phase III regulations in addition to Subpart B, unless the sales used to compute the profit margin for purposes of Subpart F are equal to the sales used to compute the profit margin for purposes of Subpart B.

If the firm of which the entity is a part is subject only to Subpart F (i.e., all of its sales are from food operations), the entity will, of course, prepare only one part II and III of the form CLC-2. Type in "Firm Subject to Subpart F Only" following the headings for part II and part III of the form CLC-2.

Part II-Calculation of Base Period Profit Margin

This part must be completed at the time the initial form CLC-2 is prepared. Thereafter, this part must be completed only if the base period profit margin is restated. The term "base period" means any two, at the option of the entity, of the following fiscal years: That entity's last 3 fiscal years ending before August 15, 1971, and any fiscal year, other than the fiscal year for which compliance is being measured, completed on or after that date. In determining a base period for the purpose of computing a base period profit margin a weighted average of profits during the 2 years chosen must be used. The entries made in items (6), (7), (9), and (10) must be reconciled with the corresponding entries reported on the supporting form 10-K or other financial statements required in the general instructions under "What to Submit or Prepare.' reconciliation must be attached to the form CLC-2.

"Such

ITEMS 6 and 7. Base years 1 and 2—net sales. Enter, for the first base year (item 6) and second base year (item 7), net sales of tangible products and other revenues as defined in Securities and Exchange Commission Regulation S-X except operating revenues of: (1) Public utilities (as defined in 6 CFR Part 130, Subpart L); (2) foreign operations (as defined in the instructions to line 23, part VI of this form); (3) insurers; and (4) farming.

ITEM 8. Total. Enter the sum of items 6 and 7.

ITEMS 9 and 10. Base years 1 and 2Operating income. Enter, for the first base year (item 9) and second base year (item 10), operating income computed as follows: Net sales of tangible products and other revenues as defined in Securi

ties and Exchange Commission Regulation S-X except operating revenues of (1) Public utilities (as defined in 6 CFR Part 130, Subpart L); (2) foreign operations (as defined in the instructions to line 23, part VI of this form); (3) insurers, and (4) farming; less (1) costs of tangible goods sold, (2) other operating costs and expenses, (3) selling, general and administrative expenses, (4) provision for doubtful accounts and notes, (5) interest expense and (6) other general expenses as defined in Securities and Exchange Commission Regulation S-X except operating costs and expenses of (1) public utilities (as defined in 6 CFR Part 130, Subpart L), (2) foreign operations (as defined in the instructions to line 23, part VI of this form), (3) insurers, and (4) farming. The following costs and expenses must not be included in the computation of operating income for Items 9 and 10: (1) Nonoperating items, (2) extraordinary items, and (3) taxes on income.

ITEM 11. Total. Enter the sum of items 9 and 10.

ITEM 12. Base period profit margin. The base period profit margin is calculated by dividing item 11 by item 8. Part III-Calculation of Profit Variation

This part must be completed by all entities each time form CLC-2 is prepared. The entries made in items 13 and 16 must be reconciled with the corresponding entries reported on the supporting form 10-K, form 10-Q, or other financial statements required in the general instructions under "What to Submit or Prepare." Such reconciliation must be attached to the form CLC-2.

ITEM 13. Net sales. Enter net sales of tangible products and other revenues as defined in Securities and Exchange Commission Regulation S-X, except operating revenues of: (1) Public utilities (as defined in 6 CFR Part 130, Subpart L), (2) foreign operations (as defined in the instructions to line 23, part VI of this form), (3) insurers, and (4) farming, for the "Current Period" and "Same Period Prior Year" in the applicable columns. Current period is defined as the portion of the fiscal year from the beginning of the fiscal year to the date in item 4, part I of this form.

ITEM 14. Base period profit margin. Enter the base period profit margin from part II, item 12.

ITEM 15. Target current period profit. Enter the target amount of current period profit determined by multiplying item 13 ("Current Period") by item 14.

