The Salt Lake tribune. [volume] (Salt Lake City, Utah) 1890-current, 1913-05-15
REPORT MADE
To WILSON ON
STEEL TRUST
Vast Difference Discovered
Between "Book" Costs and
''Net" Costs Is Feature of
the Investigation.
MANY INSTANCES
ARE POINTED OUT
Profits Paid to Subsidiary
Concerns Said to Be In
cluded in the State
ments of Cost.

WASHINGTON, May 14.-Part three
of the report OF the bureau Of corpora
tions, on it's extended investigation OF
the steel industry, dealing particularly
with the cost of production, was cub
mltted to the president today by Act
ing Commissioner Francis Walker. A
discussion Of the vast difference be.
tween "book costs' and "net costs''
featured the report, figures being given
to demonstrate that iron and steel
manufacturing companies usually in
clude in their statements Of costs of
production large profits paid to sub
sidiary and transportation concerns.
For bessemer steel rails, for instance,
the report stated that the average book
cost Of the United States Steel corpora
tion was $2l.53, while the actual net
cost, exluding intercompany profit on
transportation and material, was only
S16.67. Similar differences were shown
IN the manufacture of other steel prod
ucts,
Parts one and two of the bureau 3
report were submitted during the Taft
administration h.g former Commissioner
Herbert Knox Smith.
Book and Net Costs.
A comprehensive abstract of par.
threo was contained III Acting Commls
sioner Walkers letter Of transmittal
some Of the important points Of which
follow:
The statements Of cost of production.
as shown by the cost sheets OF iron and
steel manufacturing companies, ordinarily
include important items Of profit accru-
ing TO the same manufacturing interests
This arises from the fact that the orc
and coke used in making pig iron are
largely produced by allied or subsidiary
companies. which sell such materials to
the manufacturing plants operated by the
same interests at prices which ordinarily
include profit, and In the case OF ore
very large profit
Thus, for the Steel corporation in ls1O
Nilo iHtCi COMPANY plCHl Ou Iol OI6 Wha
no less than s1.so per ton out OF an
average ore price per ton OF $4.1s, in
which there was, In addition to the profit
Of $3.50, further considerable transpor-
tatlon cost and profit. Owing to the fact
that about two tons Of ore were required
to make a ton OF pig iron, this profit per
ton in ore involves profit of about 81. 4s
per ton in the cost of pig iron on this ac-
count alone. For similar reasons. even
larger amounts Of profit per ton are in
cluded In the costs of steel products
Hence. in ordor TO obtain tho net coat
OF manufacture for such concerns, II is
necessary to eliminate these intercom-
pany profits from the book costs. OF costs
shown on the cost sheets.
Furthermore, aome manufacturing con-
Germs. and particularly the Steel corpora
ton, have subsidiary companies engaged
In the transportation OF raw materials
for manufacture. The costs Of transpor-
tation however, included IN the book costs
OF these materials are based on the reg
ular or going rates Of transportation
charged by the transportation agencies
and include large amounts of fntercom-
pany transportation profit. Thus, tho
profit of the Steel corporation from the
transportation Of It's own orc in 1910
averaged over all its ore delivered at
lower lake ports. WIS about 81 cents per
ton This profit mounts up to over 81 90
per ton OF pig iron.
Pig Iron Costs Given.
The bureau. therefore In its statements
Of costs Of various products. gives not
only the book costs. or costs shown by
the cost sheets OF manufacturing COM
panies, but also the not costs excluding
such intermediate profits Of production
and transportation. Thus. from certain
average costs OF all companies which are
presented. The intercompany profits from
the production OF raw materials are ex-
cludAd while from the costs Of the Stool