STORAGE 24,648 .0251 618.67
QUICK FREEZING 434,843 .0251 10,914.55

SPECIAL SERVICES (LEASED SPACE) 800 .0251 20.08

NON-utiLity:
LOCKERS 14,106 .0251 354.07
ICE

963,527 $24.184.53

% TO
ANNUAL ACTUAL AMOUNT
RATE RATE TO DATE

ACTUAL COST - ALLOCATED (SCHEDULE C - 2 )

FREEZER STORAGE 118% $.0296 $14,474.75

COOLER STORAGE 110 .0275 679.09

QUICK FREEZING 101 .0252 10,976.83

LEASED SPACE 104 .0261 20.88

NON-UTILITY:
LOCKERS 110 .0275 388.67

ICE

110% $.0275 $26,540.22

ADJUSTMENT TO ANNUALIZE - PREPAID $ 2,355.69

SECTION IV- PAGE 14

 ALLOCATION OF FIXED CHARGES

SUBSIDIARY SCHEDULE C - 4 ON THE OPPOSITE PAGE IS USED TO ASSEMBLE FIXED CHARGES AND

TO ALLOCATE CERTAIN ITEMS OF INDIRECT COST TO DEPARTMENTS. THE UPPER PORTION OF THE FORM IS

FOR RECORDING THE INVESTMENT IN F A C I L I T I E S AT COST (NOT DEPRECIATED COST), WHICH IS THE BASIS

FOR ALLOCATING PROPERTY TAXES AND INSURANCE, AS INDICATED THEREON. DEPRECIATION, RENT, AND

REPAIRS AND MAINTENANCE WILL ORDINARILY BE A DIRECT CHARGE TO DEPARTMENTS. STORAGE IS SHOWN

IN TOTAL BECAUSE THE ROOMS ARE OFTEN INTERCHANGEABLE. THE TOTAL IS THEN RE-ALLOCATED TO

FREEZER STORAGE AND COOLER STORAGE ACCORDING TO USAGE AS DETERMINED BY THE NUMBER OF BASIC

UNITS STORED IN EACH DEPARTMENT.

BUDGET OF INDIRECT COSTS AND VOLUMES IN TERMS OF BASIC UNITS, AND REVISED DURING THE YEAR

AS REQUIRED. ANNUAL RATES ARE COMPUTED FOR EACH DEPARTMENT AS SHOWN AT THE BOTTOM OF THE

SCHEDULE. THESE RATES ARE USED IN SCHEDULE C-5 TO ANNUALIZE FIXED CHARGES DURING THE YEAR.

AT THE END OF THE YEAR A FINAL SCHEDULE WILL BE PREPARED FOR THE PURPOSES OF ALLO-

CATING ACTUAL COSTS FOR THE YEAR TO DEPARTMENTS.

SECTION IV - P A G E 15
 SCHEDULE

EXAMPLE COLD STORAGE CO.

ALLOCATION OF FIXED CHARGES - 1959 BUDGET

REFRIG- QUICK
SPECIAL GENERAL
INVESTMENT - FACILITIES TOTAL FREEZING OFFICE
ERATION NON-UTILITY STORAGE HANDLING SERVICES

LAND (1)
26 168 264 13 216 12 168 520
595
BUILDINGS
4o4 603 11 572 78 215 928 093 4o 4 000 2 200
MACHINERY AND EQUIPMENT 184 44 169 266
122 578 7 472 83 299 2 4oo
FURNITURE AND FIXTURES 462 26 380
SUBTOTAL BLDG. & EQUIP. (2) 721 249 134 150 85 687 283 097 85 385 123 950 4 000 4 980

TOTAL INVESTMENT - GROSS 417 134 414 98 903 295 265 85 385 123 950 4 000 5 500
747
51% -% 1% -%
% LAND TO TOTAL (1) 100% 46% -% 2%
18% 1%
% BLDG. AND EQUIP. TO T O T A L (2) 100% 12% 39% 12% 17% 1%

REFRIG- QUICK SPECIAL GEN. OFFICE

FIXED CHARGES TOTAL
ERATION NON-UTILITY STORAGE HANDLING FREEZING SERVICES (A/C 930)

PROPERTY TAXES - LAND (1)

200
1 12 612 552 _ _ _ 24
PROPERTY TAXES - BLDG. & EQUIP.(2) 10 000 1 800 1 200 3 900 1 200 1 700 100 100
PROPERTY INS. (2) 1 674 1 116 3 627 1 116 1 581
9 300 93 93
DEPRECIATION (DIRECT) 950 4 043 6 576 10 013 110 960
5 173 5 075
•

RENT (DIRECT)
15
REPAIRS AND M A I N T E N A N C E (DIRECT) 000 2 4oo 2 100 1 440 3 600 5 4oo 60 _

532 756
TOTAL FIXED CHARGES 67 450 929 11 6o4 19 11 089 1
13 363 177
9

ANNUAL UNITS (ESTIMATED)/MONTHS XXXXXXX ;XXXX 12 MO. 12 MO. 561 000 165 200 162 300 12 MO. (ALLOCATED

ANNUAL RATE PER UNIT/MONTH XXXXXXX :XXXX A SP A R TOF

327 967 .0348 .0671 .0848 30 T O T A LG&A)

SECTION IV - PAGE 16
 ANNUALIZATION OF FIXED CHARGES

SUBSIDIARY SCHEDULE C - 5 ON THE OPPOSITE PAGE IS PRIMARILY FOR THE PURPOSE OF DETERMIN-

ING THE CUMULATIVE AMOUNT OF FIXED COST CHARGEABLE TO OPERATIONS FOR THE YEAR TO DATE BY

DEPARTMENTS .

AS EXPLAINED IN SECTION IV, THE SEASONAL NATURE OF THE COLD STORAGE BUSINESS MAKES IT

NECESSARY TO CHARGE INDIRECT COSTS TO OPERATIONS ON THE BASIS OF ANNUALIZED RATES APPLIED TO

BASIC 100# UNITS STORED OR HANDLED DURING THE ACCOUNTING PERIOD. THE PROCEDURE FOR DETERMINING

THE ANNUAL RATES IS ILLUSTRATED AND EXPLAINED IN THE PRECEDING SCHEDULE AND RELATED COMMENTS.

THE BASIC UNITS FOR THE YEAR TO DATE IN THE FIRST COLUMN AT THE TOP OF THE SCHEDULE

ARE THE RESULT OF CONVERTING THE ACTUAL VOLUME FLOWING THROUGH EACH DEPARTMENT TO A COMMON

DENOMINATOR BY APPLYING COST RELATIONSHIP FACTORS RECOGNIZING DENSITY AND LOT S I Z E . THESE

ARE THE SAME UNITS DEVELOPED FOR UNIT COST PURPOSES.

ACTUAL COSTS,AT THE BOTTOM OF THE SCHEDULE, ARE TAKEN DIRECTLY FROM THE GENERAL

LEDGER. THE DIFFERENCE BETWEEN THE AMOUNT CHARGED TO OPERATIONS AND THE LEDGER TOTAL IS THE

ADJUSTMENT TO ANNUALIZE. BY WORKSHEET ENTRY THE ADJUSTMENT, WHICH MAY BE EITHER A PREPAYMENT

OR ACCRUAL DEPENDING ON THE POINT IN THE FISCAL YEAR AND OTHER CONSIDERATIONS, IS CARRIED TO

THE INTERIM BALANCE SHEET.

THE PERCENTAGES SHOWN IN THE COLUMN AT THE RIGHT ARE PARTICULARLY S I G N I F I C A N T . THEY

INDICATE THE CURRENT STATUS OF EACH DEPARTMENT AS TO CUMULATIVE VOLUME IN RELATION TO ANNUAL

BUDGET. LIKEWISE, THE PERCENTAGES FOR THE VARIOUS FIXED CHARGES REFLECT EXPENDITURES TO DATE

IN RELATION TO THE ESTIMATED AMOUNT FOR THE YEAR.

SECTION IV - PAGE 17
 SCHEDULE C-5

EXAMPLE COLD STORAGE CO.

ANNUALIZATION OF FIXED CHARGES

FOR SIX MONTHS ENDED JUNE 30, 1959

% TO BASic ANNUALIZED AMOUNT

ANNUAL UNITS RATE YEAR
BUDGET TO DATE (SCH. C-4) TO DATE

CHARGED TO OPERATIONS (EXHIBIT C):

REFRIGERATION 50% (6 MOS.) $827.00 $ 4,962
NON-UTILITY 50 (6 MOS.)
321,884
$967.00
.0348
5,802
FREEZER STORAGE )
64 11,794
COOLER STORAGE ) 35,762 .0372 1,120
HANDLiNG 43 71,381 .0671 4,790
QUICK FREEZING 42 67,620 .0848 5.734
SPECIAL SERVICES 50 (6 M O S ) $ 30.00 180
$34,382
496,647
REFRIG-
OPERATING
DEPARTMENT DEPARTMENT TOTAL

ACTUAL COST - PER GENERAL LEDGER

PROPERTY TAXES 50% 4,694 $ 906 $ 5,600
PROPERTY INSURANCE 50 3,814 836 4,650
DEPRECIATION 50 13,955 2,020 15,975
RENT -

MAINTENANCE 29 3,179 1,200 4,379

45% 25,642 $4,962 $30,604

ADJUSTMENT TO ANNUALIZE - ACCRUED $ 3,778

SECTION IV - PAGE 18
 SECTION V - UNIT COST FINDING

EACH OF THE MAJOR OPERATING DEPARTMENTS IS A SEPARATE BUT SIMILAR COST-FINDING PROBLEM,

THE COST PER BASIC UNIT WILL BE DIFFERENT FOR EACH OF THE DEPARTMENTS, AND THE NUMBER OF UNITS

FLOWING THROUGH EACH DEPARTMENT WILL BE ENTIRELY DIFFERENT. HOWEVER, THE UNIT COST-FINDING

PROCEDURES WILL BE THE SAME FOR EACH OF THE FOUR MAJOR DEPARTMENTS.

THE TECHNICAL PROCEDURES FOR UNIT COST DETERMINATION ARE ILLUSTRATED AND EXPLAINED

IN THE SCHEDULES AND RELATED COMMENTS AT THE END OF THIS SECTION, AS FOLLOWS:

PAGE

SCHEDULE NO. 1 - CONVERSION WORK SHEET 7

SCHEDULE NO. 2 - TABLE OF COST ALLOCATION F A C T O R S . , . , . . . . , 9

SCHEDULE NO. 3 - ACTUAL UNIT COSTS BY LOT SIZE AND DENSITY - FREEZER STORAGE
DEPARTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * 11

SCHEDULE No. 4 - ACTUAL UNIT COSTS BY LOT SIZE AND DENSITY - COOLER STORAGE
DEPARTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SCHEDULE NO. 5 - ACTUAL UNIT COSTS BY LOT SIZE AND DENSITY - HANDLING DEPARTMENT., 15

SCHEDULE NO. 6 - ACTUAL UNIT COSTS BY LOT SIZE AND DENSITY - QUICK FREEZING
DEPARTMENT..................................................... 17
SCHEDULE NO. 7 - COMPARATIVE UNIT REVENUES AND COSTS BY LOT SIZE AND DENSITY -
FREEZER STORAGE D E P A R T M E N T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

COMPLETE INSTRUCTIONS FOR INSTALLING AND OPERATING THE UNIFORM SYSTEM ARE CONTAINED IN

THESE SCHEDULES AND IN THE PRECEDING SECTIONS OF THIS MANUAL. CERTAIN EXCEPTIONS AND SPECIAL

PROBLEMS AFFECTING UNIT COSTS ARE DISCUSSED IN MORE DETAIL UNDER SPECIFIC CAPTIONS IN THE

FOLLOWING PARAGRAPHS.

QUANTITIES HANDLED OR STORED

As WAS STATED IN THE INTRODUCTORY SECTION, THE OTHER HALF OF ANY UNIT COST-FINDING

SYSTEM IS THE ACCOUNTING FOR QUANTITIES. ALL OF THE GOODS HANDLED OR STORED IN EACH DEPARTMENT

WILL BE FIRST RECORDED IN TERMS OF THE ACTUAL WEIGHT, OR IN TERMS OF CASES, CANS, BOXES, BARRELS,

ETC; ALL OF WHICH CAN BE READILY CONVERTED INTO THE ACTUAL WEIGHT. WHEN SUCH A CONVERSION IS

NECESSARY, THE NUMBER OF PACKAGES WILL BE MULTIPLIED BY THE STANDARD WEIGHT PER PACKAGE. THIS

CONVERSION IS NOT ONLY SIMPLE, BUT IT IS SO STANDARDIZED AND SO WELL UNDERSTOOD, THAT THERE

SHOULD NEVER BE ANY OCCASION FOR MISUNDERSTANDING OR CONTROVERSY WITH THE CUSTOMERS OF THE

WAREHOUSE COMPANY. THUS, THE COMMON UNIT OF MEASURE FOR COST-FINDING PURPOSES WILL BE 100# OF

MERCHANDISE.

COMMON DENOMINATOR UNITS WILL BE COMPUTED BY GIVING THE PROPER EFFECT TO COST DIFFER-
ENTIALS FOR BOTH DENSITY AND LOT S I Z E . THIS COST ACCOUNTING CONCEPT HAS ALREADY BEEN DISCUSSED
IN SECTION I . THE IMPORTANCE OF THIS CONCEPT CANNOT BE OVEREMPHASIZED; ALL OF THE ACCOUNTING

PROCEDURES REVOLVE AROUND THIS FUNDAMENTAL IDEA. THIS SAME COMMON DENOMINATOR UNIT OF MEASURE

SHOULD ALSO BE USABLE FOR RATE-MAKING PURPOSES, AND THIS SUBJECT IS DISCUSSED IN A LATER PARA-

GRAPH OF THIS SECTION.

SECTION V - PAGE 1
INCIDENTAL OR ACCESSORIAL REVENUES AND COSTS

THE GROSS DEPARTMENTAL REVENUES FROM W H I C H THE REVENUE PER BASIC UNIT WILL BE COMPUTED

ARE DERIVED FROM T H O S E MAJOR SERVICES, THE COSTS OF W H I C H ARE RELATED TO LOT SIZES AND DENSITY,

AS EXPLAINED AND ILLUSTRATED IN THE FOREGOING PARAGRAPHS OF THIS SECTION. BUT, IN ADDITION TO

THESE MAJOR REVENUES THERE WILL ALSO BE CERTAIN OTHER MORE OR LESS INCIDENTAL REVENUES FOR

SERVICES THAT ARE NOT RELATED TO LOT SIZE OR DENSITY. THESE REVENUES ARE INCIDENTAL TO A

CERTAIN PRODUCT, OR TO A PARTICULAR SERVICE WHICH INCREASES THE NORMAL COST OF HANDLING OR STORING.