ITEM 16. Actual operating income. Enter for the "Current Period" and "Same Period Prior Year" in the applicable columns the operating income computed as follows: Net sales of tangible products and other revenues as defined in Securities and Exchange Commission Regulation S-X except operating revenues of: (1) Public utilties (as defined in 6 CFR part 130, Subpart L), (2) foreign operations (as defined in the instructions to line 23, part VI of this form), (3) insurers, and (4) farming; less (1) costs of tangible goods sold, (2) other operating costs and expenses, (3) selling, general and administrative expenses, (4) provision for doubtful accounts and notes, (5) interest expense and (6) other general expenses as defined in Securities and Exchange Commission Regulation S-X, except operating costs and expenses of: (1) Public utilities (as defined in 6 CFR Part 130, Subpart L), (2) foreign operations (as defined in the instructions to line 23, part VI of this form), (3) insurers and (4) farming. The following costs and expenses must not be included in the computation of actual operating income for item 16: (1) nonoperating items, (2) extraordinary items, and (3) taxes on income.

ITEM 17. Current profit under (over) target profit. This entry is determined by subtracting item 16 from item 15.

Part IV-Additional Information-Selfexplanatory

Part V-Certification

Type the name and title of the individual who has signed the certification and the date of signing. The individual who signs and certifies this form CLC-2 must be the chief executive officer of the parent or such other executive officer of the entity as authorized by the chief executive officer to sign for him for this purpose. Such authorization must be received by the Cost of Living Council (price reporting firm) or filed in the records of the entity (price recordkeeping firm) in the following format:

of the above-named parent; and that, as such, I am authorized to sign documents and to certify to the Cost of Living Council, on behalf of said parent, the accuracy and completeness of all the information in such documents. Pursuant to the power vested in me, I hereby delegate all or, to the extent indicated below, a portion of that authority to the persons listed below, who are executive officers of the above-named parent or entity of the firm.

This delegation is effective until it is revoked in writing, and in the case of a price reporting firm, the Cost of Living Council so notified.

This part is used to report adjustments in the selling prices of products and services. For purposes of this form, every reference to product also applies to service and every reference to product line also applies to service line. Any price adjustments which have been made by means of changes in quantity, quality, specifications, or characteristics must be taken into account when reporting price adjustments. The price of an item in inventory may be increased only to reflect cost increases incurred in the production of that item.

Separation of food and nonfood operations. In view of the fact that the general price standard of Subpart B provides an alternative whereby prices may

be increased by a weighted annual average of 1.5 percent to reflect increased costs without limitation as to profit margin, "nonfood" sales and related costs are reported on lines 1-19 of part VI of the form CLC-2 and a weighted average percentage price adjustment test is applied to total "nonfood" sales (line 22). "Food" sales are reported separately (line 24 and separate part VI) without application of the weighted average percentage price adjustment test to total "food" sales since the 1.5 percent alternative does not apply to sales subject to Subpart F.

Separation of wholesale/retail and other operations. An entity engaged in "nonfood" wholesale or retail operations may choose to complete lines 1-19 of this part for its "nonfood" operations including wholesale and retail operations, or it may separate its wholesale and retail operations from other operations and complete lines 1-19 for its other operations only. In the case where the entity separates its wholesale and retail operations from other operations, it must include the sales and revenues from wholesale and retail operations in lines 25 of this part (see paragraph (h) under "Non-Applicable Sales") and complete and attach a schedule T, "Report or Record of Retailing and Wholesaling Markups of Gross Margins." Only an entity of a firm subject to Subpart B of the phase III regulations which chooses to complete lines 1-19 of this part for its combined "nonfood" operations, including wholesale and retail operations, may use the alternative in the general price standard pertaining to the 1.5-percent weighted annual average price increase. An entity which separates its wholesale and retail operations from its other operations has decided, in effect, that its price adjustments under Subpart B will be such that the Subpart B profit margin limitation will apply and that it is therefore not necessary to attempt to include its wholesale and retail operations in computing a weighted annual average price increase for Subpart B sales.

