Lockheed Aircraft Corp. v. County of Los Angeles

This is an appeal from a judgment awarding to plaintiff $272,053.61 plus interest as a refund of personal property taxes for the year 1954. The contested tax was based upon the value which the county assessor placed upon the plaintiff’s work-in-process inventory.

The evidentiary facts are not in dispute. On the assessment date, March 1, 1954, plaintiff was engaging in the business of manufacturing the series of commercial airplanes known as Constellations. As of that date 279 planes had been delivered and 99 were on hand partially complete. Plaintiff used what was called the "constant cost” or “standard costing” method of valuing its inventory of uncompleted Constellations. This accounting method was adopted because in the manufacture of a series of airplanes there is a great variation between the cost of manufacturing the first of the series and the cost of manufacturing the later units. When a model first goes into production there is much costly trial-and-error experimentation. As more units go down the assembly line more efficient production techniques are developed and costs are reduced. Thus in the manufacture of the 1049G series (which was a portion of the Constellation…