These include certain costs for machinery and equipment repairs, a portion of the depreciation expenses, accelerated depreciation expenses, part of the officers' salaries, donations, certain costs of plant supplies, and certain machinery rentals. After careful consideration of all the evidence, it is the opinion of the Court that further reductions and deletions in the total overhead costs must be made in order to arrive at the actual total overhead. These include experimental and research expenses in the sum of $ 3,858.24; accelerated depreciation expenses for the period in question during 1944 in the sum of $ 3,048.21 and for the period in question during 1945 in the sum of $ 4,670.50; and the officers' salaries which must be reduced for the period in question during 1944 in the sum of $ 10,700 and for the period in question during 1945 in the sum of $ 6,899.86, bringing them to the amounts allowed by the Internal Revenue Department for tax purposes.
After making reductions and adjustments on such bases, the petitioner's adjusted total overhead for the period from April 30, 1944, to December 31, 1944, is $ 231,303.55. For the purpose of determining petitioner's net loss on the electric winch contract, the next necessary step is to determine what portion of the total adjusted overhead during this period in 1944 is properly allocable to the electric winch contract. From an accounting standpoint, with the records available in this case, the fairest basis for allocating the applicable portion of overhead is by comparison of the total overhead and the total direct labor costs. The petitioner's total direct labor cost for the period from April 30, 1944, to December 31, 1944, is $ 276,250.20, making the total overhead for said period 83.72% of the total direct labor cost. Applying this percentage to the cost of direct labor for said period in 1944 on the electric winch contract which is $ 29,906.84, the portion of overhead allocable to the electric winch contract is 83.72% of $ 29,906.84, or $ 25,038.01, for the period from April 30, 1944, to December 31, 1944. Using the same method to determine the portion of overhead allocable to the electric winch contract for the period from January 1, 1945, to November 30, 1945, which is the only period for which these figures are broken down, the result is as follows: Total adjusted overhead, $ 381,230.56; total direct labor cost, $ 283,780.92; total overhead percentage of total direct labor, 134.54%; direct labor cost on the electric winch contract, $ 116,391.90; and portion of overhead allocable to electric winch contract, 134.54% of $ 116,391.90, or $ 156,593.66.
With these figures established, petitioner's total cost of performance on the electric winch contract for the period from April 30, 1944, to November 30, 1945, is obtained by adding the amounts of the following items: Outside purchases, $ 524,639.12; labor during the period involved in 1944, $ 29,906.84; overhead during the period involved in 1944, $ 25,038.01; labor during the period involved in 1945, $ 116,391.90; overhead during the period involved in 1945, $ 156,593.66; tools, jigs and fixtures, $ 20,675.46; machinery rentals $ 11,975.93; and related shop orders, $ 5,170.80; or a total cost of performance of $ 890,391.72.
The contract price on the electric winch contract was $ 843,980.16, which shows a difference in the total cost of performance and the amount to be received under the terms of the electric winch contract of $ 46,461.56, or the net loss for the period covered by the records examined. This net loss is based on records running to November 30, 1945, but Section 1 of the Act provides that the only recoverable losses are those incurred up to August 14, 1945, so clearly petitioner's losses incurred between August 14, 1945, and November 30, 1045, are not recoverable under the Act. After careful consideration of all the evidence and proper accepted accounting procedure, it is the opinion of the Court that about one-eighth of the above loss or $ 5,807.70 was incurred by petitioner after August 14, 1945. When the net loss to November 30, 1945 is reduced by this amount, the net loss recoverable under the Act is $ 40,653.86.