All sales of the entity must be listed in lines 1-19 of this part by the appropriate SIC code except sales or revenues in the following industries or categories:

a. Foreign operations (as defined in the instructions for line 23, part VI of this form) (entered in line 23).

b. Food operations (which includes wholesale and retail operations); unless the firm of which the entity is a part derives less than 20 percent and less than $50 million of its annual sales or revenues from sales of food. If less than 20 percent and less than $50 million of the annual sales or revenues are from sales of food, food operations are to be recorded in lines 1-19 of part VI.

Other Nonapplicable Sales (entered in line 25)

c. Exempt items (set forth in 6 CFR Part 130, Subpart D).

d. All insurance not set forth as exempt in 6 CFR Part 130, Subpart D.

e. Providers of health services (covered in 6 CFR Part 130, Subpart G). f. Public utilities (covered in 6 CFR Part, 130, Subpart I).

g. Custom products (as defined in the Price Commission regulations in effect on January 10, 1973, including such products provided by entities in the construction industry).

h. Nonfood wholesale and retail operations if not included in part VI, lines 1-19.

Abbreviated Reporting-Entities Under 1.5 Percent

An entity of a price reporting firm subject to Subpart B which has not increased its prices under Subpart B to more than a 1.5 percent weighted average price increase above its authorized base prices need not complete lines 1-21 of part VI on any form CLC-2 submitted to the Cost of Living Council.

However, an entity which qualifies for abbreviated reporting must complete and retain in its records a part VI with lines 1-22 completed in accordance with the specific instructions, exclusive of the instructions for abbreviated reporting, for each form CLC-2 submitted to the Cost of Living Council.

On any form CLC-2 submitted to the Council, total price information and cost justification for an entity which qualifies for abbreviated reporting is recorded in line 22 and schedule C must be attached supporting this entity-wide cost justification. The entries in columns (d), (e), and (i), line 22 are calculated in accordance with the specific instructions for line 22. If the entry in line 22, column (f) is less than line 22, column (e), documentation must be furnished explaining why the price increase exceeds the

i.e. base price times quantity sold during the reporting period.

(g) The weighted average percentage price adjustment is the difference between current revenues and base price revenues all over base price revenues. The result is multiplied by 100 to convert to a percentage, i.e.:

The weighted average percentage price adjustment can be computed using this formula for any level of aggregation (group of products, product line, all products of the firm, etc.).

(h) The actual weighted average percentage price adjustment is calculated using the actual base price to compute base price revenues.

(i) The authorized weighted average percentage price adjustment is calculated using the authorized base price to compute the base price revenues. Computing the Weighted Average Per

centage Price Adjustment

Although the calculation of the weighted average percentage price adjustment requires determination of price changes at the item or individual product level, it may not be feasible to compute and record the percentage price changes at this level of detail. In such cases, it may be permissible to use a sampling, averaging, exceptions, or other valid technique. However, the weighted average percentage price adjustment resulting from such techniques must not be materially different from the weighted average percentage price adjustment computed using the method below. Where these techniques are used to calculate a weighted average percentage price adjustment, the entity must adhere to accepted standards with regard to materiality, sampling validity, and consistency.

(1)

The entity must maintain documentation which outlines the type of techniques used in its various divisions. The entity must weight its price changes according to the quantity sold during the reporting period (as shown below), but may weight its price changes according to the quantity sold during the most recent fiscal quarter ending prior to January 10, 1973: Provided, That it can demonstrate that there has been no material difference in product mix between the two periods. The factor for weighting price adjustments may be represented by the value of the sales to which a price change applies as a proportion of the total sales for which the weighted average is computed. Note that the method shown below takes into account price increases and decreases from base price. The base price in the example below may be the actual base price or the authorized base price depending on whether the actual or authorized weighted average percentage price adjustment is being computed.

METHOD OF COMPUTING THE WEIGHTED AVERAGE PERCENTAGE PRICE ADJUSTMENT

The steps for computing the weighted average percentage price adjustment

are: