J-IP ^^M UC-NRLF *B EflO 513 GIFT OF M ^n^^ ^!r Digitized by the Internet Archiv( in 2007 with funding from m IVIicrosoft Corporation http://www.archive.org/details/costkeepingshortOOburrrich rr: I Cost Keeping Short Cuts MIIWB^ Kl l ll l llll l llllllllll l llllllll l lllllllllliil l llllllllll^^ A Cost Department where it is recognized that a clerk's time is worth money Cost Keeping Short Cuts Prepared from Experiences in Many Lines of Business Illustrated Detroit, Michigan, IT. S. A. Burroughs Adding Machine Company " mi Hf Copyright, 1911, by BURROUGHS ADDING MACHINE COMPANY of Detroit, Michigan, U. S. A. All privilege of reproducing illustrations or letterpress expressly reserved by the publishers First Edition July, 1910 Second Edition May, 1911 )-'*' Arranged, Written and Illustrated by the Departments of Systeni Service and Advertising To the Business Man Who Wants to Know the True Value of Anything He Does or Buys or Sells, this Little Book is Respectfully Dedicated 254076 Here again I would venture to utter a word of caution to business men. Let them study their own affairs frankly, and face the truth. If their methods are extravagant, let them realize the facts and act accordingly. One cannot successfully go against natural tendencies, and it is folly to fail to recognize them. It is not easy for so impressionable and imaginative a people as we Americans are to come down to plain, hard facts, yet we are doing it without loss of self-esteem or prestige throughout the worlds John D. RockefiJLler. BY WAY OF INTRODlJCriOMv. ;•:(:%;:/ THE first edition of Cost Keeping Short Cuts was issued not quite a year ago in response to what we believed to be a well defined interest among busi- ness men in cost finding. That our belief was well founded in fact has been verified by the cordial reception , given the book and the rapidity with which our supposedly ample supply has been exhausted. Requests for copies poured in from all quarters, making this second edition necessary within nine months of the first. We have taken advantage of the reprint to correct a few errors which crept into the first edition, as well as to amplify the book where experience has shown such amplification necessary or valuable. The merit of Cost Keeping Short Cuts has been well attested by the number and warmth of the appre- ciations coming to us through the mails. Perhaps the greatest compliment paid the book, however, has been its adoption by a number of schools and colleges, including one of the leading universities as an authoritative text book on costs, as well as by the successful application of its principles by a large number of manufacturers. If the second edition continues to receive the same degree of favor and proves of the same value to its readers, we shall be more than repaid for the expense of its production. The whole matter started some time ago when we were asked to make a special machine for a manufacturer who thought it took too much time to handle his cost figures by hand. We studied his conditions. We made him a Burroughs machine which got so much greater efficiency at such a reduction in cost, that we were led by his enthusiasm to further investigate the whole subject of cost finding. We had not gone far before we found several very surprising things: (a) I'hul American business men were just beginning to be interested in costs. (b) That they apparently were not much beyond the inquiry stage. (c) That the practical information on the subject of cost finding was both meagre in quantity and questionable in authority. From among thousands of good friends, users of our machines, without whose suggestions this book would have been impossible, we, however, obtained much useful experience data. An often repeated suggestion to "go ahead and get other experiences and then let us also have the benefits," caused us to arrange the material in form for publication. This book is the spoil of that little journey into Cost Land. Theory, in its objectional sense, has but little place in what follows. The offerings are hot from the crucible of everyday business practice. One word, particularly to the technical reader. You will find this book fundamental and elementary. It is our aim to have it so. We hope you will find, however, what we have tried earnestly to put here — a few helpful suggestions. If you find that it awakens inquiries and questionings that you would like to have answered, will you not write Us fully? We may not be able to answer everything you ask. ^j We are not cost experts. It may be, however, that we can send you a form or an experience that so nearly fits your problem that you will feel repaid for your trouble in writing. Certainly we shall be glad to be of such service to you. Burroughs Adding Machine Company, Detroit, Michigan. May, 1911. CONTENTS Chapter I— The Profits Made By Savings. II — Putting in a Cost System. Ill — Some Systems of Paying Wages. IV— The Day Rate Wage Plan. V— The Piece Work Wage Plan. VI— The Differential Rate Wage Plan. VII— The Premium Wage Plan. VIII— The Bonus Wage Plan. IX — Profit Sharing and Stock Distribution Plans. X — Judging the Cost Keeping Requirements of a Factory. XI — Handling Material — Perpetual Inventory Suggestions. XII — Handling Labor Costs. XIII — Indirect Expense or Burden. XIV — Distribution of Burden. XV — Some Forms Used in Cost Systems. XVI — Final Disposition of Cost Figures. XVII — Cutting the Cost of Keeping Costs. XVIII — How the Burroughs Helps the Cost Keeper. XIX — System Used in the Burroughs Factory. XX — Information for the General Manager. Born, January 28th, 1858. Died, September 14th, 1898 The Inventor of the Burroughs Adding and Listing Machine CHAPTER I The Profits Made by Savings NOT long ago a keen-minded writer on business subjects said, "During the next few years some of the tidiest profits in American industry will be saved out of operations. Heretofore, much of our profit has been made. But saving profit is a different thing altogether."* That is the keynote of the remarkable interest in manufacturing and cost of production systems, which has appeared since 1905. A nation of born salesmen and advertisers, we have heretofore solved the problem of making more profits by getting more sales. Competition has now forced us to realize that an increase of advertising and selling expense will not continue to increase the business in direct proportion to the increase of expense. The corner grocery-man who some morning finds a competitor on the opposite corner, is forced to realize the introduction of a new element. The new arrival advertises and employs the best salesmen and prices his goods at less. The old grocer finds his old trade gradually slipping away. Such conditions must be met not only by advertising and good salesmanship, but he must go a step further. It means better systems of bookkeeping, closer inven- tories, more careful checking of every item of income and outgo, more accurate methods of knowing what each clerk produces — in short the old grocer must decide to know what it really costs him to sell a peck of potatoes, in order to make the right price. The same principle rules business in all lines. Cost, / more than price, fixes profits. The public fixes the price ♦ it will pay. The dealer may keep it high, but the public fixes the limit, low or high, of what that price will produce. ♦James H. Collins, 'The Easiest Profits," Saturday Evening Post, March 26, 1910. 11 COST KEEPING SHORT CUTS Profits The merchant may cut his cost as far as his ingenuity. Savings ^^^ ^^^ manufacturing or mepchandising abiUty will take him. He can only make the difference between what the public will pay and what he saves on the costs. So vital a thing as keeping the cost and the price as widely separated as possible, would seem to call for the best thoughts of the most expert business man. But it hasn't. In fact the whole subject of costs is a wilderness of figures filled with more or less significant facts, which, to the average American business man, cost too much to catch. Balance Many manufacturers depend on their balance sheets Prices ^^ determine cost, and their competitors to fix price. This is guesswork of the rankest, most treacherous and deceiving sort. Even the street fakir selling collar buttons knows what his costs are, and in that respect knows more than some large enterprises who really know surprisingly little about how much it costs .to put their output down at the point of final delivery. Many a retailer doing a business of »^50,000 a year will tell you that **a cost system is only for manufacturers." The wholesaler and jobber thinks of costs in a lump sum as expenses in his balance sheet. Another manufacturer calmly works out his business plans on general assumptions of facts about what his product costs him. It has been well said that the average business execu- tive fails to get more than a small fraction of the vital facts and statistics that he should have to intelligently control the activities of a business. The desire to dodge the expense of the necessary system that will bring such vital statistics to the executive desk has created this condition. Any efficient accounting system should be an orderly and logical arrangement, by simple processes, of the facts COST KEEPING SHORT CUTS and figures of a business, so that it may concentrate into, Profits clear and concise statements a complete expression of the( gatings^ activities and condition of that business. Contrary to the somewhat prevalent idea, there is no inherent complexity in system, just because it is a system. It may, however, be suggested that the observance of any logical routine in the handling of business is so repugnant to the training and style of some business men that they take refuge in the absurdity that "all system is red tape" — with the often painful result that they fail without knowing why, therefore being denied the im- portant lesson their failure could have taught a man with a more analytical mind. That this attitude on the part of business men is too A Fatal general and often fatal, is generally conceded by those whose occupations such as bankers, lawyers, judges, expert accountants, referees in bankruptcy, etc., bring them into close contact with the facts and figures side of business troubles or failures. How many retailers and wholesalers and even manu- facturers have to wait for their yearly or half yearly inventory to find out if they have made or lost money? How often has this found them in a position where it was too late to do anything but call in their creditors. No less an expert on costs than Mr. J. L. Nicholson said in his interesting work on the subject of costs: *'In the majority of enterprises to-day, the profits and losses are only known at the end of the regular fiscal period, when an inventory is taken and the books closed; and even then the result is not necessarily correct, inasmuch as the accuracy depends entirely upon the correctness of the inventory, which there is no means of checking or verify- ing in the ordinary systems. The result, whatever it may be, appears in the books of accounts for the entire period in one amount, and admits of no verification due * "Nicholson on Factory Organization and Costs," pp. 8 and 9. IS COST KEEPING SHORT CUTS Profits to the principle involved. There are two important Savings (questions that relate to this: First, are the results ap- parently satisfactory; second, are they a disappointment, and a surprise? Let us take up the first question by asking one. Should a result in gross which is apparently satisfactory be accepted without question? A careful analysis of this will result in the answer. No. There is absolutely nothing in the profits shown in this manner to indicate whether the results should not have been con- siderably more. There may be many articles made at a loss, with the result that the articles upon which there is a good margin of profit have been paying the losses resulting from the sale of the other class of products. In taking up the second question, the first query that arises naturally would be: What am I going to do about it? There is only one way to correct the fault, and that is to locate it; and if the mass of detail that enters into the pro- duction of any plant is buried, owing to a lack of records dealing with the component parts of the product during the period of six to twelve months before results are obtained, this would indicate that some action is necessary in providing a plan that will admit of locating or deter- mining the cause." Touching on a similar condition of the business mind another writer recently said in a popular magazine : "The business world is of three different opinions on this subject of cost accounting, two of them wrong and the third right. "One type of manufacturer operates with little cost accounting other than his annual inventory, and main- tains that a cost system entails too much trouble and expense. From him one hears the familiar joke about Smith's cost system: 'Smith had experts working three months installing a cost system at his plant, and since then he's been busier working the system than making goods. Why, it costs him more to find out what his product costs him than it does to make it! Ha, ha!' 14 COST KEEPING SHORT CUTS "The second type of manufacturer is Smith, who has System actually become so absorbed in cost accounting that he g^^ is trying to make its smallest refinements practical. In many a mill Smith has been known to bring in experts to find out exact costs on a small job, spending more for the purpose than he made in profit. "The third kind of business man is the one who strikes a safe middle course, taking what the cost experts have to give him and applying it in the light of his own practical knowledge. A little cost accounting and a little common sense make a combination hard to beat." To steer a middle course between the extremes of the impractical system visionary who strives to operate a business on hard and invariable lines as a machine is operated, and the stone blind "practical" man who never does anything unless it is mouldy with precedent, is, indeed, a hard but a necessary thing to do. It is believed that the German was the first business man to understand that cheapening the cost of production opened the avenue to a greater and more profitable business. The old idea was to keep our methods a secret, on the general assumption that the things hidden from a com- petitor were the things that made us big and successful. The idea of overcoming competition