The defendants contend that petitioner is entitled to no recovery because of a further limitation contained in Section 2(a) of the Act to the effect that no amount shall be allowed 'in excess of the amount of the net loss * * * on all contracts and subcontracts held by the claimant under which work, supplies, or services were furnished for the Government between September 16, 1940, and August 14, 1945 * * *.' Defendant contends that in order to comply with the Act in this regard, petitioner should have brought into Court all records pertaining to each of the sixty-nine contracts petitioner had for government work and should have introduced the costs of each into evidence item by item. It is evident from a practical standpoint and from the condition of these records after the fire at petitioner's factory that such a method of complying with Section 2 of the Act could never have been intended in a situation such as the present one. Petitioner presented proof of a net loss by another method, which appears to be satisfactory under the circumstances. This proof was had by an analysis of each of petitioner's private commercial contracts, which constituted 5.43% of petitioner's total business, showing the cost of performance of said private commercial contracts. The difference between the costs of performance and the net loss of profit sustained on the said private commercial contracts, and the total costs of performance and total net loss or profit sustained from both private and government contracts represented the costs of performance and the loss or profit sustained on government contracts. From this proof it was clear that the net loss to petitioner on all government contracts held by it during the period involved far exceeded the net loss on the electric winch contract. Petitioner is not barred from recovery for its losses under the electric winch contract because of the provisions of Section 2(a) of the Act.
Petitioner also seeks to recover $ 58,906.35 representing repair and over, short and damage claims held against petitioner by the United States Maritime Commission. The sum cannot be recovered by petitioner herein because there is no evidence as to petitioner's liability. If petitioner is liable for these charges, then they were incurred through its own fault and negligence for which no recovery may be had under the Lucas Act.
Petitioner further claims the sum of $ 49,417.26 for costs incurred in preparing and processing these claims to settlement. Of this sum, it appears from the evidence that $ 16,011.40 was incurred in preparing and processing petitioner's claim under its subcontract with Dravo before August 14, 1945. Because petitioner is entitled to no recovery under the Act for its losses under the Dravo subcontract, petitioner can recover nothing for the cost of preparing and processing its claim for losses thereunder. The remaining $ 33,405.86 claimed, covers costs for preparing and processing claims under the contracts with the U.S. Maritime Commission for steam winches, and the subcontract with Dravo, as well as the contract with the U.S. Maritime Commission for electric winches. Only the portion of the claim which applies to preparing and processing the claim under the electric winch contract could be recovered in this proceeding. Pro-rating the claim on the basis of sales under the electric winch contract as compared with sales under the three contracts covered by the claim, it appears that 48.04% of the estimated costs of collection are properly attributable to the electric winch contract. On this basis (48.04% of $ 33,405.86), petitioner is entitled to recover $ 16,048.18 for costs incurred in preparing and processing the claim under the electric winch contract. Defendant contends that petitioner is not entitled to any collection costs under the Act. This contention is without merit in view of the language used in Section 6 of the Act, where it is provided, inter alia: '* * * the court, sitting as a court of equity, shall have jurisdiction to determine the amount, if any, to which such claimant and petitioner may be equitably entitled * * * .'
It was contended by the petitioner and by witnesses who testified on behalf of the petitioner that there is due the petitioner from the Dravo Corporation the sum of $ 32,002.27, and from the U.S. Maritime Commission the sum of $ 94,886.54. These sums together with proper interest should be paid by the Dravo Corporation and the U.S. Maritime Commission to the trustee of the McGann Manufacturing Company, Inc., forthwith, but as these claims are not now properly before this Court, they will not be included in the Court's decree with reference to the payment of the loss sustained by the McGann Manufacturing Company, Inc. as set forth in the foregoing opinion and the findings of fact and conclusions of law by this Court, but should be paid to the trustee of the McGann Manufacturing Company, Inc. in addition to the amount set forth in the Court's decree.
The petitioner, McGann Manufacturing Company, Inc. is entitled to reimbursement in the sum of $ 40,653.86 for losses incurred under its contract with the U.S. Maritime Commission for the manufacture of electric winches, and in addition the sum of $ 16,048.18 for costs incurred in preparing and processing said claim, or a total of $ 56,702.04. Findings of fact, conclusions of law, and an order directing the U.S. Maritime Commission to settle the claim in accordance with the findings of the Court will be filed forthwith.
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