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Furniture (Profit Margins)

Volume 463: debated on Tuesday 22 March 1949

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asked the President of the Board of Trade what are the profit margins officially allowed to the manufacturers, wholesalers, and retail distributors of utility furniture; and the profit margins usually achieved in the case of new non-utility furniture.

Utility furniture manufacturers are subect to cash maximum prices. These prices are fixed at a level designed to yield 3 or 4 per cent. profit on cost (equivalent to a return of some 10 per cent. on capital employed) to manufacturers observing the best standards of construction and making the most expensive designs which are considered appropriate to the utility scheme. These are maximum prices and the state of the market is such as to impose lower prices for articles of a more modest standard of construction and design. Distributors are allowed a gross margin of 33⅓ per cent. on price paid to manufacturers after deduction of all discounts. This margin is intended to cover their costs and yield a profit based on an estimated return on capital employed of some 10 per cent. In cases where the furniture is handled by a wholesaler, he must share this margin with the retailer.

Manufacturers' maximum prices for non-utility furniture are fixed by reference to cost of production and sale plus a profit margin of 6 per cent. The corresponding gross margin for distributors is 50 per cent. on the price paid to a manufacturer after deduction of all discounts except cash or settlement discounts (not exceeding 5 per cent.). Here again, no separate margin is fixed for wholesalers.