was to have so much capital that we were able to lose a lot more money than the competitor could afford to. If anybody got into competition with us, the process was to freeze him out by standing the loss longer than he could. This was before the science of accounting was applied to the matter of men's labor; before we realized that time was money, that materials were money. Just as soon as we grasped the idea that if we had more time we could make more money, we started in to cut down the amount of time we had to give to any one particular part of our work by getting more out of the time. We could then sell 15 COST KEEPING SHORT CUTS Profits the product more cheaply because we had put less time Sa\^ngs (money) into it. We commenced to use labor-saving machinery because it was time-saving machinery, which meant money-saving machinery. This was theory that worked. Theory! All theory is generally the product of experience and it in turn produces experience, a sort of an endless chain. It is an interesting speculation to figure out how cost accounting came into use. No doubt some man had a theory that, if he kept books with himself — not only with his customers, but with the various parts of his business, with all his workmen, with his materials, his machines and his salesmen, that he would better know what he was doing. Some men are frank enough to admit that they don't really know what they are doing. On the one side, our man put down all that workman did, and on the other, he put down all the man cost him. At the end of the year, six months, or every month, he could cast it up and see whether he was getting what he was paying for and whether that workman was making a profit for him. He kept books with the raw material that he bought. He found what raw material cost and where it went. Then he found what it cost to manage the men and the materials. Cost of management was important. If every workman could be trusted to do his work well without oversight, he wouldn't need to have an overseer or foreman, but as every workman has to have a certain amount of oversight, the employer said, "Here, I will distribute that cost of oversight to each man according to his importance on my payroll. If he makes $5.00 a day and it requires $1.00 worth of oversight, I will debit that dollar against his account." "This also applies to the amount of material he uses. I'll sell the material to the workman at cost." 16 COST KEEPING SHORT CUTS After he introduced this idea of keeping books with Keeping himself and with his men, he found that while most of ^th^ the men were paying him, a few were not. He began to Himself drop the unprofitable men and put in better. His standard was simple: If a $5.00 man over there was pro- ducing good work at a profit, he made the $5.00 man over here work up to the other fellow's standard. Before he knew it he had the whole factory working up to a higher pitch. That was one of the Cost Findings. It was but a step to the idea that he should keep books with his fines of production. He soon found that it took a lot of money to sell certain lines. The margin was small and he found other lines were more profitable. The result was he cut down the production of the unprofitable and increased the production of the profitable. Then he saw no good reason why he shouldn't keep books with his heads of departments and his salesmen. And so all along the line he got in touch with the real meanings of the activities of his business. Some day he will apply the cost idea to his clerical . and accounting department. But he had found where the minutes went and it didn't take him long to realize that as his Cost System gave him facts and figures about the activities of his business, he was fighting competition with his eyes open. He knew what he could do. All of this required system — a system which needed the people who operated it to be in sympathy with the things he wanted. At the very beginning it is well to forget all about the Forget idea that "our business is different." We find that there jj^^ are time and material and indirect expense in every manu- facturing business. It doesn't make any difference whether we make candy cones for the school children of New York, or locomotives for the Siberian railway. The 17 COST KEEPING SHORT CUTS Profits whole necessity lies in tracing the time, material and Savings iJidirect expense which make up the cost of doing business. Just as soon as we forget that "our business is dif- ferent" we begin to find out how other people do their work; how other people find what it costs them to do business. That is where we are to-day — we are seeking more light on the subject. Tearing away all the fine spun theories of the profes- sional, the fact is, having pushed price to the limit of the public acceptance, greater profits now lie behind us, in pushing costs down to the point where quality and quantity of production begin to be affected. That is the whole philosophy of cost keeping in a sentence. Many men think the application of the prin- ciple should be equally simple — but it isn't and it can't be. All the complications come in when we come to trace the course of a dollar's worth of material through two hundred and fifty hands and one hundred and ten opera- tions, to the completed article. But this complexity in turn, actually works out in expert hands, into some very simple system of records, as will later be shown. Cost accountants sometimes turn up most unusual and surprising conditions in exceptionally reputable and apparently well-regulated business households. A Printer A printing house in a mid- western city had long been °Q^^ known as a fine catalog house. It had been in business since the time of the proprietor's grandfather. The business had been profitable. The present proprietor's father, son of the founder, had put in a poster printing plant, run separately. The business was handled through one bookkeeping department. Catalog plant and poster plant were running night and day. One night the pro- prietor found the poster plant folders working overtime on a catalog order. 18 COST KEEPING SHORT CUTS "Do we charge the catalog department with that work Profits and does the poster department get credit?'* he asked of Savings^ the superintendent. "Oh yes, they turn in tickets for it." The young proprietor thought it over that night while going home. He spent the next day going over the tickets for last month's business. He thought he saw some queer things. He called in a cost expert. That expert finally got down to the detail where he could tell what it cost to have the "devil" pull a galley proof. He also found, among other things, that the catalog plant had been paying poster department losses for three years. Then the proprietor who had been working along with the expert, commenced to hire, fire and transfer. The old foreman and henchmen of the house made some gloomy prophecies of the awful things that were going to happen as a result of the change. But the change worked, and anything is good when it works. Cost finding is not a series of formulas like that which we get in chemistry. It is simply systematized processes of finding out where every item of material and time and expense go in the making of a product, or in the process of buying and selling goods. When two chemists are asked to give a formula of water, each will write H2O — ask two hundred, the answer would be the same. Chem- istry is a fixed science. Ask two cost accountants what goes into costs and A Cost you will get practically the same formula: Cost of Material + Direct Labor = Prime Cost. Prime Cost H- Direct Factory Expense = Factory Cost. Factory Cost + General Expense = Cost to Make. Cost to Make 4- Selling Expense = Cost to Make and Sell. Cost to Make and Sell + Profit = Price. 19 t COST KEE.PING SHORT CUTS Profits That is the formula and it will remain the same, no Saving^ matter how many cost accountants you ask. They may phrase it differently, but the essentials will remain the same. Suppose, however, you were to ask a hundred chemists to produce water according to the chemical formula. A careful checking of the expenses incident to the manufac- ture of a gallon by each of the hundred, would probably give you a hundred. different costs. If you should compare the costs you would get at the man who made the cheapest gallon of water. Take your cost formula and apply it to your product. Keep a careful record by departments and men. You will get a line on departmental and man efficiency that will open your eyes. Comparisons are necessary if you would get a just estimate of the relative activity and efficiency of your employes. After all, the success or failure of any business is a matter of the quality of the man-stuff of which the business is made. You can figure to the last decimal on the cost of your materials, your overhead, your rent and heat and light, know exactly what it is going to cost you to carry $1,000 in loans at the bank; but (and this is just as important) what does it cost you to let John Jones handle your green groceries; or, what does it cost you to let Bill Smith do half as much work as Sam Perkins, who works next to him in your machine shop? Why does it cost you $200 a week for your accounting department when your competitors, Fitzgerald. & Com- pany, handle twenty-five per cent more business on $150.^ Why.? Why? When you come to that point you are getting in the frame of mind where you will use a cost system as it should be used — i. e., as a means to make profits. 20 COST K E E PING SHORT CUTS Referees in bankruptcy will tell you that half the Profits failures that occur in periods of good business occur Savings because the bankrupts didn't know what their outputs cost them; they hadn't preserved the proper distance between cost and price. Too many prices are made on the basis: "Well, if he can sell it for that, we can." Of course, that doesn't follow at all. One western mill recently found that the old day -wage system was losing money for the firm, because the price of the goods was fixed by the consumer and the workman fixed the cost. A piece-work wage system was introduced. A limit was fixed on the cost of the goods with an eye to meet the price fixed by the consumer. The system created a comfortable margin between cost and price, and by the system the tendency was for the margin to gradually grow bigger as the management found places where to economize in materials and time. It is such simple things as these that work the revolu- tions in profits. The American business man has long - neglected his office, his internal organization, in favor of his selling organization. Times are forcing a change. We have, in the world's greatest and wealthiest nation, more failures than in any other nation. The vast per- centage fail for *'lack of capital," "for want of knowledge of the business" — so Dun and Bradstreet tell us. The commercial lawyers tell us that the principal "lack" is a practical knowledge of what it costs to do business. If there is any place where the old adage — "Be sure An Old you are-right, then go ahead," means something, it is in the matter of fixing prices. Without accurate costs you cannot intelligently and accurately fix price, is as plain as a pike-staff. The principal difficulty, however, has lain in the handling of the time and materials. The records required 21 COST KEEPING SHORT CUTS Profits so many hands and heads that the manufacturer preferred Savings ^^ chance it, and dismissed the whole idea with the futile pun: "It costs too much to know what it costs." Like most generalities, however, this is dangerous. Again, it is no longer true. Since the introduction of the time clock for recording the gross hours of labor; the elapsed time recorders by which each workman records in plain figures on each card the time he has actually been at work; and finally, the Burroughs Cost Machines by which the time, the value of materials, and the costs may be added and listed on wide sheets from the individual records, and all other handling of figures done at a speed of three to five times as fast as formerly done by the most expert clerks, the expense of maintaining a cost system has lost most of its terrors. Business men are now turning to the subject with a renewed interest further energized by the thought that it is better to be safe than sorry. CHAPTER II Putting in a Cost System NEVER FORGET THE MAN," ought to be written in large letters over the desk of the man who is responsible for the systems used in any kind of business. Too many systems are made on the assumption that the men working them are reasoning, thoughtful and analytical. Most men are none of these things. In fact, even most of those men who are paid to think are not analytical; their thinking is mainly remembering how a thing was done before, and then doing it again. Begin a system with yourself. Decide that you are going to be honest with yourself. The proper cost system registers the will of the -pro- prietor. It goes as far as he will go. Some managers don't want to know too much about their business. It is surprising how much more common than may be sup- posed, this failing is. The average man approaches a cost system from the wrong angle. He doesn't want to find that he has not been making as much money as he should, because that reflects on his ability as a manager. He should, on the other hand, try to find out where he is not making as much as he should in order that he may remedy the oversight. In the first place, then, determine to find out what it has cost you to produce and sell your product for one given period. That will open your eyes to losses and perhaps unnamed profits. In the second place, decide that you will put in a system to find out what your future product will cost you. Get at the costs; don't flinch or fumble, but go after and get the whole truth about yourself and your business. 