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drawing a line through them. These articles will be charged by the foreman on the material card and to the labor account, adding so much to the cost of the work.

We will now consider consumable stock, material, tools, and supplies and

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how they are to be treated. Coal for boilers, for cupolas, for forge shops; coke for foundry and forge shop; charcoal for forge shop; wood, etc., will be purchased in large quantities, as will also molding sand for foundry and

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stored for use. Returns of amounts used will be made to the cost clerk weekly. This return for fuel is shown in Fig. 177. The weekly return for molding sand, etc., will be a similar form. These are filled out in duplicate, one part being retained by the department from which it comes.

Consumable stock, materials, and tools for the different departments are drawn on requisitions made in duplicate, one part retained by the storekeeper and the other returned with the articles as an invoice, by which method each

foreman may know the expense in his department for these articles, as well as the expense of each of his men in this respect. By consumable articles is meant, of course, waste, oil, files, brushes, emery and emery cloth, and all similar articles issued by the storekeeper and consumed or worn out in the shop. Fig. 178 is the blank to be used. These requisitions will nol be sent to the storeroom by the workmen, but by an errand boy, who may profitably be employed in one large or two or three small departments.

It will have been noticed that little has been said in this chapter as to the form of books to be used. The reason is that with the exception of such as have been described, they are the ordinary ones that need no special mention, and the proper ones will readily suggest themselves. The manufacturers of

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Fig. 178. -- Size, 51 x 84 in. Color, Manila. the time clock mentioned herein furnish a very compact and useful form of pay

roll ledger in which the names of employees need be written only once in three months, and may be used to considerable advantage and with a saving of time.

The “loose leaf” system will be found very convenient for the bookkeepers, and may be used in several ways in the accounting. The principal advantages of its use are the ready manner in which the leaves may be removed and entries made on them by the typewriter, and the fact that all pages that are filled up and not needed from day to day may be removed and filed in transfer cases.

In the calculations of time and cost some mechanical aids will save much mental drudgery and give a feeling of security as to correct results. A number of good machines of this class are in the market, among them the Burroughs, Universal and Standard Adding Machines, the Locke Adder and the Comptometer. In even a small plant some one of these machines will be a welcome and useful addition to the office equipment.

CHAPTER XXVII

THE PROBLEM OF APPORTIONING THE FIXED CHARGES

Estimating. Cost keeping. Productive and non-productive costs. Diversity of opinion

among accountants. Errors of the old systems. Popular idea that the expense of a proper cost system is greater than its benefits. Good judgment necessary. Lumping non-productive expenses. “All costs are productive costs.” Ascertaining costs by a fixed machine and man rate. A percentage by averaging the total costs except those for labor and material. Dividing expenses into an unnecessarily large number of classes. The life of the machine taken into account. Accounting for the burden of fixed charges is the problem. Qualifications of a cost clerk. The “simple plan" is not a cost system. The two general plans. The time, or hourly plan. The labor cost plan. What are fixed charges. The expense burden. Supplemental expenses. The general burden. The proper system. Cost of land and buildings. Cost of light, heat, and power plants, and permanent fixtures. Insurance, taxes, water rates, maintenance, depreciation, etc. Area of floor surface. Non-productive expenses. Ascertaining the expense burden of a machine. Depreciation and interest. Classifying machines as to cost. The burden of idle machines. Importance of this factor. Faults of the old system of equipping the departments. A practical illustration. The proper method. The five factors of cost. Drawing room and pattern shop expenses. The floor space plan. Machine burden in the pattern shop. Charging the cost of regular patterns. Tool room costs. Work on regular orders. Work on tools, jigs, and fixtures. Burden of idle machines. Cost of consumable tools and supplies. Cost of transportation of material. Cost of machine repairs. Rebuilt machines. Calculating the cost of power, lighting, heating, etc. The value of this cost system. Important facts may be ascertained. Pointers for better management. Shows what departments are the more efficiently managed. Unnecessary machines. The fluctuations of business. Not a relatively expensive system. Showing where the troubles are.

The purpose of this chapter is to point out the methods for ascertaining and apportioning the fixed charges, office and salary, as well as the miscellaneous expenses, including those for interest and depreciation of machines and allowances for idle machines, all usually comprised under the general head of “ burden.” A prominent writer on the management of machine shop plants as commercial enterprises once wrote, “Upon the ability of the proper official to make correct estimates depends, to a very large extent, the commercial success of all manufacturing enterprises”; and in this aphorism he embodied much truth. Admitting the truth and importance of his statement, we are

nevertheless forced to the conclusion that were he to write of machine shop management in these times of sharp competition and close calculations he would also give a prominent place to the system of cost keeping and its numerous ramifications, pervading as they do every kind and class of material, from the time it enters the building up to its shipment.

The urgent desire for information is well illustrated by the editor of a mechanical journal, who says, “There is no inquiry which comes to this office more often than the request for sources of information on machine shop cost keeping." And he might have added that in this search for information there could hardly be a question upon which there would be a greater diversity of opinion. The reason for this is not far to seek since the science of correct cost keeping (if we may so dignify it) is as yet but imperfectly understood and the ever varying conditions where it must be attempted render the application of any large number of fixed rules impracticable.

It has often been said that there are many ways of accounting for the time spent on the different jobs in the shop, and for dividing the so-called productive from the non-productive expenses in this direction, but there is a still greater diversity of opinion and practice in accounting for the burden of fixed and miscellaneous expenses, as well as for properly ascertaining them.

When they are all considered and brought out in all their diversified aspects, and in proper relation to each other, the result may surprise many good accountants as well as business men and proprietors, who have used the old methods of assessing a certain percentage of the cost of material and labor as the proper burden which they should bear in calculating the actual cost of the product. This being a level percentage (though jobs may be in large variety and done at a bench, or on a power-driven thousand-dollar machine), is usually in error, sometimes too great, but often too small, and the result, even if the entire establishment pays a profit, still leaves uncertainty as to its source, since there are parts of the work done more economically than others, and some departments which should properly be credited with producing more profit owing to the better local management.

In the case above cited, the head of a department who manages his working force and his equipment with the greater skill and forethought has to assume a part of the burden that another foreman partly avoids. When the cost of individual parts, or separate operations upon them, is not known, we lose sight of opportunities for improving upon manufacturing methods.

Many realize the practical advantages that might accrue from a thorough knowledge of manufacturing costs, but have an idea that the expense would be greater than the benefit. It is, however, practicable to ascertain with considerable accuracy just what portion of the product has been manufactured at a loss and what portion was sold at a sufficient profit, as well as to ascertain

what departments of the shop are the more efficient, in order that the proper investigation and remedy may be applied to those which are not up to the proper

standard.

To show the great diversity of opinions and practices in the matter of ascertaining and apportioning the burden of fixed and miscellaneous charges in different shops at the present time, the following instances are given as stated by the manufacturers or the accountants themselves. They show the views of the several gentlemen and the various methods used under the varying conditions of manufacturing, as well as the great variety of the product.

In one manufactory the man who has charge of the cost-keeping says that a great deal of good judgment is necessary in distributing the fixed charges and the cost of non-productive labor, but thinks that if all money paid out for these expenses is charged to some account all will be well. It is true that a good deal of good judgment is necessary; in fact in the best and most exact system for ascertaining and apportioning the multitude of expense items we may find problems solvable by no common rule. These must of necessity be decided by the highest rule of all, the rule of judgment, founded upon practice and experience. It is not enough to say that we may simply charge the large variety of expenses to some account and then expect any reasonable degree of accuracy in ascertaining detailed costs, for the reason, as before stated, that we shall overcharge some articles of the product while others do not bear fair share of the normal burden of expense. Another manufacturer says

that the expense of the entire superintendent's department, including foremen, plumbers, electricians, watchmen, the drawing room, general repair department, pattern shop, etc., should be considered as non-productive, while the next manufacturer says, “In our factory we do not recognize that there is any such thing as non-productive costs. All factory costs with us are productive costs, because they enter into the costs of goods produced.” Here is a wide divergence of opinion and practice.

Again, a manufacturer has this method. He has a fixed price per hour for each machine and the man who runs it. This charge added to the cost of material is the “flat cost,” to which is added a percentage of fixed and nonproductive costs as ascertained month by month, or once in three months. This plan comes nearer being correct, provided the proper method is used to determine the amount charged on account of the machine.

At present it is sufficient to call attention to the fact that the correct valuation of the machines, the floor space occupied, the power required, and wliat we shall do with the cost of those that are occasionally or frequently idle, as they occupy the floor space, which must be kept clean with the machine, and this costs, excepting power and lubrication, as much as if the machine were performing profitable operations, is a matter of much importance.

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