THESE SERVICES CREATE A SPECIAL PROBLEM BY REASON OF THE FACT THAT THEIR COST IS DIFFICULT TO

IDENTIFY. THIS WILL BE EVIDENT FROM T H E NATURE OF THE SERVICES WHICH ARE DESCRIBED HEREIN BELOW.

HOWEVER, MOST OF THESE INCIDENTAL SERVICES CAN BE IDENTIFIED WITH ONE OF THE THREE

MAJOR OPERATING DEPARTMENTS: FREEZER STORAGE, COOLER STORAGE, OR H A N D L I N G . BEING IDENTIFIED

WITH A DEPARTMENT MEANS THAT THE COST OF PERFORMING THE SERVICE WILL, MORE OR LESS AUTOMATICALLY,

BE INCLUDED |N T H E DEPARTMENTAL OPERATING COST ACCOUNTS. FOR THIS REASON THE REVENUES FROM THESE

INCIDENTAL SERVICES SHOULD FOLLOW THE COSTS AND BE CREDITED TO THE APPROPRIATE DEPARTMENTAL

REVENUE ACCOUNTS ALONG WITH BUT SEGREGATED FROM REVENUES ARISING OUT OF CHARGES THAT ARE BASED

UPON LOT SIZE AND DENSITY.

THIS ACCOUNTING TREATMENT IS JUSTIFIED BY THE FACT THAT THE INCIDENTAL REVENUES WILL

OFTEN BE SO SMALL THAT THEY WILL HAVE LITTLE OR NO B E A R I N G ON T H E SIGNIFICANT CONCLUSIONS TO

BE DRAWN BY MANAGEMENT FROM A COMPARISON OF THE COST PER BASIC UNIT WITH REVENUE PER BASIC UNIT.

THIS PROCEDURE IS FURTHER JUSTIFIED BY THE INHERENT DIFFICULTY OF IDENTIFYING THE COST OF THESE

INCIDENTAL SERVICES. IT DOES NOT PRECLUDE SPECIAL ANALYSES OR A C T U A L COST STUDIES APART FROM

THE GENERAL RECORDS FOR THE PURPOSE OF JUSTIFYING OR INCREASING RATES FOR SPECIFIC FRINGE SERVICES.

ACCESSORIAL SERVICES INCLUDED IN THE CALIFORNIA P. U. C. TARIFF ARE CLASSIFIED ACCORD-

ING TO DEPARTMENT BELOW:

FREEZER STORAGE
1. ADDITIONAL CHARGE FOR TEMPERATURE REDUCTION OF PARTIALLY DEFROSTED MERCHANDISE
2. ADDITIONAL CHARGE FOR SLACK PACKAGES
3. ADDITIONAL CHARGE FOR RACKING

4. ADDITIONAL CHARGE FOR TAKING PHYSICAL INVENTORY

COOLER STORAGE
1. ADDITIONAL CHARGE FOR H U M I D I T Y CONTROL OF COMMODITIES
2. ADDITIONAL CHARGE FOR SO2 GASSING
3. ADDITIONAL CHARGE FOR SLACK PACKAGES
4. ADDITIONAL CHARGE FOR RACKING
5. ADDITIONAL CHARGE FOR TAKING PHYSICAL INVENTORY

HANDLING DEPARTMENT
I. ADDITIONAL CHARGE FOR SMALL LOT DELIVERIES
2. ADDITIONAL CHARGE FOR PACKAGES UNDER 22 POUNDS
3. OVERTIME CHARGES

5. ADDITIONAL CHARGE FOR INCIDENTAL PACKING, GRADING, INSPECTION OR STENCILING

6. ADDITIONAL CHARGE FOR DELIVERIES EX DOCK OR CAR

SECTION V - PAGE 2
 GENERAL OFFICE SERVICES
1. ADDITIONAL CHARGE FOR PAPER WORK RE STORAGE IN TRANSIT
2. ADDITIONAL CHARGE FOR CASH ADVANCES OR COLLECTIONS
3. ADDITIONAL CHARGE FOR TRANSFERS IN STORAGE

RECEIPTS

WHILE THIS i s NOT A COMPLETE L I S T OF ALL INCIDENTAL OR ACCESSORIAL SERVICES, IT WILL

BE SUFFICIENT TO MAKE CLEAR THE UNDERLYING PRINCIPLES AND PROCEDURES TO BE USED. IT WILL BE

NOTED THAT SOME OF THESE INCIDENTAL REVENUES ARE ASSOCIATED WITH GENERAL OFFICE PERSONNEL AND

SO ARE NOT IDENTIFIED WITH A PARTICULAR DEPARTMENT. HOWEVER, DUE TO THE SMALL AMOUNT INVOLVED,

AND BECAUSE GENERAL OVERHEAD IS PRORATED TO ALL DEPARTMENTS, IT IS SUGGESTED THAT SUCH REVENUES

BE CREDITED TO THE HANDLING DEPARTMENT.

A FLAT DELIVERY CHARGE REPLACING THE CHARGE FOR DELIVERIES UNDER A CERTAIN SIZE IS

DISCUSSED BELOW.

PARTIAL LOT DELIVERY CHARGE

UNDER THE PRESENT CALIFORNIA PUBLIC U T I L I T I E S COMMISSION TARIFF THE HANDLING CHARGE

COVERS BOTH THE "IN" AND "OUT" HANDLING. AS A RESULT, RATES FOR HANDLING ARE MORE EQUITABLE

FOR SOME COMPANIES THAN FOR OTHERS. THE SIZE OF THE INCOMING LOT DETERMINES THE CHARGE WHICH,

IN EFFECT, ASSUMES THAT THE DELIVERIES WILL BE THE SAME S I Z E . THIS ASSUMPTION DOES NOT

MATERIALLY AFFECT THE COST-REVENUE RELATIONSHIP WHEN THE INCOMING AND OUTGOING QUANTITIES ARE

MOSTLY FULL PALLET LOADS, BUT THIS IS FREQUENTLY NOT THE CASE. PARTICULARLY IN A DISTRIBUTION

WAREHOUSE, PARTIAL LOT DELIVERIES ARE A MAJOR FACTOR.

IT WOULD BE POSSIBLE UNDER ENTIRELY NEW AND DIFFERENT TARIFF CONCEPTS TO PROVIDE

FOR SEPARATE RATES FOR " I N " AND "OUT" HANDLING. IF THIS WERE DONE THERE SHOULD BE ONLY ONE

DEPARTMENT FOR "HANDLING" BECAUSE COSTS CANNOT BE SO SEGREGATED. HOWEVER, QUANTITIES RECEIVED

AND QUANTITIES DELIVERED WOULD BE CONVERTED SEPARATELY TO A COMMON DENOMINATOR FOR LOT SIZE

AND DENSITY. THIS LARGELY WOULD SOLVE THE PROBLEM OF THE ADDITIONAL COST ATTACHED TO PARTIAL

LOT DELIVERIES, BECAUSE THE LOT SIZE CATEGORY AT THE TIME OF DELIVERY WOULD BE BASED ON

THE SIZE OF THE DELIVERY AND NOT THE I N I T I A L LOT S I Z E .

TO FOLLOW THIS METHOD THROUGH, THE BASIC 100# UNITS FOR THE HANDLING DEPARTMENT

AND CONSEQUENTLY THE BASIC UNIT COST WOULD REPRESENT MOVEMENT IN ONE DIRECTION; IN OR OUT AND

NOT IN AND OUT. THE PREMISE IS THAT THE HANDLING COST FOR MOVING AN IDENTICAL QUANTITY INTO

STORAGE IS THE SAME AS TAKING IT OUT.

SECTION V - PAGE 3
 THIS WOULD BE A MORE ACCURATE APPROACH TO RATE STRUCTURE AND UNIT COST DETERMINATION

FOR HANDLING. HOWEVER, FROM A PRACTICAL STANDPOINT IT DOES NOT APPEAR TO BE FEASIBLE. BILLINGS

FOR OUT-HANDLING WOULD HAVE TO COME FROM COUNTLESS DELIVERY TAGS, REVENUES WOULD NOT BE RECEIVED

UNTIL THE GOODS WERE MOVED OUT, AND, THERE ARE OTHER DISADVANTAGES.
EXISTING REGULATIONS IN CALIFORNIA ATTEMPT TO COMPENSATE THE WAREHOUSEMAN FOR EXTRA

CLERICAL COSTS BY PROVIDING FOR AN ADDITIONAL CHARGE FOR SMALL DELIVERIES. IT WILL BE ENTIRELY

SATISFACTORY TO CONTINUE WITH AN EXTRA CHARGE, BUT THE PRESENT RATE FOR DELIVERIES UNDER A

CERTAIN SIZE SHOULD BE REPLACED WITH A FLAT CHARGE PER DELIVERY AND INCREASED TO COVER OTHER

COSTS INVOLVED IN PARTIAL LOT DELIVERIES.

BASIC UNIT COSTS FOR THE HANDLING DEPARTMENT UNDER THE PROPOSED METHOD WILL TEND TO

BE HIGHER TO THE EXTENT OF THE VOLUME OF PARTIAL LOT DELIVERIES. HOWEVER, THE UNIFORM SYSTEM

AUTOMATICALLY ADJUSTS FOR DIFFERENCES IN LOT SIZE RECEIVED BY APPLYING COST RELATIONSHIP FACTORS

WHICH RECOGNIZE THE VARIATIONS IN HANDLING COST RESULTING FROM LOT SIZE DIFFERENCES. THIS IS

A MAJOR ACCOMPLISHMENT OVER PRESENT PRACTICE AND THE FACT THAT EXTRA COSTS OF PARTIAL LOT DE-

L I V E R I E S ARE NOT ISOLATED AND ACCOUNTED FOR SEPARATELY IS NOT CONSIDERED TO BE SERIOUS. OF

COURSE, THERE REMAINS THE PROBLEM OF ESTABLISHING A PROPER DELIVERY CHARGE. THIS, OF NECESSITY,

WOULD BE AN AVERAGE CHARGE REPRESENTING THE DIFFERENCE BETWEEN THE COST OF DELIVERING A LOT

INTACT AND THE EXTRA COST OF PARTIAL LOT DELIVERIES.

EACH TIME THERE IS A WITHDRAWAL FROM A LOT THE WAREHOUSE OFFICE IS REQUIRED TO PRO-

CESS THE PAPER, THE LOADING DOCKS MUST SCHEDULE THE DELIVERY AND THE L I F T TRUCT OPERATOR HAS

TO LOCATE THE STOCK AND MAKE THE I N I T I A L CONTACT WITH THE CARRIER; THEREAFTER, IT IS MORE OR

LESS A SHUTTLE OPERATION. ASSEMBLING SMALL ORDERS FROM EACH OF SEVERAL LOTS ON ONE OR MORE FULL

PALLETS IS ANOTHER EXTRA COST THAT WILL BE INCLUDED IN THE DELIVERY CHARGE. WITHDRAWAL OF LESS

THAN A FULL PALLET LOAD ALSO INCREASES THE DELIVERY COST IN DIRECT PROPORTION, BECAUSE THE HAND-

LING TIME PER PALLET IS THE SAME REGARDLESS OF THE QUANTITY INVOLVED. OF COURSE, THIS FACTOR

WOULD BE RECOGNIZED IN THE DELIVERY CHARGE ONLY TO THE EXTENT THAT LOTS RECEIVED ARE IN FULL

PALLETS OR, PART PALLETS RECEIVED ARE WITHDRAWN IN EVEN SMALLER QUANTITIES. SOME WAREHOUSE

COMPANIES PERFORM A BILLING FUNCTION FOR CUSTOMERS WHICH ADDS TO POSTAGE AND STATIONERY COSTS

IN ADDITION TO T Y P I S T S . OBVIOUSLY, IT WILL NOT BE ENTIRELY EQUITABLE TO COMBINE ALL OF THE

EXTRA COSTS LISTED ABOVE, AND ANY OTHERS NOT MENTIONED, IN ONE DELIVERY CHARGE. HOWEVER, A

PRACTICAL APPROACH SHOULD BE ADOPTED AT THE OUTSET, WITH REFINEMENTS BEING INCORPORATED IN THE

STRUCTURE AS EXPERIENCE DICTATES.

EXTRA COSTS OF STORING PARTIAL LOTS WILL AUTOMATICALLY BE INCORPORATED IN THE SYSTEM
AND REFLECTED IN THE " B A S I C " UNIT COSTS BY THE CONVERSION OF QUANTITIES IN STORAGE ON A DECLINING

BALANCE BASIS. T h I S IS EXPLAINED FOR FREEZER STORAGE IN THE COMMENTS OPPOSITE SCHEDULE No . 3.

SECTION V - PAGE 4
SPACE U T I L I Z A T I O N

IT HAS BEEN STATED SEVERAL TIMES IN THIS MANUAL THAT THE COLD STORAGE WAREHOUSE BUSINESS

IS A MATTER OF SELLING SPACE. THE IMPORTANCE OF THIS STATEMENT CANNOT BE OVEREMPHASIZED. OTHER

THINGS BEING EQUAL, UNIT COSTS FOR COLD STORAGE WILL DECREASE AS BETTER USE IS MADE OF AVAILABLE

FACILITIES. OCCUPANCY STATISTICS ARE REGULARLY COMPILED WITHIN THE INDUSTRY TO MEASURE THIS COST-

VARIABLE AS BETWEEN COMPANIES AND DIFFERENT PERIODS. THE BASE POINT FOR PURPOSES OF THIS CALCULA-

TION IS TOTAL OCCUPIABLE SPACE WHICH MAY BE INTERPRETED DIFFERENTLY, BUT GENERALLY REPRESENTS

ACTUAL ROOM DIMENSIONS LESS ALLOWANCES FOR AISLES, BUNKER DUCTS, COLUMNS, WALL SPACING, AND MAXIMUM

P I L I N G HEIGHT TO CELING. PER CENT OCCUPANCY IS THEN FIGURED AT REGULAR INTERVALS BY RELATING TOTAL

OCCUPIED SPACE TO THIS BASE. IT IS APPARENT THAT CONSIDERABLE ESTIMATING IS INVOLVED DUE TO THE

VARIATION IN LOT SIZE AND DENSITY.

