The August 1942 issue of "Luggage & Leather Goods" filled in details of new price restrictions for manufacturers and retailers. (page 46)
OPA and WPB Rulings
OPA Establishes Price Regulations for New Lines
Methods by which manufacturers can readily determine maximum prices for new lines of consumer goods (which includes luggage) are established in a new regulation announced July 30 by Price Administrator Leon Henderson.
Simultaneously, OPA issued a detailed question and answer bulletin interpreting various features of the new regulation in terms of actual cases.
Domestic Sales Affected
The new regulation—No. 188, Manufacturers' Maximum Prices for Specified Building Materials and Consumers' Goods (Other Than Apparel)—went into effect on August 1 as to all sales except those to United States Government agencies. The effective date for these latter sales is September 1. The regulation applies only to manufacturers in the continental United States.
Manufacturers must apply the new pricing methods to all new goods introduced since April 1, 1942, unless maximum prices for these goods were finally determined under the General Maximum Price Regulation. If new goods brought out since April 1 have been finally priced under the General Regulation and offered for sale before August 1, the prices so determined will stand and the new methods cannot be applied. These "final" prices, under today's order, must be reported to OPA by August 20.
Only the maximum prices chargeable by manufacturers for the articles listed in the Regulation are affected. In all other respects the provisions of the General Maximum Price Regulation (and all amendments and supplementary regulations thereto) are applicable and are incorporated into the new Regulation.
Regulation's Principal Effect
Principal effect of the new regulation is to translate section 3 (b) of the General Regulation, which requires manufacturers to apply to OPA for a pricing method on new merchandise, into definite methods "whereby manufacturers can price new goods themselves. Need for definite methods of this type has been particularly pressing, since many manufacturers have been compelled by war conditions to make major changes in materials and production methods. The resulting merchandise cannot be readily priced under the applicable sections of the General Regulation.
In pricing a new article, the manufacturer must apply the following standards:
1. If only minor changes are involved from an article already being sold, the producer must set a ceiling price for the new article which is the same as the maximum price .for the existing article. Minor changes are those which do not reduce the cost of materials or prevent the new article from offering fairly equivalent serviceability. Change in the shape of a chair seat, or in the handle of a household utensil are examples of "minor changes", providing that the cost of material is not lowered.
Material Shortages Considered
2. If the new article results from substantial changes compelled by shortages of material or parts used in the original article, the manufacturer must use as his maximum price the ceiling price for the original article, plus or minus any increase or decrease in the direct unit cost of production resulting from the change.
3. If the new article cannot be priced under (2) above, the manufacturer must use the following formula:
(a) He determines the direct cost per unit of the new item, using March labor rates and March costs of materials unless OPA has rolled back the material price in which event he uses the lower price.
(b) Selects from his line of comparable articles already having maximum prices, one which has a March direct cost immediately higher and one which has a direct cost immediately lower.
(c) He then averages the mark-ups (margin by which his maximum selling price exceeds his direct cost) for the two comparable articles both in dollars and cents and in percentage.
(d) Whichever of these average markups yields the lower price is then applied to the direct cost of the new article and the resulting price is the maximum price.
In applying this formula, the manufacturer is directed to determine the class of purchaser to whom he expects to sell the largest volume of the new article being priced. In figuring his percentage and dollar mark-ups on the articles used for comparison, he must use the maximum prices he charges the class of purchaser to whom he expects to sell the largest volume of the new product.