"In cases where the government fixes a definite margin on profit above costs, as in the case of flour, there is a considerable incentive to a fictitious enhancement of costs through account juggling. This has added to the volume of unusual profits. Increase of cost showing on the producers' books can be accomplished in various ways. The item of depreciation can be padded. Officers' salaries can be increased. Interest on investment can be included in cost. New construction can be recorded as repairs. Fictitious valuations on raw material can be added, and inventories can be manipulated.
"The Federal Trade Commission has been vigilant and untiring in its exclusion of these practices. An instance of this practice was afforded by the Ismert-Hincke Milling Co., of Kansas City, Mo. This company padded its costs by heavily increasing all its officers' salaries and by manipulating the inventory value of flour bags on hand. As evidence of the length to which padding can be carried, it may be added that this company even included in its costs the gift of an automobile which it charged to advertising expenses. This case was heard of by the commission for the Food Administration. The commission recommended revocation of license and the recommendation was followed.
"Payment of extraordinary salaries and in some instances bonuses to executives of corporations have been found by the commission during its investigations."
WAR COST OF LIVING
A complete synopsis of the cost of living situation in the United States, during the four pears' years' period July, 1914, to June, 1918, was issued by the National Industrial Conference Board after a country-wide survey. The basis taken was that of family budgets divided under five heads: food, shelter, clothing, fuel and light, and sundries. The average increase for the period was shown to be between 50 and 55 per cent. The most marked advance was in clothing, 77 per cent. But the food advance of 62 per cent. was really more important because food represented 43 per cent. of the average expenditure, while clothing represented only 13 per cent. Wholesale prices, the report pointed out, are not to be relied upon in estimating the cost of living, because many articles enter only indirectly into the family budget. Often, too, wholesale prices are not reflected in retail prices until months later. The estimates given by the Board were based upon the expenditures of eleven thousand families:
"In reaching 52.3 per cent. as the amount of increase in the cost of living for the four years' period, the expenditures of 11,000 families were considered. Following is a table in which besides the 52.3 per cent. for all items entering into the family budget, the percentage for rent, clothing, fuel, and light, and sundries are given:
| Budget Item | Per Cent. Distribution of Family Expenditure | Per Cent. Inc. in Cost Dur'g War Period to June, 1918 | Per Cent. Increase as Related to Total Budget |
|---|---|---|---|
| All items. | 100.0 | .. | 52.3 |
| Food | 43.1 | 62 | 26.7 |
| Rent | 17.7 | 15 | 2.7 |
| Clothing | 13.2 | 77 | 10.2 |
| Fuel and light | 5.6 | 45 | 2.5 |
| Sundries | 20.4 | 50 | 10.2 |
The figures examined prove that there was a fair similarity of increase in the different sections of the country. The advance in rent in the dwelling places of the average wage earner was put down at 15 per cent.
"A general summary is given of changes in the cost of living among industrial workers as presented by the Railroad Wage Commission for the period between December, 1915, and the end of April, 1918, as follows:
| Per Cent. | |
|---|---|
| For families with incomes up to $600 | 43 |
| For families with incomes from $600 to $1,000 | 41 |
| For families with incomes from $1,000 to $2,000 | 40 |