QUANTITATIVE DATA ACCUMULATED FOR COST ACCOUNTING PURPOSES CAN BE USED TO ADVANTAGE

IN DEVELOPING A MORE ACCURATE AND MEANINGFUL OCCUPANCY FIGURE. BASIC 100 POUND UNITS ARE IN

TERMS OF A SPECIFIC LOT SIZE (10,000# TO 25,000#) AND DENSITY (25 TO 30 L B S . / C U . F T . ) . TOTAL

OCCUPIABLE SPACE CAN EASILY BE CONVERTED TO 100 POUND UNITS OF THE SAME DENSITY BY MULTIPLYING

THE CUBIC FEET BY 27.5 POUNDS PER CUBIC FOOT (MID-POINT OF THE 25/30 RANGE). THE RESULT OF

D I V I D I N G THE BASIC 100 POUND UNITS IN STORAGE BY THE BASIC 100 POUND UNITS THAT CAN BE STORED IN

THE OCCUPIABLE SPACE IS A COMMON DENOMINATOR OCCUPANCY RATE. AS IN THE CASE OF BASIC UNIT COSTS,

SIGNIFICANT MONTHLY COMPARISONS BY DEPARTMENT ARE THEN POSSIBLE REGARDLESS OF THE TYPE OF OPER-

ATION BECAUSE DIFFERENCES DUE TO LOT SIZE AND DENSITY HAVE BEEN ELIMINATED. SPACE UTILIZATION

COULD ALSO BE INDICATED IN OTHER TERMS FROM THE SAME DATA, SUCH AS BASIC 100 POUND UNITS PER

1,000 CUBIC FEET OF OCCUPIABLE SPACE.

SECTION V - PAGE 5
 BASIC 100 POUND UNITS

IN SCHEDULE NO. 1 ON THE OPPOSITE PAGE THE DETERMINATION OF COMMON D E N O M I N A T O R UNITS IS

ILLUSTRATED FOR THE FREEZER STORAGE DEPARTMENT. THE BILLINGS TO CUSTOMERS ARE ANALYZED AND CLASSI-

FIED IN TWO D I F F E R E N T WAYS; (1) ACCORDING TO LOT SIZE AND (2) ACCORDING TO DENSITY. IN EACH CASE

THE ACTUAL WEIGHTS ARE CLASSIFIED INTO RANGE CATEGORIES. ALONG WITH THE QUANTITY ANALYSIS OF BILL-

INGS THERE IS ALSO A SEGREGATION OF THE DOLLAR AMOUNTS, BY OPERATING DEPARTMENTS. THUS, THE DOLLAR

REVENUES ARE DETERMINED BY DEPARTMENTS AT THE SAME TIME THE QUANTITIES ARE DETERMINED; THIS CORRE-

LATION OF THE ACCOUNTING FOR DOLLARS AND FOR QUANTITIES WILL INSURE ACCURACY. FURTHERMORE, THIS

PROCEDURE MAKES IT POSSIBLE TO COMPUTE REVENUES PER BASIC UNIT IN THE SAME MANNER A S COSTS PER BASIC

UNIT, SO THAT UNIT REVENUES CAN BE RELIABLY COMPARED WITH UNIT COSTS.

HAVING DETERMINED THE NUMBER OF ACTUAL 100# UNITS BY LOT SIZES, AND BY DENSITIES, THE NEXT

STEP IS TO EXTEND THESE QUANTITIES BY THE COST RELATIONSHIP FACTORS FOR EACH CLASSIFICATION. THE

RESULT OF THESE EXTENSIONS IS THE CONVERTED OR B A S I C UNITS. THIS CONVERSION COULD BE MADE BY A SET

OF COMBINED CONVERSION FACTORS REPRESENTING BOTH THE LOT SIZES AND THE DENSITIES. HOWEVER, THESE

TWO CONVERSIONS ARE MADE SEPARATELY AND THEN COMBINED AT THE BOTTOM OF SCHEDULE NO. 1. THERE IS AN

IMPORTANT REASON FOR THIS, WHICH IS TO PROVIDE INDEX FIGURES REFLECTING THE AVERAGE LOT SIZE AND

THE AVERAGE DENSITY. THE LOT SIZE INDEX (.965 IN THE FACTOR COLUMN) INDICATES THAT THE AVERAGE LOT

SIZE IS SLIGHTLY ABOVE THE "25.000# AND OVER" CATEGORY. LIKEWISE, THE DENSITY INDEX ( .906 IN THE

FACTOR COLUMN) INDICATES THAT THE AVERAGE DENSITY IS BETWEEN 25/30 AND 30/35. THE INDEX FIGURES

WILL FLUCTUATE FROM P E R I O D TO PERIOD AND VARY AS BETWEEN DEPARTMENTS AND COMPANIES, DEPENDING ON

THE PARTICULAR TYPE OF OPERATION,

THE TWO C O N V E R S I O N S COMBINED REPRESENT THE TOTAL BASIC UNITS FOR THE FREEZER STORAGE

DEPARTMENT. THE PROCEOURE FOR DETERMINING UNIT COSTS IS ALSO SHOWN A T THE BOTTOM OF THE SCHEDULE.

THESE TOTAL BASIC UNITS ARE DIVIDED INTO THE TOTAL DOLLAR COST FOR THE DEPARTMENT TO ARRIVE A T THE

COST BASIC UNIT.

THE SAME FORM (SCHEDULE NO. 1) is USED FOR THE COOLER STORAGE DEPARTMENTS, A SAMPLE

CONVERSION SHEET FOR THE HANDLING DEPARTMENT, WHERE COMBINATION FACTORS ARE REQUIRED, IS

PRESENTED IN SCHEDULE NO. 1A.

AS EXPLAINED IN SECTION II - PAGE 4, THE UNIT COST FOR QUICK FREEZING WILL BE IN

TERMS OF ACTUAL WEIGHT. THE TOTAL WEIGHT FOR THE PERIOD CAN BE INSERTED DIRECTLY ON EXHIBIT C.

SECTION - PAGE 6
 SCHEDULE NO. 1

EXAMPLE COLD STORAGE CO.

CONVERSION WORK SHEET

FREEZER STORAGE DEPARTMENT

FOR THE SIX MONTHS ENDED JUNE 30, 1959

LOT SIZE ACTUAL CONVERTED

LOT SIZE RANGE WEIGHT WEIGHT
CODE (POUNDS) (CWT) FACTOR (CWT)

1 UNDER 500 41.66 6.00 249.96

2 500 - 1,000 97.19 3.00 291.57
3 1,000 - 2,000 215.08 1.50 322.62
4 2,000 - 5,000 1,948.86 1.25 2,436.08
5 5,000 - 10,000 14,842.91 1.05 15,585.05
6 10,000 - 25,000 59,371.66 1.00* 59,371.66
7 OVER 25,000 291,649.30 .95 277,066.84
368,166.66 .965

DENSITY ACTUAL CONVERTED

DENSITY RANGE WEIGHT WEIGHT
CODE (LBS./CU.FT.) (CWT) FACTOR (CWT)

1 UNDER 15 2.00
2 15 - 20 699.05 1 .50 1,048.58
3 20 - 2 5 45,491.71 1.25 56,864.64
4 25 - 30 112,947.92 1.00** 112,947.92
5 30 - 35 122,039.27 .85 103,733.38
6 35 - 40 25,435.80 .75 19,076.85
7 OVER 40 61.552.91 .65 40,009.39

368,166.66 .906 333,680.76

* BASIC LOT SIZE - 10,000 TO 25,000 POUNDS.

** BASIC DENSITY RANGE - 25/30 POUNDS PER CUBIC FOOT.

COMPUTATION OF COST PER CWT. - FREEZER STORAGE

BASIC UNITS:

368,166.66 x (.965 x .906) = 321.884

COST PER BASIC UNIT:

TOTAL FREEZER DEPARTMENT COST PER E X H I B I T C $39,070

COST DIVIDED BY UNITS PER E X H I B I T C - ($43,383 ÷ 321,884) $.1214

SECTION V - PAGE 7
 EXAMPLE COLD STORAGE COMPANY SCHEDULE NO. 1-A
CONVERSION WORK SHEET
HANDLING DEPARTMENT
ACTUAL WEIGHT (CWT.)
DENSITY
UNDER 15 20 25 30 35 OVER
LOT SIZE 15 20 25 30 35 40 40

5.60 5.60 5.60 5.60 5.60 5.60 5.60

UNDER 500#

2.80 2.80 2.80 2.80 2.80 2.80 2.80

500 - 1,000#

2.35 2.35 1.40 1.40 1.40 1.40

1,000 - 2,000#

2,000 - 5,000# 2.15 1.65 1.65 1. 1.20 1.20 20 1.20

2.00 1.60 1.25 1.05 1.05 .85 .85

5,000 - 10,000#

1.95 1.55 1.20 1.00 .90 .80 .70

10,000 - 25,000#

1.90 1.50 1.15 .95 .80 .70 .60

OVER 25,000#

TOTALS

TOTAL WEIGHT

BASIC WEIGHT (CWT.)

DENSITY 20
UNDER 15 25 30 35 OVER
LOT S I Z E 15 20 25 30 35 40 40

UNDER 500#

500 - 1,000#

1,000 - 2,000#

2,000 - 5,000#

5,000 - 10,000#

10,000 - 25,000#

OVER 25,000#

TOTALS

TOTAL BASIC UNITS

TOTAL COST (EX.C)

BASIC COST/CWT.

SECTION V - PAGE 7-A

 COST ALLOCATION FACTORS

COST ALLOCATION FACTORS FOR STORAGE (FREEZER OR COOLER) ARE SHOWN IN THE TABLE ON
THE OPPOSITE PAGE. THERE ARE TWO SETS OF FACTORS, EACH OF WHICH REPRESENTS COST DIFFERENTIALS.
THE FINAL RESULTING UNIT COSTS WILL BE NO MORE AND NO LESS ACCURATE THAN THESE FACTORS.

WITH RESPECT TO THE DENSITY FACTORS, SHOWN HORIZONTALLY ACROSS THE TOP OF THE TABLE,
THERE CAN BE L I T T L E DOUBT AS TO THEIR SUBSTANTIAL ACCURACY. REFER TO DISCUSSIONS OF THIS CON-
CLUSION IN SECTION I OF THIS MANUAL. FOR EACH RANGE GROUP OF FIVE POINTS IT IS ASSUMED THAT
THE AVERAGE DENSITY WILL BE APPROXIMATELY AT THE MID-POINT; FOR EXAMPLE, FOR THE 30 to 35#
DENSITY GROUP THE AVERAGE IS ASSUMED TO BE 32.5# PER CUBIC FEET.

THE LOT SIZE FACTORS SHOWN VERTICALLY IN THE TABLE ARE BELIEVED TO BE SUBSTANTIALLY
CORRECT; HOWEVER, MORE ENGINEERING TESTS TOGETHER WITH ACTUAL EXPERIENCE IN THE USE OF THESE
FACTORS MAY RESULT IN MINOR CHANGES.

ALL COMPANIES SHOULD START OUT WITH THE SAME TABLE OF FACTORS. WHILE IT MAY BE
ADVISABLE AT A LATER DATE FOR A COMPANY TO DEVELOP A SET OF FACTORS APPLICABLE TO ITS PARTICU-
LAR F A C I L I T I E S AND METHOD OF OPERATION, UNIFORM FACTORS DO HAVE CONSIDERABLE MERIT, PARTICU-
LARLY FOR INDUSTRY CONSOLIDATION PURPOSES.

THERE WILL BE, OF COURSE, A WIDE RANGE IN THE COST LEVEL, OR THE COST EFFICIENCY
FOR INDIVIDUAL COMPANIES,BUT THE DIFFERENTIALS MAY BE THE SAME OR SIMILAR FOR ALL COMPANIES.
FOR EXAMPLE, THESE COST RELATIONSHIPS MAY OR MAY NOT VARY SUBSTANTIALLY BY REASON OF CEILING
HEIGHTS, OR THE NUMBER OF FLOORS IN THE WAREHOUSE BUILDING. THERE WILL BE DIFFERENCES IN THE
ACTUAL OPERATING PRACTICES IN THE U T I L I Z A T I O N OF STORAGE SPACE; BUT THIS IS ALSO MOSTLY A
MATTER OF EFFICIENCY. EVERY COMPANY THAT USES THIS MANUAL SHOULD, BY EVERY MEANS AVAIABLE,
CHECK THESE FACTORS WITH THEIR OWN EXPERIENCE. IF THIS TABLE DOES NOT PROVE TO BE SUBSTANTIAL-
LY ACCURATE, THEN A DIFFERENT AND MORE ACCURATE TABLE SHOULD BE SUBSTITUTED THEREFOR.

COST RELATIONSHIP FACTORS OF 1.00 WERE ASSIGNED TO THE LOT SIZE RANGE OF 10,000 TO
25,000 POUNDS AND THE DENSITY RANGE OF 20 TO 25 POUNDS PER CUBIC FOOT. ANY OTHER COMBINATION
COULD HAVE BEEN SELECTED. IT IS ADVISABLE TO USE A PREDOMINANT CATEGORY BECAUSE THE UNIT
COSTS ARE IN TERMS OF THE BASIC ITEM. HOWEVER, IT SHOULD BE RECOGNIZED THAT THE COST OF ANY
LOT SIZE AND DENSITY RANGE GROUP CAN READILY BE DETERMINED FROM THE BASIC COST.

THE TOP PART OF THE SCHEDULE ON THE OPPOSITE PAGE SHOWS THE TWO SETS OF COST ALLOCA-
TION FACTORS REFERRED TO ABOVE. THE BOTTOM HALF OF THE TABLE SHOWS THE COMBINED COST ALLOCA-
TION FACTORS, REPRESENTING BOTH DENSITY AND LOT S I Z E . AS PREVIOUSLY STATED, THESE COMBINED
FACTORS ARE NOT USED FOR CONVERSION PURPOSES, BUT THEY DO HAVE OTHER IMPORTANT USES WHICH
WILL BE EXPLAINED AND ILLUSTRATED LATER.