23 COST KEEPING SHORT CUTS Putting You may have some pet method of handhng tools in Q^^^ the factory, charging the salesmen's expense, dividing System territories, handling the accounting detail in the office. You think it is efficient and profitable. It may not be. Be prepared to see it thrown on the rubbish heap. Make your superintendent and your men see the new ideas in the same way. Employes are never glad to see changes. They don't know what they mean, and being ignorant of the purpose they generally imagine it means the worst results to themselves. Superintendents, man- agers who have been responsible for the systems you have in use, would be more than human if they did not resent the "new f angled ideas" that seem to be revolutionary and mean an indictment of their own ability. Consider the man. A Story A man told a story which shows the value of this man- knowledge so essential to the success of a cost keeping system : "The management of a large machine works came down with the high-speed steel fever, a malady that needs a little description. "High-speed steels, made for cutting tools in metal works, are so superior to ordinary carbon steels for certain work that from forty to one hundred per cent increase in production often follows immediately upon their intro- duction in a machine shop. They make it possible to run machines faster, cut more deeply and speed the work all around. "This particular management tried high-speed steel and found that its costs could be reduced at least seventy per cent. That meant almost a revolution in prices and competitive conditions. An elaborate cost system was worked out, the new steels applied everywhere, and several contracts taken on terms that would have meant bankruptcy under the old scheme of things. 24 COST KEEPING SHORT CUTS "And before those contracts were, completed the Putting works did face bankruptcy. q^^^ "For the new cost system wouldn't operate itself. System Workmen had not been taught to temper the new steels, a delicate process. No provision had been made for grinding tools to exact angles in a special department. There was an insufficient supply of tools for the new con- ditions, leading to losses of time. Worst of all, employes were suspicious of the whole innovation because it had not been clearly explained to them and they feared it was meant to put them at some disadvantage. The cost system was only a theory at that point. It had never been adjusted to the human equation, and it took more than a year of patient work among the men in different departments before such adjustment was brought about, making the theory fact.'' The man power, without which a system is simply a theory on paper, had not been considered. Managers frequently go at this phase of the question in a way that leads to needless loss. At the bottom every American workman is of the right stuff. That is not • sentiment or patriotism; it is a plain statement of ex- periences. When you throw aside your general managership, and Breeds get down on the floor and talk to these men as man to man, you can generally get them into line with almost any plan of betterment. It is the formal order like this that makes it easy to form unions and call strikes: "On and after this date every workman in this factory will be put on a piece-work basis, as per schedule in the hands of each foreman. By order of the Company, John James Smith, General Manager," Go back over the labor troubles in your district and you will find a number dating from just such if-you-don't- like-it-get-out orders. 25 COST KEEPINGSHORT CUTS Putting Such orders come from a man who fails to realize that ^g^ every machine he has in his factory, every part of his System product, every sale he makes, every dollar of his invest- ment depends for its efficiency on a man. Contented men give a better result than mere men. Enthusiastic men give a better result than mere con- tented men. Men with pride in their work, with enthusiasm in their blood, and loyalty in their hearts can whip the world. That sounds like sentiment. So it is — but the stuff that rules the world, certainly has a place in ruling a business. When you get down to the men, show them that you trust them, tell them what you expect them to do, and that the system of costs is simply to protect them and you and your stockholders. You wish to place responsi- bility where it belongs, and will pay for it in proportion to its worth. Most of them will try to deserve responsi- bility, and you'll find it pays to get rid of the others. Manstuff Don't forget the manstuff on which your system depends. This task is yours. Fix in your own mind clearly what you want a system for, what you want it to do, and why you want it. The general advantages of any cost system are: First — To reduce the costs. Second — ^To increase production. Third — ^To introduce machines to do work hitherto done by hand. Fourth — ^To equalize the output in each department. Fifth — ^To serve as a guide to selling. Sixth — ^To serve as a guide to pricing. Seventh — ^To serve as a basis to judge the product and efficiency and diligence of the workmen. COST KEEPING SHORT CUTS Eighth — To place the employer in a position to get Putting a safe basis, independent of the judgment of the foremen q^^ of the different departments, on which to reward the System dihgent and to get rid of the lazy. Ninth — To act as a moral stimulus to every workman and to insure fair distribution of reward to all. Not one of these things can be handled with accuracy and safety unless you have a cost system. Starting a system is important, where to start, how and when, for these take the time of men from a business that must be kept going while it is being doctored. The expert has found his opening here. The expert always pays his way. The doctor, the lawyer, the dentist are all unnecessary, but they are economizers of life, liberty and happiness. They get more for us than we could get for ourselves. It is the same way with cost keeping. There are men who have made a special study of cost keeping. The cost keeper is generally an outsider who has made a study of costs as applied to manufacturing, wholesaling or retailing. There are experts who specialize on certain kinds of costs,- such as foundry costs, costs in specialty manufacturing and costs in department stores, and so on through a score of lines. The cost keeper should be more than a bookkeeper. The while some bookkeepers have made excellent cost keepers. Keeper He must have an ability for analyzing processes, a grasp of manufacturing detail, and a knowledge of accounting, and then the final test of his ability as a systematizer comes » in an ability to mould these things into a simple, workable system. In its workability will be shown the value of knowing human nature. Each record required of a workman must appear to lead somewhere, say something, be com- plete. To ask a man to set down some apparently need- less figures for an unknown purpose, is to make him 27 COST KEEPING SHORT C UTS Putting indifferent and inaccurate, and that is to fail to get the (^Qg^ facts in so many cases as to seriously interfere with the System accuracy of the final results. Business is enough of a gamble even after a cost system has been installed without encouraging any one to guess at any part of the data it obtains. There are two ways to find costs: First, estimated costs; second, absolute costs. The process of estimating costs leads at best to self- deception. It argues a decision to install a cost system that shall give you a knowledge of what the items of your product actually cost you to produce, and then side step- ping to introduce guesswork into the result. It is a compromise that inevitably hurts more than it helps. It is not a system in any of its crude and imperfect parts. It is just a process of recording human guesswork, and has no more right to be called a system than a process of keeping books by which you guess at the amount of the items you enter to your debit, and speculate as to how much your customers should pay you. Absolute The system by whfch absolute costs are obtained is an honest attempt to get at the real amount of labor, the real amount of material put into any piece of work. The ideal set before any costkeeper — dealing with absolute costs — is: "Get the absolute facts and figures about the various activities of the business." Approximations, guesswork, estimates and speculations of any kind are / barred, and in their place is an ever present single minded desire to be absolutely accurate. It must be realized that the value of the right system lies in the difference between average and maximum efficiency, between what is done by men who are left largely to their own devices, or the uncertain moods and ebbing and flowing energies of foremen, and men who feel the constant spur of working up to a standard. COST KEEPING SHORT CUTS The business man who thinks up to such n standard Putting realizes that nothing happens in this world; that success (^^^^ or failure does not come as a result of good or evil fortune. System Back of them is a cause. Back of all success there is a good and sufficient reason. The executive with a vision realizes that he must get at -these causes and understand them. As he hunts for them amid the activities of his business, he is hospitable to the claims of all theories, of new machines, of time saving devices in oflace or factory. Nothing is poor in his eyes until it has been found wanting after a trial. No theory is bad just because it is a theory. He knows that theory is the egg, practice is the chicken. But in this hunt for details that shall show him where and whence to find the things that make or mar profits, the manager finds that these very details are the things that palsy the hand and the mind. He must deputize — hence the costkeeper. Details will not come of themselves to the executive: the executive must go after the details, and he does this by means of a system through which are recorded all the time and materials used, and then a systematic distribu- tion of these figures to certain divisions of processes or expenses, which he knows to be the source of the greatest possible loss to him. He knows that profits will take care of themselves Profits when he has taken care of the losses. That is the execu- tive's part. Many cost experts have found that a graphic charting of the business helps to a proper analysis and aids in placing the matter in a proper light before those who will operate the system. First,, chart all the various departments of the busi- ness; under each department write exactly what the department does. Arrange each of these departments in the sequence of the work as it is done, or as the product comes through. S9 COST KEEPING SHORT CUTS Putting Arrange your system so the records will follow the (-.Qg^. sequence of operations. System , ^j^y factory or store not properly departmentized may have a working chart arranged without in any way interfering with the actual conduct of the work until the system has been fixed. The simple principle of depart- mentizing is, a department should handle the same class of operations in a factory, or the same general lines of goods in a store. Machine work should not be mixed up with wood work in a factory, nor shoes with white goods in a store. In the administration department the sales making and the accounting branches should be divided, the general executive departments should be individual- ized. For instance, take a machine shop : This is divided into foundry, tool, paint, lathe, pattern, polishing, planer work and assembling departments. Each of these departments has its own expense covering direct labor, direct material, general indirect expense. The last is divided into departmental general indirect expense and then into an account which carries a per- centage of the entire indirect expense. What a Any factory cost system should do several things; System some of course, under certain circumstances, being much should niore important than others. Among the important ° things it should do are: First — Ascertain the cost per unit on each line of the factory product. Second — Record the amount of time spent on each operation, or each order. Third — Show location in plant and the condition of work on each unfinished unit. Fourth — Show the amount of productive and non- productive labor, and for what the non-productive labor is used. COST KEEPING SHORT CUTS Fifth — Show the amount of productive and non- Putting productive labor and materials, and give stage of develop- q^^^ ment by departments. System Sixth — Show total output, average monthly output, busy time and idle time on each unit of output, for day, week or month. Seventh — Show cost per hour of operating each class of machines and by departments. Eighth — Show relative overhead and direct labor cost per hour, or per unit, in each department. Ninth — Show whether each operation is increasing or decreasing in cost, and, in its final analysis, whether you are making goods at a profit or a loss. Finally, it should be understood from the start that Finally cost keeping is not a fad. Be convinced that it is a prime necessity to financial success. Business — almost any kind of a businesses but a guess without it. It requires study and judgment and steady application of correct prin- ciples. From the time material is bought until it is fashioned by the workingman into the finished product, the manufacturer is at an expense that never ceases. To . , ascertain accurately the proportion of cost a job unit of production should be charged with, is the function of cost accounting. The actual work done — the visible work — the grinding, cutting, punching, shaping, heating, polishing, etc., are too commonly figured as the only cost chargeable against the job. In fact, these items com- prehend about fifty per cent only of the true cost. Why this is so, and wherefrom these additional costs accumu- late against each particular unit of the production, cost accounting makes plain. SI CHAPTER III Some Systems of Paying Wages IABOR is time and time is money in factory economy. J Time is one of the most expensive things the average manufacturer pays for, because it involves a cost that, in most cases, is about equal to cost of material and overhead expenses combined. The proper cost system gives an absolute check on the time reports of workman and foreman and shows just how each man's time has been expended. To know where and how we may most efficiently apply the time of our employes for getting the best results is the great question of the day. No adequate answer to this question can be found elsewhere than in a complete and thorough cost system. A man is paid wages in order to produce certain results. These results are more or less well defined just in proportion as each man's work in a factory is defined. It is not likely that any wage system, or any factory is so well organized that there is an absolutely fixed arbi- trary standard for a man's activities, either in the quality of his work or the quantity he produces, yet wages are the standard by which men are judged in the world of labor, so that where high wages abound, good work is expected, and where low wages abound, a corresponding grade of work may be looked for. On the other hand, the cost record of a factory is the standard by which men are judged of their importance, their ability and their productiveness in the economy of that factory. The amount of their wages is dependent upon that record. It is therefore important that the man who works for wages produce all that the manufacturer can reason- ably expect of him, or that the manufacturer has been 32 COST KEEPING SHORT CUTS able to get from anybody else doing that same class of Some work. Hence the necessity for a manufacturer to know ^J^ ^^^ from actual records the worth of a man, not only for his Paying own protection, but also that he may pay the man all ^^^^ that the work is worth. Abstractly speaking, every conscientious man who thinks, should endeavor to produce the utmost for the money he receives, on the general principle that "He profits most who serves best," but unfortunately too few people regard the matter in this light. Therefore, we must take men as we find them, and in order to get the greatest efficiency, we have adopted various systems that place a premium on a man doing what he should do, and when we devise a wage system that will make a man want to produce the utmost for his paj^ we will have the wage system that will immediately supplant all others. There are numerous plans by which the wages paid to a workman can be determined. They are: 1 — Day Rate Plan. 5 — Bonus Plan. 2— Piece Work Plan. 6— Profit Sharing Plan. 3 — Differential Plan. 7 — Stock Distribution Plan. 4 — Premium Plan. The value of any wage system over another necessarily depends upon the conditions of the plant in question, and the plan must be adopted after a careful study of these conditions and the nature of the product. The different systems will be briefly explained in the following chapters. 33 CHAPTER IV Day Rate Wage Plan THE "day rate" or the "day's work" plan is one of the most generally used — first, because it is the simplest, and second, because it makes a less com- plicated payroll. It applies both to high class labor and to men engaged in more or less routine work and those employed in non- productive labor. It consists in paying a workman a certain rate per day or per hour; the amount of pay being determined by the market rate for the class of work and afterwards by the special skill of the workman. There are objections to this plan, especially where no adequate cost system is used, because there is no incentive to make a workman do his best or to produce to his full capacity. He gets so much a day whether he makes 100 parts or whether he makes 75. If he happens to be faster than his fellow workmen and discovers that he is doing more work than they he asks for a raise, and if he doesn't get it, slows down to the same pace. In other words, the day rate gives the men an oppor- tunity to take it easy, their only incentive being a prod from the foreman when he sees that they are "soldiering." It is all in favor of the workman. The only way in which a day rate plan can be equalized between employer and employe is by a cost system. Of course the total labor cost can be predetermined on account of the fixed rate paid to the men, but the relation between the rate and the amount of work each man is turning out cannot be exactly known unless some kind of record is kept. There are some classes of labor where the amount of work is not measurable by quantities, such as engineers, $i COST KEEPING SHORT CUTS firemen, inspectors, truckmen, watchmen, clerks, etc. Day These necessarily must be paid so much per day, but the pj^^j men who turn out the goods can be measured by the amount of work they do. Suppose that each man turns in a labor distribution ticket every night, showing how much work he has done during the day, or turns in a separate ticket when he has finished a job. . The information thus gathered, if properly used, will show the relative value of workmen. This is especially true where a certain rate per hour is paid and there is prospect for an increase of pay with an increased amount of work. Under these conditions the labor distribution tickets which are turned into the cost department, and which show the time consumed on cer- tain jobs by different workmen, contain data that indi- cates those who deserve a "raise." Without an increase of pay in view, the tickets would, in all probability, show a dead level of production on the part of all the workmen and be of no utility except to indicate that some man is wasting an unusual amount of time. The necessity for a well-ordered system whereby a factory management can know the relative value of work- men arises from the fact that factory employes, as a general rule, are given to frittering away as much time as possible. Time is money to the manufacturer always; to the Time is employe only when it is made to appear so. The men are paid, say, for ten hours a day. If they waste half an hour or an hour of it the employer pays just the same amount as if the full ten hours had been productive. This increases the cost of his goods. The table on the following page shows how much money a daily waste of five minutes amounts to in a year and should be studied carefully by every employer who is anxious to cut down the cost of production. S5 COS T KEEP I N G S H R T C U T S Rate Loss Day per by 1 By 10 Man Men By 20 By 25 By .'J5 By 40 By 50 By 100 Men Rate Day Men Men Men Men . Men Plan $1.00 $2.90 $29.00 $ 58.00 $ 72.50 $101.50 $116.00 $145.00 $290.00 1.25 3:62 36.20 72.40 90.50 126.70 144.80 181.00 362.00 1.50 4.35 43.50 87.00 108.75 152.25 174.00 217.50 435.00 2.00 5.80 58.00 116.00 145.00 203.00 232.00 290.00 580.00 2.50 ,7.25 72.50 ■ 145.00 181.25 253.75 290.00 362.50 725.00 3.00 8.69 86.90 173.80 217.25 304.15 347.60 434.50 869.00 Labor distribution tickets are made out by the fore- man or his clerk, and on them are recorded the time of beginning and finishing a job. They provide a means of keeping "tab" on the men and finding the exact labor cost. This is especially true of a factory that is turning out a uniform commodity. The very fact that each workman has a ticket and knows that the work he is doing will be timed by it in the cost department, makes him put forth more effort. If he wastes time and escapes the surveillance of his foreman to-day, his ticket will indicate the extra time to complete a job and show the discrepancy between to-day's work and the work on the same job to-morrow or next day. Besides, there are other workmen engaged in the same work with whose expertness he can be compared. The The adding machine plays a most important part in ,^^^i^g the addition of time and amounts on the labor distribu- tion tickets, not only for getting labor cost of jobs and checking the payroll, which will vary with absentees, latesj^new men, etc., but for compiling data from which information can be obtained regarding any man's record. A daily or weekly charge to accounts or to depart- ments, and the earnings of workmen, cost of jobs, etc., can be quickly determined with an adding machine. In fact the machine makes possible the compilation of valuable statistics, within a reasonable length of time, such as would be practically impossible without it. And a still greater advantage of exact statistical infor- mation is that it makes the day rate wage plan more equitable to the employer. It shows him whether or not his men are doing their work faithfully. 36 CHAPTER V Piece Work Wage Plan "b' THE piece work wage plan is based on the principle of paying the employe for the exact amount of work he is capable of doing. He gets so much per piece or so much per hundred pieces, and therefore has a chance theoretically, and to a considerable extent in practice, to earn according to his efforts and abilities. The tendency of workmen to lag when paid by the day or hour is so universally manifest in all kinds of business that the manufacturer must realize that he is paying too much for his labor when he uses this plan. In order to remedy this defect in the day rate plan, the piece rate was instituted. No sooner did it go into effect, however, than the rate of production in some fac- tories jumped by leaps and bounds and men who were formerly employed at $2.50 and $3.00 per day began to earn wages of $4.00 and $5.00. This fact immediately showed the manufacturer that he had been imposed upon by his workmen while oper- ating under the day rate plan. In order to adjust prop- erly the wages to the class of work being done he made a cut in the rate per piece. The inevitable cut shows the workmen that if they produce too much they will only set for themselves a high speed standard and still be unable to earn more than a certain maximum amount. So human nature again creeps in and the men begin to work just fast enough to get the highest wage without going beyond the limit that will mean a cut. In this way the full advantage of a piece work rate is considerably modified. This system also makes it necessary to inspect care- fully all parts because of the increased rapidity with which COST KEEPING SHORT C UTS Piece they are made and the corresponding liabihty to faulty Plan workmanship. Each workman is held responsible for the parts rejected and in this way compelled to exercise care in their manufacture. It requires tact and expert judgment to change from a day rate to a piece rate plan, and care must be taken that no intimation of the new plan gets abroad. For days, the rate of production of the men engaged in the different classes of work must be quietly observed in order to arrive at a fair price per piece. It has been the experience of many manufacturers that when a price was thus arrived at, it was found to be far too high, as proven by the enormous increase of pro- duction following immediately after the piece rate went into effect. Because of this, considerable friction arises between the men and the manager before the piece rate is finally adjusted to the point where equity is guaranteed to both. Another failing of the piece rate plan is this : If each man is allowed to earn according to his utmost power of production, there will always be found some, who by vir- tue of unusual skill, will earn a very large amount. This makes the manufacturer feel that he is paying too much for his labor and at the same time arouses the antagonism of other workmen who can't earn an equally large amount. System An adequate cost system is necessary to the most ecessary g£pg(.|-iyg handling of piece rate workers' time and earn- ings. Labor distribution tickets are used the same as with the day rate plan, the time required for making a certain number of parts being recorded. This informa- tion gives the cost keeper an opportunity to find out whether every workman is doing his best. Some men, who could earn $3.00 per day by applying themselves, are content to earn $1.75 or $2.00 and ease down on their work accordingly. This is a detriment to the general efficiency of the factory and must be discouraged. C OST KEEPING SHORT CUTS The cost keeper finds that the adding machine is Piece indispensable for getting the total time and earnings of pi^n piece workers on different jobs without an undue expen- diture of clerical time and labor. After getting the total labor cost of a job or operation, the machine is used for making extensions to determine the burden or indirect expense on that job or operation and in this respect saves time and money. In addition to the time saved there is an assurance of accuracy in the , listed proof of the work. Many other additions and multiplications are neces- sary to get the total department cost, the total cost by accounts and to extend the price of certain parts requi- sitioned from the finished stock room. And the Burroughs has the capacity both to add and list and to multiply, printing every item so that proof can be easily obtained. Then the totals can be recapitulated by accounts and the bookkeeper furnished with neatly and accurately tabulated sheets from which to make his postings to the Cost Ledgers. CHAPTER VI Differential Rate Wage Plan THE third plan is known as the differential rate plan and has met with the approval of a great many manufacturers because of the equitable adjustment of wages to production. This plan consists of paying the workman an increased rate per piece according to the increased number of pieces that he produces above a certain standard, and likewise of decreasing the rate per piece in case the number he produces falls below the standard, which has previously been fixed by ascertaining the average earning capacity of all the workmen. The easiest way to explain this plan is by an illustra- tion. Suppose the manufacturer has found out by experi- ence that eight of a certain kind of parts can be made by the average workman in a day of ten hours and that for each part 27 cents can be paid. The manufacturer tells the workmen who are engaged on this class of work that if they will make ten parts a day and do the work perfectly, they will receive 29 cents a piece for them, and if, by their industry and ability they can make eleven parts a day, they will receive 30 cents a piece for the work. Likewise he tells them that in case they fail to make as many as eight parts, the price per part will be lowered so that if only seven parts are turned out, they will get 25 cents a piece for them. It will be seen from this that each workman is given an opportunity to earn extra money. Looking at it from the manufacturer's standpoint the man who can turn out the most work even at the increased rate per part is more economical to him and reduces the final cost of each part more than the man who turns out COST KEEPING SHORT CUTS only a few pieces and gets the smaller rate per part. Differen- This is true because the burden or overhead cost for p^^^ manufacturing a few more parts a day is not as great in proportion to the number of parts manufactured as when fewer parts are made each day and the work is spread out over several days. Thus the amount of burden to be added to the eleven parts that a skilled workman turns out in one day is not as great as the amount to be added to the same number of parts when made by a less rapid workman who turns out only seven parts in one day and leaves four parts to be manufactured the second day. This reduction of burden per piece very materially reduces the final cost. The following table shows how^ the man who makes the fewest parts per day actually costs the company more money than does the man who make more parts and gets more for each part: No. of Price per Labor Cost of Overhead Total Cost per Articles Article • Cost Material Cost Cost Article 7 $0.25 $1.75 $0.70 $1.50 $3.95 56^ 8 .27 2.16 .80 1.50 4.46 55f 10 .29 2.90 1.00 1.60 5.50 55 11 .30 3.30 1.10 1.64 6.04 54ff One of the best features of this plan is that the poor Poor Pay workman gets poor pay and the good workman gets good ^^^ °°^ pay, thus differentiating the grades of employes much more effectively than when the straight piece work plan is used. The poor workman cannot reasonably * 'kick*' on his lower pay when he is shown that his inefficiency is actually making the manufactured article cost more per piece than in the case of the man who is getting higher pay and doing more work. It is the opinion of cost experts that for a factory or plant where indirect expenses are very large in compari- son to the cost of labor, the differential rate plan is almost sure to pay, but where this indirect cost is comparatively small, the advantage is more doubtful. 