COST ALLOCATION FACTORS FOR THE HANDLING DEPARTMENT ARE SHOWN IN SCHEDULE NO. 5

SECTION - V PAGE 8
 SCHEDULE NO. 2
EXAMPLE COLD STORAGE CO.
TABLE OF STORAGE COST ALLOCATION FACTORS
LOT S I Z E AND DENSITY

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY
15 20 25 30 35 40 40

LOT S I Z E FACTOR 2.00 1.50 1.25 1.00 .85 •75 .65

UNDER 500# 6.00

500 - 1,000# 3.00

1,000 - 2,000# 1.50

2,000 - 5,000# 1.25

5,000 - 10,000# 1 .05

10,000 - 25,000# 1 .00

OVER 25,000# •95

COMB I NED

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY
15 20 25 30 35 40 40

LOT S I Z E FACTOR 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 12.00 9.00 7.50 6.00 5.10 4.50 3.90

500 - 1,000# 3.00 6.00 4.50 3.75 3.00 2.55 2.25 1.95

1,000- 2,000# 1.50 3.00 2.25 1.88 1.50 1.28 1.13 .98

2,000 - 5,000# 1 .25 2.50 1.88 1.56 1.25 1.06 .94 .81

5,000 - 10!,000# 1.05 2.10 1.58 1.31 1.05 .89 .79 .68

10,000 - 25,000# 1 .00 2 .00 1.50 1.25 1.00 .85 .75 .65

OVER 25,000# •95 1.90 1.43 1.19 .95 .81 .71 .62

SECTION V - PAGE 9
 FREEZER STORAGE DEPARTMENT

A GENERAL EXPLANATION OF THE COST RELATIONSHIP FACTORS FOR FREEZER STORAGE DEPARTMENT

(ON THE OPPOSITE PAGE) IS INCLUDED IN THE COMMENTS RELATING TO THE PRECEDING SCHEDULE. IN

APPLYING THESE FACTORS IT IS NECESSARY TO CLASSIFY EACH LOT ACCORDING TO DENSITY RANGE. VARIOUS

PRODUCT LISTINGS ARE AVAILABLE FOR I N I T I A L CODING OF IN-STORAGE LOTS. THEREAFTER, EACH LOT

SHOULD BE CODED AS RECEIVED FOR STORAGE, WHICH MAY INVOLVE ACTUAL MEASUREMENT OF SOME PRODUCTS.

IN ANY EVENT, DENSITY IS A MATHEMATICAL CALCULATION ACCEPTED IN THE INDUSTRY WITHOUT QUESTION.

IN THE CLASSIFICATION OF THE NUMBER OF 100# UNITS OF FREEZER STORAGE BY LOT SIZES THE

SIZE CATEGORY WILL FIRST BE DETERMINED AT THE TIME THE CUSTOMER IS BILLED FOR THE FIRST MONTH'S

STORAGE . EACH MONTH THEREAFTER THE CUSTOMER IS BILLED FOR ADDITIONAL STORAGE. THE LOT SIZE

CATEGORY FOR SUBSEQUENT MONTHS MAY BE DETERMINED EITHER (1) ACCORDING TO THE ORIGINAL S I Z E , OR

(2) ACCORDING TO THE DECLINING BALANCE.

WHEN THE ORIGINAL LOT SIZE IS USED TO DETERMINE THE STORAGE RATE THERE IS A DISTORTION

IN THE COST-REVENUE RELATIONSHIP. AS THE SIZE OF THE LOT DECREASES, THE COST INCREASES; THIS IS

BECAUSE OF THE LESS ECONOMICAL USE OF STORAGE SPACE FOR SMALL LOTS. THE MONTHLY STORAGE CHARGE

TO CUSTOMERS SHOULD ALWAYS BE BASED UPON THE LOT SIZE AS DETERMINED BY THE DECLINING BALANCE.

WHEN THIS POLICY IS FOLLOWED THERE WILL BE AN AUTOMATIC ADJUSTMENT IN THE RATES, WHICH WILL IN-

CREASE THE CHARGES PER 100# UNIT AS THE SIZE OF THE LOT DIMINISHES.

IN ACTUAL PRACTICE, THE CUSTOMER IS SOMETIMES PERMITTED TO INCLUDE SEVERAL SEPARATE

RECEIPTS OF MERCHANDISE IN ONE STORAGE LOT; THE PURPOSE BEING TO INCREASE THE LOT SIZE AND THUS

REDUCE THE STORAGE RATE. THIS INCREASES THE NEED FOR BASING THE THE SUBSEQUENT MONTHS' STORAGE

ON THE DECLINING BALANCE.

LOT SIZE COST RELATIONSHIP FACTORS FOR FREEZER STORAGE ARE BASED ON THE FACT THAT

SPACE U T I L I Z A T I O N DECREASES IN DIRECT PROPORTION TO THE DECREASE IN SIZE OF LOTS IN STORAGE.

THIS IS PARTLY A MATTER OF ADDITIONAL AISLE SPACE REQUIRED FOR DIRECT ACCESS TO SMALLER LOTS.

THE ONLY ALTERNATIVE IS ADDITIONAL LABOR IN MOVING GOODS TO OBTAIN ACCESS, WHICH ALSO INCREASES

STORAGE COSTS. LOST SPACE RESULTING FROM PART PALLETS RECEIVED OR FROM PARTIAL DELIVERIES FROM

SMALLER LOTS IS ALSO A MAJOR CONSIDERATION IN THE CASE OF DISTRIBUTION WAREHOUSES. NUMEROUS

OTHER SPACE RESTRICTIONS AND LIMITATIONS ASSOCIATED WITH PARTICULAR F A C I L I T I E S WERE DISREGARDED

FOR THIS PURPOSE AND WILL BE REFLECTED IN OVER-ALL EFFICIENCY.

THE BASIC UNIT COST FOR FREEZER STORAGE OF $.121 PER 100 POUNDS WAS TAKEN FROM

E X H I B I T C AND EXTENDED AT THE RESPECTIVE FACTORS TO SHOW THE COST OF OTHER COMBINATIONS OF LOT

SIZE AND DENSITY.

SECTION V - PAGE 10
 SCHEDULE NO. 3
EXAMPLE COLD STORAGE CO.

TABLE OF COMBINED COST ALLOCATION FACTORS

UNDER
15 20 25 30 35 OVER
RANGE GROUP DENSITY
15 20 25 30 4O

LOT SIZE FACTOR 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 12.00 9.00 7.50 6.00 5.10 4.50 3.90

500 - 1,000# 3.00 6.00 4.50 3.75 3.00 2.55 2.25 1.95

1,000 - 2,000# 1.50 3.00 2.25 1.88 1.50 1.28 1.13 .98
.94
2,000 - 5,000# 1.25 2.50 1.88 1.56 1.25 1.06 .81

5,000 - 10,000# 1.05 2.10 1.58 1.31 1.05 .89 . 79 .68

10,000 - 25,000# 1.00 2.00 1.50 1.25 1.00 .85 .75 .65

OVER 2 5 , 0 0 0 # .95 1.90 1.43 1.19 .95 .81 .71 .62

FREEZER STORAGE DEPARTMENT

STATEMENT OF ACTUAL UNIT COSTS - BY LOT SIZE AND DENSITY

Six MONTHS TO JUNE 30, 1959

(PER 100 POUNDS)

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY 15 25 30 35

LOT SIZE FACTORS 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 1.452 1.089 .908 .726 .617 .544 .472

500 - 1,000# 3.00 .726 .544 .454 .363 .309 .272 .236

1,000 - 2,000# 1.50 .363 .272 .227 .182 .155 .137 .119

2,000 - 3,000# 1.25 .302 .227 .189 .151 .128 .114 .098

5,000 -10,000# 1.05 .254 .191 .159 .127 .108 .096 .082

10,000 -25,000# 1.00 .242 .182 .151 .121 .103 .091 .079

OVER 25,000# .95 .230 .173 .144 .115 .098 .086 .075

S E C T ION V - PAGE 11
 COOLER STORAGE DEPARTMENT

THE COST-FINDING PROCEDURES DESCRIBED FOR FREEZER STORAGE DEPARTMENT WILL APPLY WITH-

OUT EXCEPTION TO COOLER STORAGE DEPARTMENT. OTHER COMMENTS ARE INCLUDED AT THIS POINT FOR

FURTHER CLARIFICATION.

THE LOT SIZE RANGE BRACKETS ARE EXPRESSED IN TERMS OF ACTUAL POUNDS. FOR THIS REA-

SON THERE IS A MARGIN OF ERROR IN THE LOT SIZE CLASSIFICATION OF VERY HIGH AND LOW DENSITY

PRODUCTS. THIS COULD BE CORRECTED BY PROPER IDENTIFICATION ON THE TABLE BUT THE DIFFERENCE

INVOLVED DOES NOT WARRANT THIS COMPLICATION.

THE LOWEST LOT SIZE FACTOR AT 25/30 DENSITY IS .95 AND THIS IS FOR ALL LOTS IN

EXCESS OF 25,000 POUNDS. THERE IS SOME INDICATION THAT BETTER U T I L I Z A T I O N OF SPACE IS ACHIEVED

ON LARGE LOTS RANGING TO 500,000 POUNDS, AS A RESULT OF F I L L I N G AISLES OR REDUCING AISLE SPACE.

IF THESE MEASURES WERE RECOGNIZED IN SETTING COST RELATIONSHIPS, THE BOTTOM OF THE SCALE WOULD

BE LOWER AND PERHAPS ANOTHER BRACKET SHOULD BE INCLUDED.

TO THE EXTENT THAT THE ABOVE SITUATION IS ASSOCIATED WITH COOLER STORAGE THE BETTER

SPACE U T I L I Z A T I O N WILL BE REFLECTED IN A LOWER BASIC UNIT COST, ALTHOUGH THIS ADVANTAGE MAY BE

OFFSET BY IDLE F A C I L I T I E S DURING CERTAIN SEASONS OF THE YEAR. THE BASIC UNIT COST FOR COOLER

STORAGE DEPARTMENT, AS INDICATED IN THE TABLE ON THE OPPOSITE PAGE, IS FREQUENTLY LOWER THAN

THE COST OF FREEZER STORAGE DEPARTMENT, DUE TO LOWER REFRIGERATION REQUIREMENTS; HOWEVER, THIS

CONDITION IS OFFSET ON OCCASION BY THE HIGHER TEMPERATURES OF ITEMS RECEIVED FOR COOLER STORAGE.

S E C T I O N V - P A G E 12
 SCHEDULE NO. 4
EXAMPLE COLD STORAGE CO.

TABLE OF COMBINED COST ALLOCATION FACTORS

UNDER
15 20 25 30 35 OVER
RANGE GROUP DENSITY 25 40
15 20 30 35

LOT SIZE FACTOR 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 12.00 9.00 7.50 6.00 5.10 4.50 3.90

500 - 1,000# 3.00 6.00 4.50 3.75 3.00 2.55 2.25 1.95

1,000 - 2,000# 1.50 3.00 2.25 1.88 1.50 1.28 1.13 .98

2,000 - 5,000# 1.25 2.50 1.08 1.56 1.25 1.06 .94 .81

5,000 - 10,000# 1.05 2.10 1.58 1.31 1.05 .89 .79 .68

10,000 - 25,000# 1.00 2.00 1.50 1.25 1.00 .85 .75 .65
1.43
OVER 25,000# .95 1.90. 1.19 .95 .81 .71 .62

COOLER STORAGE DEPARTMENT

STATEMENT OF ACTUAL UNIT COSTS - BY LOT SIZE AND DENSITY

Six MONTHS TO JUNE 30, 1959

(PER 100 POUNDS)

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY 15 20 25 30 35 40 40

LOT SIZE FACTORS 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 1.008 .756 .630 .504 .428 .378 .328

500 - 1,000# 3.00 .504 .378 .315 ,252 .214 .189 .164

1,000 - 2,000# 1.50 .252 .189 .158 .126 .108 .095 .082

2,000 - 5,000# 1.25 .210 .158 .131 .105 .089 .079 .068

5,000 -10,000# 1.05 .176 .133 .110 .088 .075 .066 .057

10,000 -25,000# 1.00 .168 .126 .105 .084 .071 .063 .055

OVER 25,000# .95 .160 .120 .100 .080 .068 ,060 ,052

SECTION V - PAGE 13
 HANDLING DEPARTMENT

COMBINATION FACTORS ARE NECESSARY FOR ALLOCATION OF HANDLING DEPARTMENT COSTS.

BASIC PREMISE IS THAT THE COST PER PALLET IS THE SAME REGARDLESS OF THE LOAD. CONSEQUENTLY
THE COSTS PER CWT. FOR HANDLING THE SEVEN LOT SIZE CATEGORIES DO NOT FOLLOW A STRICT DENSITY
PATTERN.

THE FACTORS FOR CONVERSION OF THE WEIGHT HANDLED TO COMMON D E N O M I N A T O R UNITS ARE
AT THE TOP OF SCHEDULE NO. 5. NOTE, FOR EXAMPLE, THAT THE FACTOR FOR A LOT UNDER 500 LBS.
IS THE SAME AT ALL DENSITIES, THIS IS ALSO TRUE OF SIZES 2, AND SIZE 3 UP TO THE ASSUMED
LIMIT OF 60 CU. FT. FOR ONE PALLET. THEREAFTER, THE FACTORS CHANGE IN SUCCESSIVE STEPS RE-
FLECTING THE NUMBER OF PALLETS REQUIRED AT DIFFERENT DENSITIES AND STRAIGHT SHUTTLE TIME.

THE B O T T O M PART OF THE TABLE ON THE RIGHT IS AN ILLUSTRATIVE SCHEDULE OF ACTUAL

UNIT COSTS FOR THE SIX MONTHS PERIOD. IT WILL BE NOTED THAT THE UNIT COSTS FOR THIS DEPART-
MENT ARE ENTIRELY DIFFERENT THAN THOSE SHOWN ON THE PRECEDING PAGES FOR THE FREEZER STORAGE
AND COOLER STORAGE. THE B A S I C UNIT COSTS IN THE SMALL BLOCKED SPACE (10,000 TO 25,000# LOT
SIZE - AND 25 TO 30# DENSITY) IS THE SAME UNIT COST AS SHOWN IN THE UNIT COST STATEMENT,
EXHIBIT C. THE COMBINED FACTOR FOR THIS ITEM IS 1.00. THE UNIT COST FOR EACH LOT SIZE AND
EACH DENSITY CATEGORY IS COMPUTED SIMPLY BY MULTIPLYING THE BASIC UNIT COST BY THE FACTORS
SHOWN IN THE TABLE AT THE TOP OF THE PAGE.