41 COST KEEPING SHORT CUTS Differen- When the differential rate plan is in operation it is pj^jj necessary to maintain a very rigid inspection department so that faulty workmanship due to the increased speed on the part of some workmen may not slip through. A few advantages of the differential plan may be summed up as follows: First — The wages are raised and the cost is lowered, thus bringing about a better feeling between employer and employe. Second — The work is of a uniform quality, owing to the system of inspection. Third — It obtains a maximum production per unit of time because of the fact that the workman is laboring for higher wages and at the same time is prevented from turn- ing out inferior work by the inspection of the parts that he makes. Fourth — It discourages and automatically relieves the factory of incompetent workmen since they can't blame anyone but themselves for their small wages. Labor distribution tickets again enter into the proper recording of work done by this system. In order to have the required data at hand for figuring earnings, it is absolutely necessary to use tickets on which are given the time put on a job, the number of pieces made, etc. The strong point in favor of an adding machine to handle work of this kind is that it can be used for making the numerous extensions of rates per piece and the number of pieces turned out by each workman. Multipli- Thus, in the example in Figure 1, there are three l^achine different extensions to make in order to arrive at the earnings of the men who turn out 132, 144 and 165 pieces respectively. While these problems are simple, there are many where the number of pieces run into the thousands at a rate of so many cents or a rate of so many cents and mills per hundred. 42 COST KEEPING SHORT CUTS This complicates the extensions and makes the adding Differen- machine especially useful. To those who are unfamiliar with the Adding Machine it might seem like a contradiction to cite instances where it is used for multiplying, but as a matter of experience, it is capable of performing multiplication about three times as fast as it can be done mentally. It can be used with equal facility in handling either whole numbers or whole numbers combined with fractions. I The value of a listing machine in this case is obvious, since it records the operation and thus gives proof of the work. tial Rate Plan .Zls — er/cs — .r/cs — 1 3 2 ^.2 4 1 4 4 ^.2 6 1 6 5 ■^S 5 ■5J- 1.3 2 1.4 4 •i'C- 1.6 5 1.3 2 1.4 4 1.6 5 1.3 2 1.4 4 1.6 5 1.3 2 1.4 4 1.6 5 13.2 1.4 4 1.6 5 13.2 1.4 4 16.5 #3 1.6 8-;:- 14.4 16.5 14.4 16.5 / 3 7.4 4^'^- ^5 7.7 5«- Pig. 1 Facsimile reproduction of three multiplications made with a Burroughs Adding Machine. 48 CHAPTER VII Premium Wage Plan "&' THE next wage plan, which is conceded to be one of the most successful in actual operation, is known as the Premium Plan. This is somewhat similar to the differential plan, the difference being that instead of increasing the rate per piece, the increment of earning is based upon time saved. That is, a certain premium is given for the time saved in completing a job for \yhich an average time has been pre- determined. In addition, a minimum wage is incorporated in this plan, which assures the workman of a certain amount of pay in case he fails to s,ave time on account of accidents, etc. This has placed the whole system in a more favorable light with the employes, thus reducing the general opposition to its installation. It can best be illustrated by example : Suppose a man is working ten hours a day at the rate of 26 cents an hour. At this rate, he will earn $2.60 a day. The manufacturer tells him that if he will cut down the time on a job from ten hours to nine hours he will pay him 26 cents an hour for those nine hours, which is $2.34, and will divide with him the wage that he would have been paid for work done in the remaining hour. If this division is on a half-and-half basis, the workman will get $2.34, plus 13 cents, or $2.47. Then he has another hour to work during which time he can earn more. If he saves two hours, he will receive 26 cents an hour for the eight hours, which will amount to $2.08, and get one-half of the two remaining hours' wages, which, on the half-and-half basis, amounts to 26 cents. In this case he has two hours more during that day in which to earn an additional wage; COS T KEEPING S H O R T CUTS and even if he earns no additional premium during these Premium two hours, he will at least get the regular rate of 26 cents pj^^^ per hour, or 52 cents in all. So for the day of 10 hours work under these conditions, he will earn $2.08 pay for eight hours, plus 26 cents bonus for saving two hours, plus 52 cents additional wage earned in the two hours, or $2.86 in all. Thus the workman's superior skill and speed have -earned him more money while the employer has obtained a greater number of parts at a lower final cost per part. This plan has also the advantage of inspiring the men with an ambition to exert themselves to their full capacity and at the same time it automatically remunerates them according to their ability. In the piece work plan the employe gets the benefit, the employer saving only in the burden or indirect expense. Under the Premium Plan, the profit is divided more evenly and both the employer and employe enjoy its benefits. The table, *Figure 2, gives an idea of the relative efficiency as to saving in labor cost between the different systems in vogue at the present day. Systems 11 Rate of Pay is h 3« ]a Overhead Cost Total Cost Cost per Article TeductioT in Cost per 100 Articles Day Rate Piecework... Differential... Premium Bonus .8 8 10 8 10 8 10 8 10 .30 per hour .'. . . .32 per piece. . . . .32 per piece .... .32 per piece .... .34 per piece .... .28 per hour .... .14 additional for each hour saved. .28 per hour .... .32 per hour .... $3.00 2.56 3.20 2.56 3.40 2.80 3.15 2.80 3.20 .'eV ' .84 .35" .40' $1.00 1.00 1.25 1.00 1.25 1.00 1.25 1.00 1.25 $1.50 1.50 1.60 1.50 1.60 1.50 1.60 1.50 1.60 $5.50 5.06 6.05 5.06 6.25 5.30 6.00 5.30 6.05 .6875 .6325 .6050 .6325 .6250 .6625 .6000 .6625 .6050 $2;75" ".75 6;25 '5.75 Fig. 2 Comparative Costs of Similar Articles as resulting from the different Wage Plans, showing effect upon Labor Cost, Material Cost, Overhead Cost and Total Cost. ♦"Nicholson on Factory Organization and Costs," 45 COST KEEPING SHORT CUTS Premium It will be seen that the premium plan has a great deal pff^ in its favor as regards the reduction in the cost price per article. This system also necessitates an exact set of records in order that no workman will be deprived of his just earnings and also that no "soldier" will share in the premiums which he has not earned. The labor distribution tickets necessary for this information can be handled with the greatest possible accuracy and speed on an adding machine. Likewise the many extensions that must be made where workmen are reducing the amount of time on a job and thereby earning wages based on this reduction, can be figured more quickly and accurately with an adding machine than by hand and mind. CHAPTER VIII Bonus Wage Plan THE bonus plan is based on the principle of increasing the pay in a certain ratio as the time for completing a job is decreased, the rate depending on the per cent of time saved. By referring to the table on page 45, it will be seen that where eight articles are made in ten hours, on the Bonus Plan, the rate per hour is 28 cents, and where ten articles are made the rate per hour is 32 cents. This plan is practically the same as the Premium Plan and in fact some cost accountants make no distinction between them. The same circumspection must be used in introducing this plan to the factory as with the Premium or Piece Work Plans, care being taken to fix as accurately as pos- sible the rate of increase in wages resulting from time saved on a job. One fact in connection with the installation of the Premium or Bonus Systems should be borne in mind. Where there is only a little machine work, the rate should be made fairly low, since the rate per cent of increase will be large. But if the work involves machine work it will require a greater application of skill and effort to effect a large increase, and therefore a Premium rate with a fairly high premium can be used. In other words the increase where machine work is prevalent has been found to be comparatively small in contrast to manual work. Other points of excellence in the Premium and Bonus Plans may be summed up thus: In using these plans the employe's reward is immediate as compared with the results of other plans, such as profit sharing. The fact 47 COST KEEPING SHORT CUTS Bonus that quick rewards are obtained appeals to the average workman. The workman does not have to pay a penalty for not "speeding up," except the loss of his "bonus" or being discharged when he has proven unfit for the work. The minimum wage makes it easier to install the Premium and Bonus Systems because it does away with the intense antagonism that is generally shown when a new plan is proposed. It is an excellent incentive for the men to exert them- selves to their full capacity when they realize that they will be rewarded according to the amount of work they turn out. The management does not suffer as much loss in case of an over-estimation in the rate of Premium or Bonus, and it provides a more equitable division of profits between employer and employe. 48 CHAPTER IX Profit Sharing and Stock Distribution Plans THERE are two other plans that are calculated to bring increased production and better relations between employer and employe. These are the profit sharing and stock distribution plans. There is not as much definite information about them as in the case of other plans because they have only been tested out in comparatively few cases. However, it will be well to understand the principles upon which they are based. The Profit Sharing Plan embodies the feature of the workmen sharing in the profits of the factory but it has the defect of not discriminating between the good and poor workmen, both sharing the profits alike. Then again, the increased profits of a plant may result from the selling force or from some source entirely outside the activities of the workmen, in which case they have no just claim to a share in the profits. And, if through some mismanagement, there are losses instead of profits, they object to standing their share of the losses. Another disadvantage of the plan is that the rewards are too far in the future to be much of an incentive to the average man to put forth his best efforts. Ordinarily, the profits are figured but once a year and this means that each workman must wait a year before he can know how much his share amounts to. A number of authorities hold that there is only one practical method of handling the profit sharing plan and that is to set a price on every article manufactured. The factory is charged only with such expenditures as relate to its production and a predetermined burden for super- vision. The factory is then credited for all articles at this scheduled price whether they are sold or not. 49 COST KEEPING SHORT CUTS Profit When the inventory is taken, the factory account in ^^"^^ the ledger will show the factory profit and the difference between the actual cost and schedule price. Whatever saving there may be is distributed among the foremen of the different departments and in some instances among the employes, according to the rate of pay for each man. Penalties are enforced for faulty workmanship, poor attendance, and so forth, according to existing conditions. The stock distribution plan will probably be more successful in small shops where the proprietor and work- men are brought into closer touch with one another. The same defects exist in this plan when applied to the larger shops, as in the case of the profit sharing plan. In reviewing the different wage systems, it must be borne in mind that the success of any one of them depends as much upon the manager's tact and sympathy and understanding of the workmen's attitude as upon the plan. The Any plan in itself is a cold-blooded proposition, and in fs^CoW order to warm it up, it must be imbued with a good deal of human interest. In going about the installation of any wage system, the manager must study carefully the class of men whom he has employed and look at the whole situation as much as possible from their standpoint. By doing so he will provide himself with a guide that will lead to the plan best suited to his particular case and the one calculated to produce harmonious relations between himself and his employes. The systems we have just outlined have been in actual operation. Some of them have proven more efficient than others but the object of all of them is to increase produc- tion and bring about an equitable adjustment between the amount of pay given out and the amount of labor received. CHAPTER X Judging the Costkeeping Requirements of a Factory GREAT care should be taken in the introduction of a Cost System in a factory. In one case a firm manufacturing a specialty, and employing about 1200 men in the factory, introduced a system that ultimately required nearly 250 printed forms. When these were rearranged and a proper system was installed, all but 23 of the forms were discarded. The saving, of course, was tremendous. This condition of over systematizing generally comes as a result of '^letting the system work out itself," instead of having some specialist come in and work out a complete plan of costkeeping, coherent, logical, thorough, with definite objects in view. Where a form is introduced to get a certain set of facts or figures — then another form to get something else — then another and so on, as is done in so many places, the cost system is a menace, breeding confusion and loss of time when it should nourish order and efficiency. Remember, however, that mere forms do not make a system; nor do an adding machine, a typewriter, or a few clerks make a system. They are simply the physical expression of a system. No form in this book should be put in operation by a manufacturer or business house, until it has been care- fully considered, both in its relation to the specific thing that the form is to record, and in its relation to every other form in the system. It is well to keep in view one thing. Put on the form just as much data as you can. Don't, however, use any one ,form for entirely different classes of data. COST KEEPING SHORT CUTS Judging A cost system to be complete must embrace every item ^ments ^^ expense connected with a commodity from the time the raw material is received in the factory, until the finished product is sent to the shipping room. In order to provide a set of records that will give this information, cost has been divided into three parts: 1. Cost of Material. ^. Cost of Labor. 3. Indirect Expense or Burden. Cost of material and cost of labor are very closely related, these two combined giving the prime cost or flat cost of any article. The indirect expense, while a most vital factor, is in a way separate and distinct. However, it is necessary to know this indirect expense and to distribute it over all the manufactured articles in order that a selling price may be fixed that will insure a profit. It is a well-known fact that all the raw material coming into the factory does not go into the manufacture of the goods. Some of it is used, for instance, to make tools with which the articles are made. Division This leads up to the division of material cost into two of Costs 1 classes : First — Direct material cost. Second — Indirect material cost. The direct material cost is the cost of all material that goes into the product. The indirect material cost is that which embraces the cost of factory supplies, tools and so forth, and cannot be charged as a component of the product. It is, however, included in the burden or an indirect expense. Labor cost is also divided into two classes : First — Direct Labor. Second — Indirect labor. The direct labor cost is that which constitutes the pay of the men who actually work on the product. 5? COST KEEPING SHORT CUTS Indirect labor cost embraces all labor about the fac- tory that does not actually produce goods. All foremen, repairmen, handlers of material, errand boys and the like, come under this classification, which is also included in burden. Factory burden is composed of indirect cost of labor, indirect cost of material and indirect expense. Indirect expense includes such items as light, heat, power, maintenance, insurance, taxes, depreciation and similar expenses which are necessary to the manufacture of the goods. t,^ Burden should be figured with the greatest possible accuracy and properly distributed over each of the articles manufactured, according to the amount of direct labor or of time and material expended in its production. Judging Require- ments 30% PROEIT 100% 1 SELLING S PRICE • SELLING EXP 70% rOTAL COST 20% INDIRECEEXR EMTORYCOST 20% LABOR 3S% PRIME COST MATER/flL Fig. 3 Diagram Illustrating the Building of Costs. The diagram in Figure 3, illustrates the building up The Cost of the cost of an article to the price at which it can be sold ^^^ram with a profit. It will be noted that material and labor, represented by 15 and 20 per cent of cost respectively, make up the prime or flat cost, which is 35 per cent. Then this prime or flat cost plus the indirect expense of 20 per COST KEEPING SHORT CUTS Judging cent gives the final factory cost, which is 55 per cent. The ^ments ^^^^ factory cost plus the selling and administrative expense of 15 per cent gives the total cost of 70 per cent, and the total cost of 70 per cent plus the profit of 30 per cent gives the selling price of 100 per cent. A careful study of this diagram will explain clearly the various elements that go to make up the selling price of a commodity. Remember, that the cost of goods when placed in the shipping room, does not include the expense necessary to market the product. Manufacturing costs and selhng costs are two separate and distinct propositions and must not be confused with one another. By fixing this fact firmly in mind at the outset much trouble will be avoided. M CHAPTER XI Handling Material; Perpetual Inventory Suggestions THE cost of material is comparatively easy to obtain. The price paid for it depends on the market. To this is added all charges in connection with hand- ling it. Therefore when the amount required to make a certain number of articles is definitely known, it can be charged up at the same rate at which it was purchased. We have already pointed out that raw material is divided into direct and indirect. The direct, in some cases, is divided into accessory material and finished material. Thus, a plant manufacturing a commodity made up of a large number of stamped parts would con- sider cold rolled steel or metal sheets as part of its raw material, while the plant that manufactures cold rolled steel would consider pig iron as raw material, and the furnace in turn that manufactures pig iron would consider iron ore as raw material. Therefore, the raw material in any plant is the material as it is received before any change has been made in it. Even finished parts, if received, are classed with the raw material which goes into the make-up of a commodity. Thus a furniture manufacturer would class with his raw material such items as handles, knobs, casters, etc. Accessory material is that which does not go into the product itself but is used in its manufacture. In this class fall such items as tool steel out of which certain tools are made, repair material, etc. The market may fluctuate, it is true, but still the mean or average price of material is easy to determine. Some factories contract for a year's supply of raw material at a fixed rate and in this way the market 56 COST KEEPING SHORT CUTS Handling fluctuations have no effect upon the cost, except at Material i • . i long intervals. The operations necessary in handling raw material are its purchase, storage and subsequent distribution through the factory. The cost authorities seem united in favor of the perpetual inventory as a system for handling material. Some of the most successful say: Perpetual inventories are undoubtedly the best, because by them we are able to keep an exact record of stock on hand; we know the minute we arrive at a point where it is advisable to place orders for new stock so that no part of the supply may become exhausted before a new supply is in hand. Perpetual inventories require perpetual attention. The difficulties in handling them have been largely due to lack of attention upon the part of employes. There are some very simple rules that should be noted. Constant First — No material should be permitted to leave the raw stock room without a requisition, signed on behalf of the department where it is to be used. Second — All requisitions must be checked up each night before closing, and for that purpose an hour should be established in the afternoon, after which all requisitions of the day should be filled the first thing in the morning. Third — Low water marks should be established by which the Supply Clerk can be protected, and the Pur- chasing Agent can be warned of the possible exhaustion of the supply. Fourth — A large low water mark should be placed on each kind of raw material so that the Purchasing Agent may have sufficient time to get new estimates before ordering a new stock of material. Fifth — Perpetual inventory records should be treated as cash is treated. Cash is verified often, or should be, so inventory should have regular periods for verification. 56 Attention COST KEEPING SHORT CUTS The perpetual inventory of raw stock or raw and semi- Handling finished stock constitutes only a part of a complete factory stock inventory, because there is always a great deal of stock in process of construction. Since every hour of labor expended on raw or semi- finished stock enhances its value, it is obvious that all stock in process of manufacture will be worth considerably more than the raw or semi-finished stock. Furthermore, the stock in process will not be indicated on the perpetual inventory record since it is charged off the card when requisitioned by the factory foreman. Therefore, it is necessary to rely on the cost records to get an accurate value of stock in process. This is easily accomplished by noting the various departments through which the stock or material has passed up to the time of the inventory and then figuring the labor cost and burden expended and adding to this the value of the material as indicated on the requisitions, carbon copies of which are always sent to the cost department. Thus by co-ordinating the perpetual stock records Raw and with the cost department records the value of raw and gtock semi-finished stock and of stock in process can be obtained with a great degree of accuracy. The individual stock card for each class of material applies equally well to raw stock and semi-finished stock. Thus, in a factory that makes parts from raw material and then assembles machines from those parts into com- plete machines or other product, two sets of perpetual inventory cards are kept, one for raw material and one for the finished parts or semi-finished material. Both sets of records are kept in the way described above. See Figures 67 and 68 for Finished Stock Records. In the proper recording of all material, one of the best forms of record is a perpetual stock card. This consists of a suitable card for each class of raw material and on it COST KEEPING SHORT CUTS II i^^:^ t^^^l ^ ^^ y^ ^ ^ ;^ ^^1 ^ i? ^^ ^ ^ ^ ^ J? ^^ 1 ?« 1 fil N rv ^ :'>^i. > "Hi N V . ^ N ^ S t>o ^ ^ '^ > > tyj fto ^ >^ ") ^ - ^ 6c^ I «S N. '^ «» Q - S» V) M t^ ^ (>« "i 1^ T) ^^ ^ "^ *■ ^ V, ^ i CS K > > ■v V »S5 VS >* N w> & i<\ -4- >^ c^ tN ^ c^ ^ SS S «^ V > . Q Os ^ ■. \ N. Ci V. N NS SS ^ •v ^ N. ts (S- ^ • V V N . ^^ ^ ^ «> sj «vi ^^ cv, \ \ \ \ c^ ^ CN N ^J ~s \ -N. ^ s SI K o N ■J 2;.: J; ^ 5? S. ■* ^ 3 s ^ 5 > ^ ^ ^ 1 "^> ■ ^ t- N« •^ N* ^ M «0 ^ O ^ o 5X4 I «>o »* > n SO ^ «!^ ^ ^ Q> "' ". ^ ' ^ • -' ' > « * • • * ' ' ' * ' • ^ ^^ < 3 V) >> (n K cn vo > <>>., ;: « « rj so IS) x^ V c NS N ^ CO ?^ «< Iv v^ O u q: < I -1 R > Ul m X 1 > ^ . CV) CO CO 00 ■>! M V. ^ 5 ? i 5 ■» 1^ Is 5 N (4 > S > S S 5 i S »0 0* ^ ? ; j^ Q « V V "s "^ : N •s CO v« i ^ ■■ * > i| C • <>• S s X i 1- z 1 s 1 ? El '1 5 If COST KEEPING SHORT CUTS is recorded the amount of material and the date when it Handling is received. The distribution of the material is made on ^*^^*^ receipt of requisition blanks, which give the amounts taken from the stock room and show the job to which the material is to be charged. These amounts are deducted from the bal- ances on their respective stock record cards. This gives the factory a per- petual inventory of all the different kinds of raw material remaining in the stock room. The use of an adding machine not only expedites the work, but assures its accuracy. In Figure 4 is shown the stock record card used in a factory for recording each kind of stock. It is checked up with the adding machine as follows : When a suflScient number of requi- sitions have been given to fill the col- umn of "amounts issued," the stock- - keeper takes the adding machine and adds up the different amounts that have been received together with the original balance. In the illustration on this page the total of amounts re- ceived and the original balance as secured with the adding machine is 35,3733^ pounds, the whole numbers ' and fractions being added at the same time. Then he adds the amounts issued, securing a total of 15,7393^ pounds, and deducts this total from the total amounts received. If the remainder corresponds to his last bal- ance (19,633%), he knows that the '1^ 1 3 5.8 7% 1 9 .7 4 • 1 1 5 .8 4 6 5.0 9 1 7.1 9 3 5 3.7 3% ;• 2 4.0 1.3 2.6 3 .2 0" 1 3.4 1 3.0 1 .1 .3 1 0.2 b% 1 8.5 1 4.6 7 1 2 .2 3 • .4 1 1.3 .1 4.2 6 2.8 2 7.7 4 .1 .1 1 5 7.3 9% - S0 COST KEEPING SHORT CUTS Handling column of balances has been properly extended and can, a eria ^j^gj-gf^i-e, carry the last balance forward to the back of the card, knowing that his work is exactly right. On each requisition is recorded the kind of stock used, the price, the date it was withdrawn, the part into which it was made and any other information necessary to show exactly where and for what the raw material was used. By indicating on each requisition the job number or symbol, it is an easy matter to find the material cost of a job by adding up the requisitions bearing any particular job number. This is done very quickly and accurately with an adding machine. CHAPTER XII Handling Labor Costs THE cost of labor constitutes a large part of the total cost of any commodity. It also embraces the greatest amount of detail work because it is neces- sary, not only to ascertain the labor cost of every article, but to record various kinds of data relative to the efficiency of workmen, which is obtained from their labor distribution tickets. No matter how many different jobs or parts of jobs any one man may work on, he is paid for the work and his work contributes toward the building of a certain product. For this reason, it is necessary to keep an accurate record of all the time he devotes to the job and the amount he earns, the nature of this record of course depending upon the wage plan used at the factory. One of the greatest leaks in connection with labor cost is due to the workman's loss of time, either on account of getting started on new jobs slowly or on account of "soldiering." Therefore, in finding the cost of labor with a view to cutting it down as much as possible it is essential that such loss of time should show up on the records. All the necessary information for compiling this data is given on labor distribution tickets. On these are recorded the job number, the date, the workman's number, and the time required to complete a job together with the earnings. In handling these an adding machine is almost indis- pensable. Obtaining