THESE UNIT COSTS FOR HANDLING, BY LOT SIZE AND DENSITY, WILL NOT BE PREPARED REGULAR-
LY, BECAUSE THE UNIT COST FOR THE BASIC ITEM SHOWN IN THE UNIT COST STATEMENT (EXHIBIT C) WILL
REPRESENT A TRUE INDEX TO THE COST OF ALL OTHER ITEMS. THIS ILLUSTRATION OF UNIT COSTS FOR ALL
OTHER ITEMS IS SHOWN MERELY AS AN A I D TO A FULL UNDERSTANDING OF THE COST-FINDING PROCEDURES.
THIS UNIT COST STATEMENT WILL ALSO SERVE ANOTHER PURPOSE, WHICH IS TO SHOW W H A T THE UNIT REVENUE
SHOULD BE IN ORDER TO RESULT IN A PROFIT; THE REVENUES SHOULD BE SOMETHING MORE THAN THESE UNIT
COSTS.

THE UNIT COSTS REPRESENT THE COMBINED TOTAL COST OF HANDLING A SPECIFIC SIZE LOT IN
AND OUT OF STORAGE. THE ADDITIONAL COST OF PARTIAL LOT DELIVERIES IS ALSO INCLUDED IN THE
TOTAL COST AND W I L L BE RECOVERED BY AN EXTRA DELIVERY CHARGE AS EXPLAINED IN OTHER SECTIONS OF
THIS MANUAL.

SECTION V - PAGE 14
 SCHEDULE NO. 5

EXAMPLE COLD STORAGE CO.

TABLE OF COST ALLOCATION FACTORS

DENSITY
UNDER 15 20 25 30 35 OVER
L O T SIZE 15 20 25 30 . 35 40 40

UNDER 500# 5.60 5.60 5.60 5.60 5.60 5.60 5.60

500 - 1,000# 2.80 2.80 2.80 2.80 2.80 2.80 2.80

1,000 - 2,000# 2.35 2.35 2.35 1.40 1.40 1.40 1.40

2,000 - 5,000# 2.15 1 .65 1.65 1.20 1.20 1.20 1.20

5,000 - 10,000# 2.00 1.60 1.25 1.05 1.05 .85 .85

10,000 - 25,000# 1.95 1.55 1.20 1.00 .90 .80 .70

OVER 25,000# 1 .90 1.50 1.15 .95 .80 .70 .60

HANDLING DEPARTMENT

STATEMENT OF ACTUAL UNIT COSTS - BY LOT SIZE AND DENSITY

SIX MONTHS TO JUNE 30, 1959

(PER 100 POUNDS)

DENSITY 20
UNDER 15 25 30 35 OVER

LOT SIZE 15 20 25 30 35 4o 4o

UNDER 500# 1.736 1.736 1.736 1.736 1.736 1.736 1.736

500 - 1,000# .868 .868 .868 .868 .868 .868 .868

1,000 - 2,000# .728 .728 .728 .434 .434 .434 .434

2,000 - 5,000# .666 .512 .512 .372 .372 .372 .372

5,000 - 10,000# .620 .496 .388 .326 .326 .263 .263

10,000 - 25,000# .604 .480 .372 .310 .279 .248 .217

OVER 2 5 , 0 0 0 # .589 .465 .356 .294 .248 .217 .186

SECTION V PAGE 15
 COSTS AND REVENUES

UNIT COSTS FOR THE COLD STORAGE DEPARTMENT ARE REPEATED AT THE BOTTOM OF THE SCHEDULE

ON THE OPPOSITE PAGE. BY APPLICATION OF APPROPRIATE FACTORS, ACTUAL ALLOCATED UNIT COSTS FOR

DIFFERENT COMBINATIONS OF LOT SIZE AND DENSITY ARE DEVELOPED. THE COST OF A PARTICULAR

PRODUCT STORED IN A GIVEN QUANTITY (LOT SIZE), IS MERELY A MATTER OF KNOWING THE DENSITY, WHICH

CAN BE OBTAINED FROM A DENSITY TABLE OR BY ACTUAL MEASUREMENT.

THESE ARE GRAND TOTAL UNIT COSTS WHICH CAN BE COMPARED SIGNIFICANTLY WITH CORRESPOND-

ING UNIT REVENUES OR (IN THE CASE OF CALIFORNIA) WITH TARIFF RATES ESTABLISHED BY THE P. U. C.

THE PRIMARY OBJECTIVE OF SUCH A COMPARISON IS TO DETERMINE THE PROFITABILITY OF INDIVIDUAL SER-

VICES. OF COURSE, IT DOES NOT NECESSARILY FOLLOW THAT ALL CHARGES TO CUSTOMERS CAN BE BASED ON

COST PLUS A REASONABLE PROFIT. IT WILL BE NOTED THAT THE STORAGE COSTS ON L O W D E N S I T Y SMALL

LOTS ARE VERY SUBSTANTIAL; CONSIDERABLY ABOVE EXISTING RATES AND NO DOUBT HIGHER THAN THE CUS-

TOMER CAN BE EXPECTED TO PAY. EVEN THOUGH THESE REVENUES CANNOT BE INCREASED, THE INFORMATION

IS ESSENTIAL TO MANAGEMENT FOR MAKING DECISIONS.

IN EXHIBIT C THE REVENUE PER BASIC 100 POUND UNIT IS DETERMINED BY DIVIDING THE TOTAL

REVENUE FOR THE FREEZER STORAGE DEPARTMENT BY THE COMMON DENOMINATOR UNITS. THIS FIGURE OF

$.175 IS PLACED IN THE BLOCK ON THE UPPER TABLE AT THE RIGHT. THE DIFFERENCE BETWEEN THIS BASIC

UNIT REVENUE AND THE $.121 COST IN THE SAME POSITION IN THE LOWER TABLE IS THE UNIT PROFIT OF

$.054 FROM F R E E Z E R STORAGE OPERATIONS.

BY APPLYING THE COST RELATIONSHIP FACTORS TO THE BASIC UNIT REVENUE THE TOTAL REVENUE

FROM F R E E Z E R STORAGE CAN BE RE-ALLOCATED TO THE SAME 49 DIFFERENT LOT-SIZE-DENSITY COMBINATIONS.

As ILLUSTRATED IN SCHEDULE NO. 7, THIS MAKES IT POSSIBLE TO COMPARE UNIT REVENUES WITH UNIT

COSTS IN A DIFFERENT MANNER. IN ACTUAL PRACTICE THIS IS NOT NECESSARY BECAUSE A COMPARISON OF

THE BASIC UNIT COST PROVIDES A TRUE INDEX OF ALL ITEMS FLOWING THROUGH THE DEPARTMENT.

THE PRESENT RATE STRUCTURE IN CALIFORNIA, AND IN OTHER AREAS AS WELL, IS COMPLICATED

AND IT IS OBVIOUS THAT MANY INEQUITIES EXIST. UNDER THE UNIFORM SYSTEM IT WOULD EVENTUALLY BE

POSSIBLE TO SIMPLIFY THE PROCESS OF ESTABLISHING UNIT REVENUES TO THE POINT OF HAVING ONLY ONE

BASIC RATE FOR EACH OF THE MAJOR OPERATING DEPARTMENTS. FOR PURPOSES OF BILLING THE CUSTOMER,

QUANTITIES STORED OR HANDLED WOULD BE CONVERTED TO A COMMON DENOMINATOR AND EXTENDED AT THE

BASIC RATE. CONSIDERATION OF RATE ADJUSTMENTS WOULD BE CONFINED TO A COMPARISON OF THE BASIC

RATE AND THE BASIC UNIT COST, WHICH WOULD REFLECT THE ENTIRE VOLUME OF A COMPANY. BY PROPER

CONSOLIDATION THE WEIGHTED AVERAGE BASIC UNIT COST WOULD BE REPRESENTATIVE OF A GROUP OF COMP-

ANIES. OF COURSE, THE RATE FOR A SPECIFC LOT SIZE AND DENSITY RANGE GROUP COULD BE DETERMINED

WITH THE USE OF THE TABLE OF COST RELATIONSHIP FACTORS, AS REQUIRED.

Section V - P a g e 16
 EXAMPLE COLD STORAGE CO. SCHEDULE NO. 7
FREEZER STORAGE DEPARTMENT
STATEMENT OF COMPARATIVE UNIT REVENUES AND COSTS - BY LOT SIZE AND DENSITY
REVENUES PER CWT.

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY 40 40
15 20 25 30 35

LOT SIZE FACTOR 2.00 1.50 1.25 1.00 .85 .75 .65

UNDER 500# 6.00 2.100 1.575 1.313 1.050 .893 .788 .683

500 - 1,000# 3.00 1.050 .788 .656 .525 .446 .394 .341

1,000- 2,000# 1.50 .525 .394 .329 .263 .224 .198 .172

2,000 - 5,000# 1.25 .438 .329 .273 .219 .186 .165 .142

5,000 - 10,000# 1.05 .368 .277 .229 .184 .156 .138 .119
.175
10,000 - 25,000# 1.00 .350 .263 .219 .149 .131 .114

OVER 25,000# .95 .333 .250 .208 .166 .142 .124 .109

COSTS PER CWT.

UNDER 15 20 25 30 35 OVER
RANGE GROUP DENSITY 15 20 25 30 35 40 40
.65
LOT SIZE FACTORS 2.00 1.50 1,25 1.00 .85 .75
UNDER 500# 6.00 1.452 1.089 ,908 .726 .617 .544 ,472

500 - 1,000# 3.00 .725 .544 .454 .363 .309 .272 .236

1,000 - 2,000# 1.50 .363 ,272 .227 .182 .155 .137 .119

2,000 - 5,000# 1.25 .302 .227 .189 .151 .128 .114 .098

5,000 -10,000# 1.05 .254 .191 .159 ,127 .108 .096 .082

10,000 -25,000# 1.00 .242 .182 .151 .121 ,103 .091 .079

OVER 2 5 , 0 0 0 # .95 .230 .173 .144 .115 .098 .086 .075

SECTION V -PAGE 17
 SECTION V I - DESCRIPTIVE CHART OF ACCOUNTS

THE GROUPING OF THE OPERATING ACCOUNTS LISTED AND DESCRIBED IN THIS SECTION IS A

FUNCTIONAL ONE. THIS IS IMPORTANT BECAUSE A FUNCTIONAL GROUPING OF THE OPERATING COSTS IS

NECESSARY IN ORDER TO ACHIEVE UNIFORMITY FOR THE COLD STORAGE WAREHOUSE INDUSTRY.

IT MUST NOT BE ASSUMED THAT THIS CHART OF ACCOUNTS WILL MEET THE NEEDS OF EVERY

WAREHOUSE COMPANY. EACH INDIVIDUAL COMPANY WILL HAVE OPERATING AND ACCOUNTING PROBLEMS PECULIAR

TO ITSELF. THEREFORE, THIS CHART OF ACCOUNTS WILL NEED TO BE MODIFIED TO MEET THESE NEEDS.

THIS CAN BE DONE WITHIN THE FRAMEWORK OF THE FUNCTIONAL CLASSIFICATION OF THE ELEMENTS OF COST.

FOR EXAMPLE, IF A COMPANY DOES NOT OPERATE A QUICK FREEZING FACILITY, THEN THE ACCOUNT FOR

"DIRECT LABOR - QUICK FREEZING" WILL BE OMITTED. ANOTHER EXAMPLE; IF A COMPANY HAS AN

"ASSEMBLY LINE OPERATION" CERTAIN GENERAL LEDGER ACCOUNTS MUST BE PROVIDED FOR THAT OPERATION.

THE GENERAL LEDGER ACCOUNTS ARE AN IMPORTANT PART OF THE ACCOUNTING PLAN WHICH PRO-

VIDES FOR DEPARTMENTAL OPERATING STATEMENTS. REGARDLESS OF THE DEPARTMENTS OPERATED BY A

PARTICULAR COMPANY, THE CHART OF ACCOUNTS SHOULD PROVIDE THE ACCOUNTING DATA NECESSARY TO PRE-

PARE THESE OPERATING STATEMENTS IN A UNIFORM MANNER. THIS CHART OF ACCOUNTS IS FLEXIBLE ENOUGH

TO MEET THE NEEDS OF MANY TYPES OF OPERATIONS AND AT THE SAME TIME ACHIEVE A DEGREE OF UNIFORMITY

IN DETERMINING DEPARTMENTAL OPERATING RESULTS AND UNIT COSTS.

GENERAL LEDGER ACCOUNTS ARE CUSTOMARILY NUMBERED, AND A SUGGESTED NUMBERING SYSTEM HAS

BEEN USED FOR THIS CHART OF ACCOUNTS. A NUMBERING SYSTEM IS MERELY A TOOL FOR THE USE OF THE

ACCOUNTING DEPARTMENT. A DIFFERENT NUMBERING SYSTEM MAY BE USED WITHOUT, IN ANY WAY, AFFECTING

THE IMPORTANT OBJECTIVES OF THE ACCOUNTING SYSTEM.

THE P. U. C. ACCOUNT NUMBERS SHOWN AT THE LEFT IN THE DESCRIPTIVE CHART OF ACCOUNTS

PROVIDE A CROSS-REFERENCE FOR CALIFORNIA WAREHOUSES OPERATING UNDER THE P U B L I C Utilities

COMMISSION. THE SUGGESTED SUB-ACCOUNTS INCLUDED IN THE DESCRIPTIVE CHART OF ACCOUNTS ARE

OPTIONAL EXCEPT FOR THOSE REQUIRED OF CALIFORNIA WAREHOUSES BY THE P. U. C.