the total cost of each job is only one of the operations necessary in connection with labor tickets. They must be handled several times and a great deal of adding and listing is necessarily done! For instance, the total cost of a job must be obtained. Then the total cost of manufacturing by departments, the total amount to b^ 61 COST KEEPING SHORT CUTS -4^//. e^ ^/f £o ^3/.2o ■^/6.2/ ■4!i^Zo.oo ^e/s-o ^36.27 LfiBOR co>s7: T'/'/rre /frnounf: 8^4 ■5f 2.3 5 8 'A 2.0 1 12 3.7 9 6 1.5 16 '/a 4.7 7 1 6% 4.9 3 1 3.0 7 8 'A 2 2.3:5^* Fig. 5 . Diagram showing the increase in value of raw material as it passes through diflFerent departments and an example of adding machine work, where time and amounts are listed and the two totals obtained at one operation. «« COST KEEPING SHORT CUTS charged to the numerous manufacturing accounts and Handling checking up the pay roll, etc., and various other recapitu- Costs^ lations are necessary. It is in this connection that the adding machine comes in, not only as a time and labor saver but for proving the accuracy of the work. Items that are listed can easily be checked and verified. The accompanying diagram, Figure 5, gives a general idea of the detail work necessary to figure the cost of labor. The order for a job originates in the superintendent's office. One of his clerks makes out a requisition for the necessary material and sends it to the Raw Stock room. This notifies the Raw Stock keeper that a job has been started and that certain material will be used. It also gives him authority for honoring the foreman's requisition for the material. A production order describing the job is sent to the Starting foreman of the department where the first operation is to * ^ ^ be done. A cost card, also describing the job and showing the cost of the material, is sent to the Cost Department. The foreman in Department 1 then draws all the ma- - terial or part of it, as the case may be, and begins the job. The material in this case is worth $11.85. Depart- ment 1 does $2.35 worth of work on it, thereby increasing its value to $14.20 exclusive of Burden, which is ignored in this instance. The partly finished job is then sent to Department 2 and a time ticket for operation No. 1 showing $2.35 is sent to the Cost Department. Department 2 does $2.01 worth of work on the job and thereby increases the value of the material to $16.21. A time ticket showing the labor cost of $2.01 is sent to the Cost Department. The material passes on in this way to all the depart- ments, which send their time tickets to the Cost Depart- ment, Department No. 7 finishes the job, which is now worth $34.20, and turns it into the Finished Stock room. COST KEEPING SHORT CUTS Handling The Cost Department then sorts the tickets per- Costs taining to the job from the many others that have been sent in arid adds the hours and amounts on the Burroughs Cost Machine. This gives the labor cost for the job and the time required for its completion, the hours and amounts are added and listed at the same time with this machine. The two totals are printed by pressing the total button and pulling the handle. The It is obvious that the Cost Department will handle urroug s ^^j^^ ^^ accumulation of tickets in order to get the total labor cost of all jobs, and it is for this reason that the adding machine is so exceedingly useful. The foregoing gives a general idea of what is necessary for figuring cost of labor. The other recapitulations of labor tickets by departments for figuring Burden by accounts, for figuring labor distribution and so forth necessitate an equally large amount of adding. A more complete outline of the work is ^iven later in the descrip- tion of the cost system used by the Burroughs Adding Machine Company. n CHAPTER XIII Indirect Expense or Burden THE question of computing and distributing the Indi- rect Cost or Burden, which constitutes from twenty- five to two hundred and fifty per cent of the total cost of a finished product, according to the nature of the product and the conditions under which it is manufactured, is one of the most puzzhng questions involved in costs. At the outset it must be distinctly understood that there is a difference between Factory Burden and Selling Expense. The former has to do with the productive cost of the goods, the latter is separate and apart and is confined to putting the goods on the market. Factory cost, which includes Burden, is the value of the product when it is turned into the warehouse or shipping room. The selling expense cannot be included in this value because it would inflate it by just that much and give an erroneous asset on the balance sheet when inventory is taken. If the general manager of a manufacturing concern looks after the selling and his assistant looks after the manufacturing, the salary of the former goes into selling expense and the salary of the latter goes into burden as part of the factory cost. While he does not handle the product personally, his expense to the factory is necessary in supervising its manufacture and must be included as part of the cost. In short, the whole object of burden distribution is to allocate the charges which constitute it in such way that every department in the factory will bear its pro- portionate share. When this has been done, the cost keeper can tell to a very close figure the cost of every article, whether it has been handled by all departments or by only one or two of them. 65 COST KEEPING SHORT CUTS Indirect Burden includes every expense necessary to the ^^^^11 manufacture of an article outside of the direct labor cost Burden and cost of material. The numerous elements that make up Burden are given in the following: 1 — Indirect Labor. 2 — Repairs and Maintenance. 3 — Heating, Lighting, Rent, etc. 4 — Taxes. 5 — Insurance. 6 — Depreciation. Indirect Labor includes the labor of all the men and boys about the factory who do not work directly on the product. The superintendent's salary comes under this classification, likewise that of his assistants and foremen. Since it is usually necessary to have a building in which to make goods, the cost of supplying it with heat, light, power, etc., must go into Burden. If the building is rented, the rent is included in Burden. In like manner taxes, insurance and maintenance are included in Burden. Spread- In spreading Burden it is the best practice to divide Bifrden ^^^h element on a monthly basis so that any changes in- factory conditions tending to raise or lower it can be more quickly and easily adjusted. For example, if the heating of a factory costs $1200 a year, this element of Burden will be divided into twelve parts and spread over the factory departments on the basis of $100 per month. In subdividing the $100 for each department the total cubical contents of the factory is taken and each department receives a part of the Burden which is proportionate to its contents. Thus, if a factory has a total of 150,000 cubic feet and Department "A" has 30,000 cubic feet, this department will receive 30,000-150,000 of the $100, which is $20. Rent, taxes and insurance are distributed in the same general way. Indirect labor, depreciation and repairs and main- tenance, however, must be proportioned according to the COST KEEPING SHORT CUTS jimount of each that is incurred by a department, because Indirect it is a rare exception when every department of a factory ^^^^^'^^^ will require a part of Burden that is proportionate to Burden its size. After the Burden has been spread over the departments on the monthly basis it is distributed to the product according to one or more of the methods which are de- scribed on the following pages. These elements of Burden are comparatively easy to ascertain and can be spread over the various manu- facturing departments with sufficient accuracy for all practical purposes. But depreciation, which is also an element of Burden, is different, and requires more study, care and experience in its calculation than all the other elements put together. Depreciation applies both to buildings and equipment, Depre- the amount to be charged off depending on several con- ^^^^^^^. ditions. For instance, a frame building is comparatively short lived, while a building made of concrete and steel endures for many years. Therefore, a higher rate of depreciation must be charged off for a frame building than for a concrete steel building. On the other hand, the difference in these rates will not be so great as the difference in the structure would indicate. The frame building may be made of good timber and contain light, smooth-running machinery, while the concrete-steel build- ing may contain heavy, vibrating machinery. From this it will be seen that the nature of the building itself is not all that must be considered in fixing a rate of depreciation. Ordinarily the rates for factory buildings are from 2 per cent to 6 per cent, depending upon local conditions, the kind of structure and the nature of the work going on within the walls. In the case of machinery, the percentage covers a broader range running from ^}/2 per cent to 1^3^ per cent. 67 COST KEEPI N G SHORT CUTS Indirect This also depends upon the amount and kind of work the ^^^°Q^ machine is called upon to do and requires close observa- Burden tion and experience to determine. It has been observed that some machines depreciate rapidly the first year or two, and after that at a much slower rate, while others depreciate very slowly for the first few years and then seem to go to pieces at once. Again, some machines can be operated in a more or less dilapidated condition while others must always be in the best running order. There are other considerations in fixing depreciation aside from actual wear and tear. Maintenance or upkeep has a direct bearing upon depreciation in that an effectual maintenance from year to year, especially on certain kinds of machinery, affects in large measure the loss due to depreciation Reserve Thus, if a machine worth $1,000 depreciates at the Account ^^^^ ^j -^p p^j. ^^^^ p^j. yg^j. j^ ^jjj 1^^ ^^j.^j^ ^gQQ ^^ ^Yie end of the first year, and $100 will be set aside as a reserve to take care of the depreciation. If, however, $50 is spent in repairs to the machine which restores it to a condition practically as good as new, it is the general practice, except in very conservative concerns, to take this $50 from the $100 depreciation, reserve fund instead of charging this item of repairs to General Expense. Then the stability of the machinery as regards up-to- dateness must be considered, because in some manufac- turing businesses methods are improving so constantly and new style machinery is required so frequently that a much higher rate of depreciation must be used. There are cases where a machine, practically as good as new, must be scrapped on account of a more improved machine coming on the market. Obviously the rate of deprecia- tion in such cases is exceptionally high. The problem of depreciation is further complicated by the fact that a business itself may not be permanent, yet COST KEEPING SHORT CUTS it may" require some highly specialized machinery, in Indirect which event a decreasing demand will mean a decreasing ^j.^^*^"^^ value of the plant. Burden Summing up a few of the many points necessary to consider in fixing a rate of depreciation, we mention : First — The nature of goods manufactured, whether staple, specialty or novelty. Second — The kind of machinery used, heavy or light, fast or slow moving. Third — The kind of buildings used and the nature of the work within them. Fourth — The location of the plant regarding increase or decrease in value of property. Fifth — The nature of maintenance or upkeep. Sixth — The exposure of equipment to the elements. Seventh — The permanence in style of machinery and equipment. At first sight it would seem an almost hopeless under- Available taking to fix a rate of depreciation with anything like fnce^"" accuracy; but fortunately there are a great many concerns similar in the nature of their product, whose experience can be studied and compared. Then, the Fire Insurance Companies, who base their risks on depreciated values, have evolved from their large experience certain principles governing depreciation which can be relied on as giving very good results. In ;'egard to the prorating of depreciation over the various manufacturing departments in a factory it may be well to mention that the best practice consists in dividing the annual depreciation into twelve parts, so that a certain amount can be included in the factory burden each month. Thus, if a $60,000 plant has a depreciation of 10 per cent per year, instead of charging off $6000 at the end of the year, divide this amount by C O S T K E E PING S II O K T CUTS Indirect 12 and charge off $500 monthly as part of Factory xpense g^J.^gJJ gy treating depreciation in this way the true Burden production cost is secured every month. So much, in a general way, for the different elements that go to make up Burden. We will now briefly describe the different methods of distributing it over the product. These methods are very important in determining the best way to get at the cost of a product. 70 CHAPTER XIV Distribution of Burden BURDEN may be distributed in many different ways and the right way can be decided upon only after a study has been made of the conditions in the factory where the cost system is to be installed. The following methods of distributing burden are most commonly used: 1 — Direct Labor Cost Method. 2 — Direct Labor Hours Method; 'J — Direct Labor and Material Method. 4 — New Machine Rate Method. 