SECTION V -PAGE 1
 SUMMARY CHART OF ACCOUNTS

REVENUE ACCOUNTS

300 - NON-UTILITY REVENUES

310 - 350 - OPERATING DEPARTMENT REVENUES

OPERATING ACCOUNTS
400- DIRECT LABOR - NON-UTILITY OPERATIONS
410 - 450 - DIRECT LABOR - OPERATING DEPAR
460 - DIRECT LABOR - REFRIGERATION DEPARTMENT

500 - SUPERINTENDENCE AND INDIRECT LABOR

510 - EMPLOYEE LABOR BENEFITS
520 - ELECTRIC POWER COST

600 - DIRECT SUPPLIES AND E X P E N S E - NON-UTILITY

610 - 650 - DIRECT SUPPLIES AND EXPENSE - OPERATING DEPARTMENTS
660 DIRECT SUPPLIES AND EXPENSE - REFRIGERATION DEPARTMENT

700 - REPAIRS AND MAINTENANCE - NON-UTILITY

710 - 750 - REPAIRS AND M A I N T E N A N C E - OPERATING DEPARTMENTS
760 - REPAIRS AND M A I N T E N A N C E - REFRIGERATION DEPARTMENT

800 - FIXED CHARGES - NON-UTILITY AND GENERAL

81O - 850 - FIXED CHARGES - OPERATING DEPARTMENTS
860 - FIXED CHARGES - REFRIGERATION DEPARTMENT

GENERAL AND ADMINISTRATIVE EXPENSE ACCOUNTS

900 - ADMINISTRATIVE AND S E L L I N G SALARIES

910 - GENERAL OFFICE SALARIES
920 - EMPLOYEE LABOR BENEFITS - OFFICE AND ADMINISTRATIVE

930 - OFFICE SUPPLIES AND EXPENSES

940 - GENERAL AND SELLING EXPENSE
950 - TAXES, PERMITS AND LICENSES
960 - Loss AND DAMAGE CLAIMS
970- FINANCIAL EXPENSE

OTHER INCOME AND EXPENSE

980 - SUNDRY NON-OPERATING INCOME

990 - SUNDRY NON-OPERATING EXPENSE

995 - TAXES ON INCOME

SECTION VI - PACE 2
 DESCRIPTIVE CHART OF ACCOUNTS

P . U. C .
ACCOUNT

5500 ACCOUNT 300 - NON-UTILITY REVENUES

CREDIT THIS ACCOUNT WITH ALL REVENUES THAT ARE CLEARLY N O N - U T I L I T Y , INCLUD-

ING SALE OF REFRIGERATION. IN MANY INSTANCES IT MAY BE NECESSARY OR DESIRABLE TO PRO-

VIDE SEPARATE LEDGER ACCOUNTS TO PROPERLY SEGREGATE THE REVENUES FROM THIS SOURCE.

THE NUMBER OF GENERAL LEDGER ACCOUNTS, OR SUBDIVISIONS OF THIS ACCOUNT, WILL DEPEND

UPON THE CIRCUMSTANCES IN EACH CASE.

6710 ACCOUNT 310 - FREEZER STORAGE REVENUES

CREDIT THIS ACCOUNT WITH THE REVENUES BILLED FOR STORAGE OF MERCHANDISE AT

FREEZER TEMPERATURES. FREEZER STORAGE IS CLEARLY DEFINED BY THE P . U. C . TARIFF RATES.

IN ADDITION TO THE BILLINGS FOR MONTHLY STORAGE, THIS ACCOUNT WILL BE

CREDITED WITH THE FREEZER STORAGE PORTION OF BILLINGS FOR QUICK FREEZING. THIS SEGRE-

GATION AS BETWEEN (1) FREEZER STORAGE, (2) HANDLING AND (3) QUICK FREEZING IS NECES-

SARY WHERE THE PRESENT TARIFF REGULATION ITSELF DOES NOT IDENTIFY THE CHARGES FOR

EACH OF THESE THREE KINDS OF SERVICES. RECENTLY IN CALIFORNIA SEPARATE TARIFF RATES

WERE ESTABLISHED FOR FIRST MONTH'S STORAGE AND FOR HANDLING; WHERE THIS IS NOT THE CASE

IT WILL BE NECESSARY TO SEGREGATE THE COMBINED CHARGE.

311 - ACCESSORIAL FREEZER REVENUES - CREDIT THIS ACCOUNT WITH INCIDENTAL OR AC-

CESSORIAL REVENUES THAT ARE CLOSELY RELATED TO FREEZER STORAGE, AND FOR WHICH

IT IS NOT PRACTICABLE TO IDENTIFY THE COSTS APPLICABLE THERETO.

6710 ACCOUNT 320 - COOLER STORAGE REVENUES

CREDIT THIS ACCOUNT WITH THE REVENUES BILLED FOR STORAGE OF MERCHANDISE AT

COOLER STORAGE TEMPERATURES, AS DEFINED BY THE P . U. C . TARIFF REGULATIONS. THE PRO-

BLEM OF SEGREGATING REVENUES AS BETWEEN COOLER STORAGE AND HANDLING IS THE SAME AS

DESCRIBED ABOVE FOR FREEZER STORAGE REVENUES.

CREDIT THIS ACCOUNT WITH REVENUES FROM PRECOOLING; THESE REVENUES MAY BE

TREATED AS A SUBDIVISION OF THIS ACCOUNT SO THAT, IF AND WHEN IT IS DESIRABLE TO DO

SO, A SEPARATE DEPARTMENTAL OPERATING STATEMENT CAN BE PREPARED. WHEN THIS IS DONE IT AL-

SO WILL BE NECESSARY, OF COURSE, TO PRORATE THE COSTS AS BETWEEN COOLER STORAGE AND

PRECOOLING. THIS SEGREGATION WILL NOT BE NECESSARY WHEN THE PRECOOLING IS ONLY A

VERY SMALL AND INCIDENTAL ITEM.

321 - ACCESSORIAL COOLER REVENUE - CREDIT THIS ACCOUNT WITH ALL REVENUES FROM

ACCESSORIAL SERVICES THAT ARE PURELY INCIDENTAL, TO THE COOLER STORAGE OPERATION,

AND FOR WHICH IT IS NOT PRACTICABLE TO IDENTIFY THE COSTS APPLICABLE THERETO.

SECTION V -PAGE 3
P. U. C.
ACCOUNT

6730 ACCOUNT 330 - HANDLING REVENUES

CREDIT THIS ACCOUNT WITH ALL BILLINGS FOR THE HANDLING OF MERCHANDISE,

WHICH WILL INCLUDE HANDLING IN AND HANDLING OUT, FOR BOTH COOLER STORAGE GOODS AND

FOR FREEZER STORAGE GOODS. ALSO CREDIT THIS ACCOUNT WITH THE HANDLING PORTION OF

A COMBINED CHARGE FOR QUICK FREEZING AS EXPLAINED UNDER QUICK FREEZING SERVICES.

331 - ACCESSORIAL HANDLING REVENUES - CREDIT THIS ACCOUNT WITH REVENUES FOR

ALL ACCESSORIAL SERVICES THAT ARE PURELY INCIDENTAL TO HANDLING, AND FOR

WHICH IT IS NOT PRACTICABLE TO IDENTIFY THE COSTS APPLICABLE THERETO. SUCH

REVENUES SHOULD BE ACCUMULATED IN A SUBSIDIARY RECORD OR S U B D I V I S I O N FOR THE

PURPOSES OF INFORMATION ONLY.

IT IS RECOGNIZED THAT THE CREDIT FOR HANDLING COVERS BOTH "HANDLING IN

AND HANDLING OUT." THEREFORE, ONLY ABOUT ONE-HALF OF THIS CREDIT IS EARNED AT THE

TIME THE BILLING IS MADE; THE BALANCE WILL BE EARNED WHEN THE GOODS ARE DELIVERED TO

OR FOR THE ACCOUNT OF THE CUSTOMER. HOWEVER, FOR PRACTICAL ACCOUNTING PURPOSES,

THIS TECHNICALITY CAN BE IGNORED AND THE ENTIRE AMOUNT CREDITED TO THIS ACCOUNT AT

THE BILLING DATE. FOR A FURTHER DISCUSSION OF THIS ACCOUNTING PROBLEM REFER TO

ANOTHER SECTION OF THIS MANUAL UNDER THE CAPTION "DEFERRED INCOME."

ACCOUNT 340 - SPECIAL SERVICES REVENUE

CREDIT THIS ACCOUNT WITH ALL REVENUES DERIVED FROM S P E C I A L SERVICES,

(PRIMARILY HOURLY LABOR CHARGES AND RENTAL REVENUE). DO NOT CHARGE THIS ACCOUNT

WITH "ACCESSORIAL REVENUES "; THESE REVENUES WILL BE CREDITED TO SEPARATE ACCOUNTS

UNDER STORAGE AND HANDLING, AS DESCRIBED ABOVE. IT WILL BE NECESSARY, OF COURSE, TO

MAKE DIRECT CHARGES TO THIS DEPARTMENT, AND TO PRORATE CERTAIN INDIRECT EXPENSES.

EXAMPLES OF THE SPECIAL LABOR SERVICES, FOR WHICH INCOME WILL BE REFLECTED

IN THIS ACCOUNT ARE: LOADING OR UNLOADING CARS AND TRUCKS, SPECIAL FORK LIFT OPERA-

TIONS, WASHING, WEIGHING, AND CASING GOODS FROM THE QUICK FREEZING OPERATIONS.

FOR PURPOSES OF ANALYSIS, REVENUES DERIVED FROM C H A R G I N G THE HOURLY RATES

PRESENTED IN THE TARIFF SHOULD BE SEGREGATED FROM REVENUES ARISING FROM SERVICES

BILLED ON O T H E R BASES.

IF A N D WHEN THESE UNUSUAL SERVICES ARE PURELY INCIDENTAL, OR SO SMALL THAT

THEY ARE OF NO IMPORTANCE, THE SEGREGATION OF REVENUES AND EXPENSES MAY BE INGORNED

AND INCLUDED WITH THE REGULAR HANDLING DEPARTMENT. TWO OF THE MORE FREQUENTLY USED

SECTION VI - PAGE 4
P. U. C.
ACCOUNT

CATEGORIES ARE INCLUDED AS SUB-ACCOUNTS BELOW;

6710 341 - LEASED SPACE REVENUE - CREDIT THIS ACCOUNT WITH REVENUE DERIVED FROM

THE LEASING OF FREEZER AND COOLER STORAGE SPACE UNDER P . U. C . TARIFF RATES.

6730 342 - LOADING AND U N L O A D I N G CARS AND T R U C K S - CREDIT THIS ACCOUNT WITH

REVENUES DERIVED FROM HOURLY RATE CHARGES FOR THIS SERVICE.

6750 ACCOUNT 350 - QUICK FREEZING REVENUES

CREDIT THIS ACCOUNT FOR REVENUES FROM BILLINGS FOR QUICK FREEZING AS

DEFINED BY THE P . U. C. TARIFF REGULATIONS. SOME TARIFF RATES COVER (1) QUICK

FREEZING, (2) HANDLING IN AND OUT OF FREEZER STORAGE AND (3) FREEZER STORAGE.

THEREFORE, IT IS NECESSARY TO MAKE A THREE-WAY ANALYSIS OR SEGREGATION OF BILLINGS

FOR GOODS HANDLED BY T H I S DEPARTMENT. THIS SEGREGATION IS NECESSARY AND SHOULD BE

DONE CURRENTLY AS THE INVOICES ARE ISSUED. THE FOLLOWING IS AN EXAMPLE OF THIS

ANALYSIS OF REVENUES;

TOTAL CHARGE PER 100# - PER TARIFF RATE

CHARGE FOR FREEZER STORAGE - PER MONTH $0.20
CHARGE FOR HANDLING ONLY 0.15
BALANCE - CHARGE FOR QUICK FREEZING 0.40

TOTAL CHARGE

7000 ACCOUNT 400 - DIRECT LABOR - NON-UTILITY OPERATIONS

CHARGE THIS ACCOUNT WITH THE DIRECT LABOR INVOLVED IN THE COST OF THE

FUNCTIONS AND SERVICES WHICH ARE DESCRIBED IN THE REVENUE ACCOUNT DESIGNATED

NON-UTILITY REVENUES. THE SUBDIVISIONS OF THIS ACCOUNT WILL, OF COURSE, BE

DEPENDENT UPON AND CLOSELY RELATED TO THE SUBDIVISIONS WHICH ARE PROVIDED FOR IN

THE REVENUE ACCOUNT. THE NEED FOR SUBDIVISIONS WILL DEPEND ON THE CIRCUMSTANCES IN

EACH CASE.

7000 ACCOUNT 410 - DIRECT LABOR - FREEZER STORAGE OPERATIONS

CHARGE THIS ACCOUNT WITH ALL DIRECT LABOR INVOLVED IN THE HANDLING OF

MERCHANDISE WHILE IN THE FREEZER STORAGE ROOMS, SUCH AS MOVING FROM ONE LOCATION

TO ANOTHER, RE-ARRANGING, CLEANING, DEFROSTING, ETC. ALL OF THIS KIND OF LABOR IS

A NECESSARY PART OF THE SERVICE FOR WHICH THE CUSTOMER IS CHARGED A MONTHLY RATE FOR

FREEZER STORAGE ONLY.

IT WILL BE NECESSARY TO PROVIDE TIME CARDS FOR EMPLOYEES SO THAT A DAILY

RECORD OF MAN HOURS CAN BE MADE FOR SEGREGATING LABOR CHARGES AS BETWEEN THE MAJOR

OPERATING DEPARTMENTS,

SECTION V - PAGE 5
P . U. C.
ACCOUNT
7000 ACCOUNT 420 - DIRECT LABOR - COOLER STORAGE OPERATIONS

CHARGE THIS ACCOUNT WITH ALL DIRECT LABOR INVOLVED IN THE HANDLING OF MER-

CHANDISE WITHIN THE COOLER STORAGE ROOMS, SUCH AS MOVING FROM ONE LOCATION TO ANOTHER,

RESTACKING, CLEANING UP, DEFROSTING, AND ANY OTHER SIMILAR LABOR WHICH IS FOR THE

CONVENIENCE OF THE WAREHOUSE COMPANY, AND WHICH IS COVERED BY THE COLD STORAGE

TARIFF RATE.

IT WILL BE NECESSARY TO PROVIDE DAILY TIME CARDS FOR EMPLOYEES WHO MAY

WORK IN MORE THAN ONE DEPARTMENT, SO THAT LABOR CHARGES CAN BE PROPERLY SEGREGATED

AS BETWEEN MAJOR OPERATING DEPARTMENTS.

7000 ACCOUNT - DIRECT LABOR - HANDLING OPERATIONS

CHARGE THIS ACCOUNT WITH THE WAGES OF L I F T TRUCK OPERATORS AND/OR HAND

TRUCK OPERATORS MOVING GOODS FROM THE RECEIVING DOCK OR QUICK FREEZER TO THE COOLER

OR FREEZER STORAGE ROOMS. ALSO, CHARGE THIS ACCOUNT WITH THE WAGES OF THE SAME

WORKERS MOVING GOODS OUT OF COOLER STORAGE AND/OR FREEZER STORAGE TO THE PLATFORM

FOR DELIVERY TO THE CUSTOMER,

IT WILL BE NECESSARY TO PROVIDE DAILY TIME CARDS FOR THESE EMPLOYEES SO

THAT LABOR CHARGES CAN BE PROPERLY SEGREGATED AS BETWEEN FREEZER STORAGE, COOLER

STORAGE, AND HANDLING. NO SEGREGATION WILL BE NECESSARY AS BETWEEN HANDLING IN AND

HANDLING OUT.

7000 ACCOUNT 440 - DIRECT LABOR - SPECIAL SERVICES OPERATIONS

THERE ARE CERTAIN SPECIAL LABOR OPERATIONS NOT COVERED BY THE REGULAR

P . U. C . TARIFF RATES FOR REGULAR L I F T TRUCK HANDLING. CONSISTENT WITH THE DES-

CRIPTION OF REVENUE ACCOUNTS, THESE COSTS SHOULD BE ACCUMULATED IN SEPARATE LABOR

COST ACCOUNTS. DEPENDING UPON THE NEED FOR AND THE TYPE OF THESE SERVICES, SUB-

SIDIARY ACCOUNTS MAY BE PROVIDED FOR SEGREGATING THIS ACCOUNT INTO SUBDIVISIONS SUCH

AS THE FOLLOWING: (1) PREPARATION AND/OR SPECIAL HANDLING OF PRODUCTS IN CONNECTION

WITH THE QUICK FREEZING OPERATIONS, (2) LOADING AND UNLOADING RAILROAD CARS OR

TRUCKS, (3) SPECIAL FORK L I F T SERVICES.

THE SUBDIVISIONS OF THIS ACCOUNT SHOULD BE THE SAME AS THOSE PROVIDED FOR

SPECIAL SERVICES REVENUE. AND THE NUMBER OF SUBDIVISIONS WILL DEPEND UPON THE C I R -

CUMSTANCES IN EACH CASE. SOME OF THESE SPECIAL SERVICES ARE COVERED BY P. U. C.

TARIFF RATES, AND SOME MAY NOT BE COVERED. REGARDLESS OF THE TARIFF RATES ONLY THE

MAJOR IDENTIFIABLE LABOR SERVICES WILL BE CHARGED TO THIS ACCOUNT. SUCH SUBDIVISIONS

SECTION V -PAGE 6
P. U. C.
ACCOUNT

MAY BE I G N O R E D WHEN T H E OPERATION IS INCONSEQUENTIAL.

T H E WAGES OF WORKERS PERFORMING THIS FUNCTION FOR W H I C H P . U. C. HOURLY RATES

ARE CHARGED.

7000 ACCOUNT 450 - DIRECT LABOR - QUICK FREEZING OPERATIONS

CHARGE THIS ACCOUNT WITH THE WAGES OF ALL WORKERS HANDLING PRODUCTS INTO

AND O U T OF T H E QUICK FREEZING TUNNELS AND W i T H ALL OTHER LABOR DIRECTLY INVOLVED IN

THE OPERATION OF THE QUICK FREEZING EQUIPMENT. THIS DEPARTMENT ENDS A T THE POINT

WHERE THE GOODS A R E TURNED OVER TO THE CUSTOMER FOR CASING, ETC., OR T O L I F T TRUCK

OPERATORS FOR TRANSFER TO COLD STORAGE.

THE LABOR CHARGES TO T H I S ACCOUNT WILL BE STRICTLY LIMITED TO THOSE

SERVICES WHICH ARE COVERED BY THE P. U. C. TARIFF RATES FOR Q U I C K FREEZING. diRECT

LABOR FOR S P E C I A L SERVICES TO THE CUSTOMER, W H I C H ARE OVER AND A B O V E THE P . U . C.

TARIFF RATEs, SUCH AS SPECIAL PREPARATION AND HANDLING OF G O O D S , WILL NOT BE CHARGED

TO T H I S ACCOUNT, BUT RATHER TO THE ACCOUNT FOR D I R E C T LABOR S P E C I A L S E R V I C E S DE-

SCRIBED ABOVE.

DAILY TIME CARDS W I L L BE NECESSARY I N O R D E R T O MAKE A PROPER ALLOCATION OF

DIRECT LABOR TO THIS DEPARTMENT BUT IN SOME CASES ALL OF THE TIME OF A PARTICULAR

LABOR CREW W I L L BE CHARGEABLE TO T H I S DEPARTMENT.

7062 ACCOUNT 460 - DIRECT LABOR - REFRIGERATION DEPARTMENT

CHARGE THIS ACCOUNT WITH ALL DIRECT LABOR USED IN THE MANUFACTURE OF

REFRIGERATION. THIS MEANS PRINCIPALLY ENGINE ROOM AND RELATED LABOR, SUCH AS

OPERATING ENGINEERS, TEMPERATURE CONTROL PERSONNEL, WATCHMEN, ETC.

DAILY TIME CARDS W I L L BE N E C E S S A R Y IN MAKING CHARGES TO T H I S DEPARTMENT

BECAUSE THE OPERATING EMPLOYEES ARE CUSTOMARILY ASSIGNED TO MAINTENANCE WORK FOR

A PART OF THEIR TIME.

7004 ACCOUNT 500 - SUPERINTENDENCE AND INDIRECT LABOR

THE CHARGES TO THIS ACCOUNT WILL BE L I M I T E D TO THE SALARIES OR W A G E S OF

PLANT PERSONNEL THAT CANNOT BE D I R E C T L Y IDENTIFIED AS T O O P E R A T I N G DEPARTMENTS,

SUCH AS THE GENERAL PLANT SUPERINTENDENT AND/OR PLANT MANAGER, ASSISTANT GENERAL

SUPERINTENDENT OR G E N E R A L FOREMAN, PLANT CLERICAL STAFF, ETC. THE PLANT CLERICAL

STAFF WILL CONSIST OF TIMEKEEPERS, RECORD KEEPING IN CONNECTION WITH CHECKING

SECTION VI - PAGE 7
P. U. C.
ACCOUNT

MERCHANDISE IN AND OUT, MAINTAINING STOCK RECORDS, PREPARATION OF BOOK INVENTORIES

AND WAREHOUSE RECEIPTS, TAKING PHYSICAL INVENTORIES, BILLINGS (OR PREPARATION OF

CHARGES WHERE BILLING IS DONE CENTRALLY) , AND OTHER SIMILAR WORK THAT USUALLY IS

DONE AT THE PLANT REGARDLESS OF THE LOCATION OF THE GENERAL OFFICE. FOR CERTAIN

SMALLER COMPANIES IT MAY BE NECESSARY TO IDENTIFY AND CHARGE TO INDIRECT LABOR THE

SALARIES OF GENERAL OFFICE EMPLOYEES PERFORMING THESE CLERICAL TASKS.

THIS ACCOUNT WILL BE PRORATED TO THE OPERATING DEPARTMENTS ONLY (NOT IN-

CLUDING REFRIGERATION DEPARTMENT) IN RELATION TO THE AMOUNT OF DIRECT LABOR CHARGES.

THIS WILL BE DONE IN THE OPERATING STATEMENT ONLY, AND NOT IN THE GENERAL LEDGER.

THIS CAN BE DONE EITHER MONTHLY OR CUMULATIVELY TO DATE THROUGHOUT THE YEAR.

7100 ACCOUNT 510 - EMPLOYEE LABOR BENEFITS

CHARGE THIS ACCOUNT WITH ALL INCIDENTAL LABOR COSTS APPLICABLE TO THE

PAY ROLLS FOR THE OPERATING DEPARTMENTS AND FOR THE REFRIGERATION DEPARTMENT; ALSO

FOR SUPERINTENDENCE AND INDIRECT LABOR DESCRIBED IN THE PRECEDING ACCOUNT; AND FOR

THESE EXPENSES APPLICABLE TO REPAIRS AND MAINTENANCE LABOR. THESE LABOR BENEFIT

EXPENSES WHICH ARE APPLICABLE TO ADMINISTRATIVE, SELLING AND GENERAL OFFICE PAY ROLL

WILL NOT BE CHARGED TO THIS ACCOUNT.

THE TOTAL AMOUNT OF THIS ACCOUNT WILL BE PRORATED TO THE OPERATING DEPART-

MENTS AND TO THE REFRIGERATION DEPARTMENT IN RELATION TO DIRECT LABOR, IN THE SAME

MANNER AS DESCRIBED ABOVE FOR SUPERINTENDENCE AND INDIRECT LABOR. THIS PRORATION

WILL BE MADE ONLY IN THE OPERATING STATEMENTS, AND NOT IN THE LEDGER ITSELF.

FOR SOME COMPANIES IT MAY BE DESIRABLE TO DETERMINE THE AMOUNT APPLICABLE

TO "REFRIGERATION" SEPARATELY, RATHER THAN TO PRORATE ON A F L A T PERCENTAGE BASIS.

7501 ACCOUNT 520 - ELECTRIC POWER COST

CHARGE THIS ACCOUNT WITH ALL ELECTRIC POWER COSTS REGARDLESS OF WHERE

USED. THE PROBLEM OF ALLOCATING POWER IS DESCRIBED IN MORE D E T A I L ELSEWHERE IN

THIS MANUAL. ALSO REFER TO THE ILLUSTRATIVE SCHEDULES IN SECTION IV.

THE AMOUNT OF POWER COST ALLOCATED TO THE REFRIGERATION DEPARTMENT WILL

BE RE-ALLOCATED TO OPERATING DEPARTMENTS, ALONG W I T H AND AS A PART OF THE COST OF

REFRIGERATION. THE TOTAL AMOUNT OF THE REFRIGERATION COST WILL BE ALLOCATED TO

OPERATING DEPARTMENTS IN RELATION TO REFRIGERATION USAGE.

SECTION VI - PAGE 8
P. U. C.
ACCOUNT

THERE WILL NOT BE A GENERAL L E D G E R ACCOUNT FOR " R E F R I G E R A T I O N ; " THIS IS

A SERVICE DEPARTMENT C O N S I S T I N G OF A NUMBER OF A C C O U N T S . THE ALLOCATION OF

REFRIGERATION COSTS W I L L NOT BE SHOWN I N T H E GENERAL LEDGER, BUT RATHER I N A SUB-

SIDIARY CUMULATIVE RECORD, AND A L S O I N THE D E P A R T M E N T A L OPERATING STATEMENT.

POWER C O S T S P E R T A I N I N G T O N O N - U T I L I T Y O P E R A T I O N S AND O F F I C E SHOULD BE

T A K E N FROM THE POWER A L L O C A T I O N SCHEDULE (CSW-4). OFFICE ELECTRICITY (ACCOUNT 932)

SHOULD BE T R A N S F E R R E D BY J O U R N A L ENTRY FROM T H I S A C C O U N T . OTHER POWER ALLOCATIONS

WILL BE MADE D I R E C T L Y , F R O M C S W - 4 ON A WORKSHEET B A S I S , AND W I L L NOT INVOLVE JOURNAL

ENTRIES.

ACCOUNT 600 - DIRECT SUPPLIES AND EXPENSE

CHARGE T H I S S E R I E S OF ACCOUNTS W I T H A L L I T E M S OF S U P P L I E S , MATERIALS,

OR E X P E N S E S , T H A T CAN BE IDENTIFIED AS A D I R E C T CHARGE T O N O N - U T I L I T Y OPERATIONS,

OPERATING DEPARTMENTS, SUCH A S (A) FREEZER STORAGE, (B) COOLER S T O R A G E , (c) HANDLING,

OR ( D ) QUICK FREEZING, OR ( E ) TO THE R E F R I G E R A T I O N DEPARTMENT.

ALSO, CHARGE T H I S ACCOUNT W I T H A N Y OTHER S I M I L A R M I S C E L L A N E O U S EXPENSES

EVEN THOUGH T H E Y CANNOT BE E A S I L Y I D E N T I F I E D W I T H ONE OF THE O P E R A T I N G DEPARTMENTS.

T H E T O T A L , AMOUNT OF T H E S E ITEMS W I L L REPRESENT A R E L A T I V E L Y SMALL AMOUNT, AND WAY

BE CHARGED TO O P E R A T I N G DEPARTMENTS I N SOME A R B I T R A R Y MANNER T H A T W I L L REPRESENT A

REASONABLY ACCURATE E S T I M A T E . C O N T R A C T S E R V I C E S , SUCH AS A D T OR WATCHMEN SHOULD BE

CHARGED T O ACCOUNT 660 - DIRECT S U P P L I E S AND E X P E N S E - REFRIGERATION DEPARTMENT,

SINCE IT IN TURN I S ALLOCATED TO O P E R A T I N G DEPARTMENTS.

S U B - A C C O U N T S ARE P R O V I D E D FOR R E C O R D I N G T H E S E CHARGES BY D E P A R T M E N T S AS

FOLLOWS:

5600 600 D I R E C T S U P P L I E S AND E X P E N S E - NON-UTILITY

( 6101 DIRECT S U P P L I E S AND E X P E N S E - FREEZER STORAGE DEPARTMENT

( 620 D I R E C T S U P P L I E S AND E X P E N S E - COOLER S T O R A G E DEPARTMENT

( 630 DIRECT SUPPLIES AND E X P E N S E - HANDLING DEPARTMENT

7200 ( 640 D I R E C T S U P P L I E S AND E X P E N S E - SPECIAL SERVICES DEPARTMENT
( 650 DIRECT SUPPLIES AND E X P E N S E - QUICK FREEZING DEPARTMENT

( 660 DIRECT SUPPLIES AND E X P E N S E - REFRIGERATION DEPARTMENT

ACCOUNT 700 - REPAIRS AND MAINTENANCE

CHARGE T H I S S E R I E S OF A C C O U N T S W I T H A L L M A I N T E N A N C E COSTS A P P L I C A B L E TO

NON-UTILITY OPERATIONS, O P E R A T I N G DEPARTMENTS AND THE R E F R I G E R A T I O N DEPARTMENT.

SECTION VI - PAGE 9
P. U. C.
ACCOUNT

T H I S ACCOUNT SHOULD BE PROVIDED WITH A "TWO-WAY" ANALYSIS RECORD; (A) BY DEPARTMENT

AND (B) BY KIND OF EXPENSE, SUCH AS (1) LABOR, (2) REPAIR PARTS AND MATERIALS, (3)
SUNDRY SUPPLIES AND SERVICES.

ALL OF THE CHARGES TO THIS ACCOUNT FOR BOTH LABOR AND OTHER COSTS MUST BE

EITHER CHARGED DIRECTLY OR ALLOCATED TO AN OPERATING DEPARTMENT IN SOME REASONABLY

ACCURATE AND EQUITABLE MANNER. SUCH AN ALLOCATION CAN BE MADE IN A SATISFACTORY

MANNER IF IT IS DONE AT THE TIME THE EXPENSE IS INCURRED.

IT WILL BE NECESSARY TO PROVIDE DAILY TIME RECORDS FOR MAINTENANCE PERSON-

NEL SO THAT LABOR CHARGES CAN BE ALLOCATED TO DEPARTMENTS IN A SUBSTANTIALLY ACCURATE

MANNER.

SUB-ACCOUNTS ARE PROVIDED FOR RECORDING THESE CHARGES BY DEPARTMENTS AS

FOLLOWS:

5600 700 - REPAIRS AND M A I N T E N A N C E - NON-UTILITY

701 - REPAIRS AND M A I N T E N A N C E (LABOR) - NON-UTILITY

7300 710 - REPAIRS AND MAINTENANCE - STORAGE DEPARTMENT

7OO3 711 - REPAIRS AND MAINTENANCE (LABOR) - STORAGE DEPARTMENT

7300 730 - REPAIRS AND MAINTENANCE - HANDLING DEPARTMENT

7003 731 - REPAIRS AND M A I N T E N A N C E (LABOR) - HANDLING DEPARTMENT

7300 740 - REPAIRS AND M A I N T E N A N C E - SPECIAL SERVICES DEPARTMENT

7003 741 - REPAIRS AND M A I N T E N A N C E (LABOR) - SPECIAL SERVICES DEPARTMENT

7300 742 - REPAIRS AND M A I N T E N A N C E - LEASED STORAGE SPACE

7003 743 - REPAIRS AND MAINTENANCE (LABOR - LEASED STORAGE SPACE

7300 750 - REPAIRS AND M A I N T E N A N C E - QUICK FREEZING DEPARTMENT

7003 751 - REPAIRS AND M A I N T E N A N C E (LABOR) - QUICK FREEZING DEPARTMENT

7300 760 - REPAIRS AND M A I N T E N A N C E - REFRIGERATION DEPARTMENT

7003 761 - REPAIRS AND MAINTENANCE (LABOR) - REFRIGERATION DEPARTMENT

ACCOUNT 933 -GENERAL AND ADMINISTRATIVE EXPENSE, IS PROVIDED FOR REPAIRS

AND MAINTENANCE APPLICABLE TO THE GENERAL OFFICE.

ACCOUNT 800 - FIXED CHARGES

CHARGE THIS SERIES OF ACCOUNTS WITH (A) PROPERTY TAXES, (B) INSURANCE,

(C) DEPRECIATION, (D) AMORTIZATION, AND (E) RENT OF FACILITIES.

THESE CHARGES ORDINARILY WILL BE MADE EACH MONTH B Y MEANS OF STANDING

JOURNAL ENTRIES IN AMOUNTS EQUAL TO APPROXIMATELY 1/12 OF THE TOTAL ANNUAL COSTS.

SECTION VI - P A G E 10
P. U. C.
ACCOUNT

As EXPLAINED IN SECTION III AND S E C T I O N IV, FIXED CHARGES ALSO WILL BE PRO-

PERLY AJNNUALIZED SO THAT DISTORTED COSTS RESULTING FROM SEASONAL FLUCTUATIONS IN

VOLUME CAN BE AVOIDED. HOWEVER THE ADJUSTMENTS AND DEPARTMENTAL ALLOCATIONS WILL

BE SHOWN IN SUBSIDIARY SCHEDULES SPECIALLY DESIGNED FOR THAT PURPOSE AND CAN BE

CARRIED DIRECTLY TO THE INTERIM OPERATING STATEMENTS WITHOUT FORMAL ENTRY IN THE

LEDGER UNTIL YEAR-END FOR P. U. C. REPORTING PURPOSES.

IT W I L L NOT BE NECESSARY TO ANNUALIZE THE MONTHLY CHARGES TO THE REFRIGER-

ATION DEPARTMENT ACCOUNT IN CONNECTION WITH THE PREPARATION Of INTERIM OPERATING

STATEMENTS SINCE THE REFRIGERATION COST IN TOTAL WILL BE ANNUALIZED.

THE ALLOCATED AMOUNTS FOR PROPERTY TAXES AND INSURANCE ARE DETERMINED ON

THE BASIS OF INVESTMENT IN FACILITIES (CSW-5). THE OTHER ELEMENTS OF COST IN THIS

SERIES ARE CHARGED DIRECTLY TO DEPARTMENTS. WHEN D E T E R M I N E D , THESE ALLOCATIONS CAN

BE CHARGED TO THE APPROPRIATE SUB-ACCOUNTS FOR P, U. C. PURPOSES.

SUB-ACCOUNTS PROVIDED FOR THESE CHARGES ARE AS FOLLOWS:

5600 801 - PROPERTY TAXES - NON-UTILITY

74o4 802 - PROPERTY TAXES - UTILITY PLANT
5600 803 - INSURANCE - NON-UTILITY
-
7401 8o4 INSURANCE - UTILITY PLANT

) 805 - DEPRECIATION - NON-UTILITY

5600) 806 - AMORTIZATION - NON-UTILITY

) 807 - RENT -NON-UTILITY

7412 815 - DEPRECIATION - STORAGE DEPARTMENTS

7413 816 - AMORTIZATION - STORAGE DEPARTMENTS

7509 817 - RENT - STORAGE DEPARTMENTS
7432 835 DEPRECIATION - HANDLING DEPARTMENT

7433 836 - AMORTIZATION - HANDLING "

7509 837 - RENT - HANDLING "
7452 855 - DEPRECIATION - QUICK FREEZING DEPARTMENT

7453 856 - AMORTIZATION - QUICK FREEZING "

7509 857 - RENT - QUICK FREEZING "
7462 865 - DEPRECIATION - REFRIGERATION DEPARTMENT
7463 866 - AMORTIZATION - REFRIGERATION "
7509 867 - RENT - REFRIGERATION "

ACCOUNTS 815, 816, AND 817 (DEPRECIATION, AMORTIZATION, AND RENT

APPLICABLE TO STORAGE) ARE INTENDED TO INCLUDE COOLER STORAGE, FREEZER STORAGE,

AND LEASED SPACE. THESE FIXED CHARGES THEN SHOULD BE REALLOCATED ON A REASONABLE

BASIS, SUCH AS CUBIC FEET, BETWEEN STORAGE (COOLER AND FREEZER) AND LEASED SPACE

ON A W O R K S H E E T BASIS. (SEE FORM CSW-5).

ACCOUNTS 934-937 - GENERAL AND A D M I N I S T R A T I V E EXPENSE - ARE PROVIDED

FOR FIXED CHARGES APPLICABLE TO THE GENERAL OFFICE.

SECTION VI - P A G E 11
P. U. C.
ACCOUNT

ACCOUNT 900 - ADMINISTRATIVE AND SELLING SALARIES

CHARGE THIS SERIES OF ACCOUNTS WITH SALARIES AND BONUSES PAID TO

OFFICERS, GENERAL MANAGERS, EXECUTIVE ASSISTANTS AND SOLICITORS. ALCO INCLUDE IN

THIS ACCOUNT THE SALARIES OF GENERAL WAREHOUSE SUPERINTENDENTS AND THE CENTRAL EN-

GINEERING STAFF IN MULTIPLE PLANT OPERATIONS.

SUB-ACCOUNTS ARE PROVIDED AS FOLLOWS FOR P. U. C, PURPOSES;

8006 901 - ADMINISTRATIVE SALARIES

8005 902 - SOLICITATION SALARIES

8001 ACCOUNT 910 - GENERAL OFFICE SALARIES

CHARGE THIS ACCOUNT WITH THE SALARIES PAID TO CLERICAL PERSONNEL ASSIGNED

TO THE GENERAL OFFICE, NAMELY: BOOKKEEPERS, COST ACCOUNTANTS, SECRETARIES, ETC.

THIS ACCOUNT SHALL NOT BE CHARGED WITH THE SALARIES OF PLANT OFFICE CLERKS; SUCH

SALARIES ARE CHARGED TO INDIRECT OPERATING LABOR DESCRIBED IN ACCOUNT 500, ABOVE.

IN THE EVENT GENERAL OFFICE PERSONNEL PERFORM D U T I E S RELATING TO LOADING DOCK

OPERATIONS (MAINTENANCE OF INVENTORY LOCATION RECORDS, RECEIVING AND DELIVERY

RECORDS, ETC.) THEIR SALARY COST SHALL BE CHARGED TO INDIRECT OPERATING LABOR.

8100 ACCOUNT 920 - EMPLOYEE LABOR BENEFITS - OFFICE AND ADMINISTRATIVE

CHARGE THIS ACCOUNT WITH SOCIAL SECURITY TAXES, COMPENSATION INSURANCE,

PENSION PLAN CONTRIBUTIONS, AND ALL OTHER SIMILAR EMPLOYEE BENEFITS APPLICABLE TO

ADMINISTRATIVE AND O F F I C E PERSONNEL.

ACCOUNT 930 - OFFICE SUPPLIES AND EXPENSE

CHARGE THIS SERIES OF ACCOUNTS WITH EXPENSES INCURRED IN THE OPERATION

OF THE GENERAL OFFICE, SUCH AS STATIONERY, PRINTING, POSTAGE, ELECTRICITY, TELE-

PHONE AND TELEGRAPH, OFFICE EQUIPMENT REPAIRS OR RENTALS, DEPRECIATION, INSURANCE,

ETC .

SUB-ACCOUNTS PROVIDED FOR CLASSIFYING THE CHARGES TO THIS ACCOUNT ARE AS

FOLLOWS:

8200 931 - OFFICE MATERIALS, SUPPLIES, AND SERVICES

8501 932 - OFFICE ELECTRICITY
8300 933 - MAINTENANCE AND REPAIRS - OFFICE
8401 934 - INSURANCE - OFFICE
8402 935 - DEPRECIATION - OFFICE
8403 936 - AMORTIZATION - OFFICE
8509 937 - RENT - OFFICE

SECTION VI - PAGE 12
P. U. C.
ACCOUNT

8506 ACCOUNT 940 - GENERAL AND SELLING EXPENSE

CHARGE THIS SERIES OF ACCOUNTS WITH THE COST OF AUTO AND TRAVEL EXPENSE,

PROFESSIONAL SERVICES (INCLUDING MANAGEMENT FEES), ADVERTISING, BAD DEBT EXPENSE

AND O T H E R SIMILAR EXPENSES RELATED TO THE GENERAL MANAGEMENT OF THE BUSINESS, AS

DISTINGUISHED FROM T H E GENERAL OFFICE EXPENSES.

SUB-ACCOUNTS PROVIDED FOR CLASSIFYING THE CHARGES TO THIS ACCOUNT ARE

AS FOLLOWS:

8502 941 - ADMINISTRATOR EXPENSES

8503 942 - SOLICITATION EXPENSES
8505 943 - REGULATORY EXPENSES
8401 944 - GENERAL INSURANCE

8407 ACCOUNT 950 - TAXES, LICENSES, AND PERMITS

CHARGE THIS SERIES OF ACCOUNTS WITH THE COSTS OF BUSINESS LICENSES, IN-

SPECTION PERMITS AND T A X E S OF A GENERAL OVERHEAD NATURE, OTHER THAN TAXES ON IN-

COME WHICH ARE CHARGEABLE TO ACCOUNT 995.

8504 ACCOUNT 960 - LOSS AND DAMAGE CLAIMS

CHARGE THIS ACCOUNT WITH ALL COSTS RELATING TO CLAIMS ARISING FROM

LOSS OR DAMAGE TO MERCHANDISE CONSIGNED TO THE STORAGE COMPANY.

5805 ACCOUNT 970 - FINANCIAL EXPENSE

CHARGE THIS SERIES OF ACCOUNTS WITH ALL INTEREST AND SIMILAR COSTS

RELATED TO CORPORATE DEBTS.

SUB-ACCOUNTS PROVIDED FOR CLASSIFYING THE CHARGES TO THIS ACCOUNT ARE

AS FOLLOWS:

5801 971 - INTEREST ON L O N G - T E R M DEBT

5802 972 - AMORTIZATION OF DEBT DISCOUNT AND EXPENSE
5803 973 - AMORTIZATION OF P R E M I U M ON DEBT
5804 974 - INTEREST ON D E B T TO ASSOCIATED COMPANIES

5700 ACCOUNT 980 - SUNDRY NON-OPERATING INCOME

CREDIT THIS ACCOUNT WITH SUNDRY ITEMS OF INCOME THAT ARE NOT RELATED

TO THE COLD STORAGE WAREHOUSING BUSINESS, SUCH AS DIVIDENDS AND OTHER INCOME

FROM INVESTMENTS, CAPITAL GAINS, ETC.

SECTION VI - PAGE 13
P. U. C.
ACCOUNT

5900 ACCOUNT 990 - SUNDRY NON-OPERATING EXPENSE

CHARGE THIS ACCOUNT WITH EXPENSES THAT ARE CLEARLY NOT RELATED TO THE

COLD STORAGE WAREHOUSING BUSINESS, BUCH AS CAPITAL LOSSES, ETC.

ACCOUNT 995 - TAXES ON INCOME

CHARGE THIS ACCOUNT WITH FEDERAL AND STATE TAXES ON INCOME, INCLUDING

THE CALIFORNIA FRANCHISE TAX.

SUB-ACCOUNTS FOR CLASSIFYING THE CHARGES TO THIS ACCOUNT ARE AS FOLLOWS:

8405 996 - STATE TAXES ON INCOME

8406 997 - FEDERAL TAXES ON INCOME

SECTION VI - PAGE 14