5 — Fixed Machine Rate Method. C— New Pay Rate Method. A knowledge of the general principles on which these methods are based will give a better insight to the method best adapted to your business. It is important to use the most economical and effect- ive system, but there are one or two easy methods that work out to fallacious results and are therefore bad. Spreading a fixed blanket burden over all departments is essentially wrong in principle, because the article, for instance, going through two departments should not bear the same indirect expense as that which goes through six. It will generally be found that figuring an indirect expense on a percentage principle leads to false conclusions, and it is important not to have false conclusions in any system which attempts to be accurate. For instance, it was found to be a poor system that distributed, as part of a blanket burden, the salary of a General Manager who devoted his time to the selling end of the business. The result was an inflation of the value of finished stock because the indirect labor, which was 71 COST KEEPING SHORT CUTS Distribu- part of selling expense, had been included in the Cost of Burdeii Production, and distributed without reference to the department in which it was employed. In figuring burden the growth and alteration in the factory or the changes of processes should always be taken into consideration. For this reason it is advisable to prorate overhead charges monthly, so that the burden rates can be checked monthly, or at least every three months. Under average running conditions the rate will undoubtedly fluctuate, but the fluctuation can usually be attributed to some specific cause. In cases of improved methods of manufacture, the monthly or quarterly burden test will show the rate so much altered that a change will be necessary in order to distribute the correct amount of burden. Direct The Direct Labor Cost Method of figuring burden Cost ^^ ^^^ ^^ ^^^ most generally used on account of its Method simplicity. It is based on the principle that the product increases in value as labor is added to it and consequently the greater the amount of labor applied to its manu- facture, the greater will be the expense of supervision and management. The method of obtaining the ratio of indirect expense to labor cost is very simple, the process involving the divi- sion of the total amount of indirect expense by the total amount paid for labor during the same period of time. In other words, if the total indirect expense for one month is, say $7,000, and the total expense of labor for the same period is $9,200, the per cent of burden to be dis- tributed over the different articles will be 7,000^9,200 or 76 per cent. This extra charge is added to the articles made during the same period. In this way each article is charged with a certain part of the indirect expense of the entire plant, the amount varying according to the cost of labor put upon it. Thus if an article has $1.25 worth of labor put COST KEEPING SHORT CUTS into its manufacture and the material cost is 75 cents, Distribu- according to the above ratio, 76 per cent of $1.25, which is purfjen 95 cents, is added as burden, making the total cost $1.25 (labor), plus 75 cents (material), plus 95 cents (burden). The same principle is used in distributing the total burden of $7,000 over the various articles manufactured. The different departments of a factory may vary con- siderably in their process and equipment and if the nature of the article is such that it passes through many different operations, it is almost certain that the indirect expense in some of the departments will be greater than in others. Again, certain articles may be completely finished in one department while others pass through several depart- ments, and the indirect expense of the one department may be far greater than the average indirect expense of the other departments. In this case a general average of all the departments, including the one, will be lower than the expense of the one department and hence the true cost of the article manufactured in that department will not be obtained. Where departmental conditions are different and an The average rate is used, it is evident that the extra indirect R^te^^^ cost of manufacture in certain departments will be loaded on other departments where the expenses are not so heavy. While an average rate will give the cost of all the articles combined, under these conditions it cannot give accurately the cost of each individual article. This information is necessary in fixing selling price. Another phase in connection with this method is that the rate of paying all the workmen is not always pro- portional to the indirect expense, because a man working for $1.75 a day will oftentimes incur more indirect expense than the man who earns from $3.00 to $3.50 a day. An example of where this may occur is found where a cheap workman is operating an expensive machine and an 73 COST KEEPING SHORT CUTS Distribu- expensive workman is operating a cheap . machine. In Burden ^^^^ former case, the overhead charge will be too small and in the latter it will be too great. Again, if a manufacturer is fighting competition with certain articles, such a method of adding burden will not give the exact cost of those articles and hence it will be impossible to fix accurately their selling price with a view to making sure profits on their actual cost. Apparently such a method is erroneous, but the trouble lies in the fact that an average cannot be estimated on a number of different kinds of articles. If a system that is based on wages is to be operated successfully, the wages must represent the true conditions of production and must be in proportion to the actual cost. This condition is found only where labor is practically uniform as regards production, wages and amount of time consumed on each operation. Applying To apply this system successfully, the percentage of System burden must be calculated by departments. In this way a close approximation to the true cost of the article can be obtained. Under this method the total indirect cost of $7,000 for the whole plant is divided up into smaller amounts chargeable to each department and prorated to articles manufactured according to the amount of burden the department incurs in performing its respective oper- ations upon them. The diagram. Figure 6 makes clear the principle of apportioning burden departmentally. In this case it has been calculated that for each dollar's worth of productive labor in Departments 1, 2, 3, 4 and 5, a burden of 75 per cent, 67 per cent, 85 per cent, 91 per cent and 83 per cent, respectively, shall be added to the direct labor cost of the product in order to obtain the total factory cost. Thus a batch of raw material conies to Department 1 and is valued at $12.75. In Department 1, $3.20 worth COST K E E P I N G SHORT CUTS of labor is done upon it. This increases the vakie to Distribu- $15.95. Then 75 per cent of the labor cost, $3.20, which is tmdL $2.40, is added to the $15.95, giving a total cost of $18.35. The partly finished material is passed on to Depart- ment 2 where $2.10 worth of work is done on it. This amount together with 67 per cent of $2.10, which is $1.41, is added to the $18.35, increasing the value of the partly finished product to $21.86. /^M 6rOCK Wsmmm Va/ue ^/^^^ Lf\BOR COST METHOD ^-^-e ¥3Q.03 i/a/we ^/8.3S, ^&mam _ emom Va/ue^2Aa6 jl' 'BiS^' \ i/o/ue ^2S.^7 I ^t% ^0.2S Fig. 6 Graphic Illustration of the Labor Cost Method of Figuring Burden. In this way,- the material passes on through Depart- ments 3, 4 and 5 to completion and is turned into the Finished Stock Room, worth $38.03. The Labor Distribution Tickets made out by each department that performs an operation on this material, are sent to the Cost Department and give the labor cost for each of the operating departments. 75 COST KEEPING SHORT CUTS Distribu- When the job has been finished the amount of burden Burden ^^ ^^ charged to the product is calculated from data on these tickets. Then by adding to the amounts of labor and burden, the value of the material used, the total cost of the job is obtained. Inven- There is another very important point in this connec- Work in ^^^^ which should not be overlooked. It pertains to the Process inventory of work in process. Suppose, for example, a batch of partially finished goods has just come to Department 4 at the time the inventory is being taken, and it is desired to find its true value. On the supposition that individual time tickets have been used, all such tickets relating to this particular batch of semi-finished stock, will have been sent to the Cost Department and filed behind the cost card for this job. When the inventory clerk finds this semi-finished stock in Department 4 he takes note of the job or order number and reports to the Cost Department that job so and so is in Department 4 ready to go through the operation performed by that department. The cost clerk then turns to the cost card for that job, sorts the time tickets by departments, which in this case will be for Departments "1," "2" and '%" gets the total labor cost for each of these three departments, figures the burden for each and combining these two totals with the value of the material, obtains the true cost of the semi-finished stock as it lies in Department 4. The same method is used for getting the value of all work in process and can be done quickly and accurately when the cost records are kept in proper shape. The usefulness of the adding machine for getting the labor totals is obvious. Direct The Direct Labor Hours Method is similar to the Hours direct labor cost method, both of them being methods Method by which the burden is distributed on the basis of a 76 COST KEEPING SHORT CUTS general average rate. The difference between them is Distribu- that different bases are used for determining the burden. Burden This method is based on workmen's time instead of labor cost, the hour being taken as the unit of time. In other words, the indirect expenses of a plant are distributed according to the hours worked by the employes instead of the wages they receive. A rate per hour is obtained by dividing the total indirect expense for a certain period by the total number of hours for the same period and in this way determining the amount per hour to be added to the cost of production in order to get the total cost. Thus, if the indirect expenses are $7,000 and the total number of productive hours are 50,000, the amount of burden per hour would be 7,000- :-50,000 or 14 cents per hour. Applying this method to the example given under the Labor Cost Method with the assumption that the labor cost of $1.25 represents 5 hours work, the cost will be $1.25 plus 75 cents for material, plus 5X14 = 70 cents burden or $2.70, as against a total cost of $2.95 in the case of the labor cost method. The difference in the total cost of these two methods is very easily explained since by the first method the amount of burden varies according to the amount of money each man earns but by this method it is distributed equally among hif!,h. priced and low priced men, the basis being the number of hours each man works. In the former case the articles produced by .a high priced employe are charged a greater amount of indirect expense than those produced by a low priced employe. Since, by the direct labor hour plan, the indirect expense is divided equally between high and low priced employes on the assumption that they work the same number of hours per day, the two sets of costs do not exactly agree. 77 COST KEEPING SHORT CUTS Distribu- This method of distributing burden also lends itself Burden readily to accurate valuation of work in process at inven- tory time. It is very similar to the method just described under Labor Hours Method. Inven- Under these conditions, however, it is necessary after Work in distributing by departments the time tickets pertaining Process iq q, job, to get the total hours of work put in by each department. Then the rate per hour of burden for each department is multiplied by the total number of hours, thus securing the burden for each department. Then these items of burden are recapitulated and combined with the value of labor and material used on the job up to the stage where the inventory clerk finds it, and the inventory value is obtained. The most effective application of the labor hours method is found by dividing the factory into departments determined by similarity of machinery or processes and calculating the hour rate according to the number of hours put in by the men in each department. When the general average method is employed the apparant cost of the product may be so far wrong that the manufacturer may discourage sales of articles that are making money and encourage sales of others which are sold at an actual loss. These conditions are due, of course, to the fact that too much burden is charged to certain articles and too little to others. Taken alto- gether, the direct labor hours method is somewhat more accurate' than the direct labor cost method if the work is departmentalized, unless the labor cost happens to be proportional to the true cost of production. Both methods are more or less imperfect as regards accurate results, when applied to a factory as a whole, because they are not based on elements which represent actual conditions, except in the case where the product 78 COST KEEPING SHORT CUTS and process are very simple and uniform. The depart- Distribu- mental method of distributing burden on these plans is Burden the only one where accurate results can be expected. Rm STOCK Value mis H ED STOCK ^'""'^ LmOR HOURS MFTHnn ^^/u S/zh rs-fS) 2c f^ Labor- 1^*, \/a/ue //; 3arz:/er; / /9 DEPMmEm cosr ^/2.a9 '7ihs (S) Zo^ 6hrs@22% La6or- ///^,S Labor ■93 Burckn BURQ£N /2/.J6 i^/.32 La6or\ ^/2S 96 BunJen\ ./J" j^/3.6S [ BURDEN I . ^ > I BUROm Fig. 7 Graphic Illustration of Labor Hours Method of FiguringiBurden. The diagram in Figure 7 shows how burden is appor- tioned to each operating department at so much per pro- ductive hour. From the diagram it will be seen that Departments 1, An 2, 3, 4 and 5 carry a burden rate of 14, 12, 16, 15 and 18 J""^^""^' cents per hour respectively. The raw material valued at $10.00 comes into Depart- ment 1 where 8}^ hours of labor are expended on it. The labor cost at 20 cents an hour is $1.70 and the burden at 14 cents an hour is $1.19. Therefore, when the material leaves Department 1, it is worth $10.00 (raw material), plus $1,70 (labor cost), plus $1.19 (burden), or $12.89, tion COST KEEPING SHORT CUTS Distribu- • The partly finished product now worth $12.89 is sent Burden ^^ Department 2 where 7% hours of work are done upon it. This increases its value $1.55 (labor cost 20 cents per hour), plus 93 cents (burden), which is added to $12.89 giving the partly finished product a new value, $15.37. In this way the product passes on through depart- ments 3, 4 and 5, each one of which increases its value by so much labor cost and so much for burden, until it is turned into the Finished Stock Room worth $21.36. Direct The Dircct Labor and Material Method of figuring ^and burden is similar to the labor cost method, with the Material exception that it takes the total cost of labor and material ^ ** as the basis instead of the total labor cost only. The application of such method is practical only in those cases where the material constitutes the greater part of the direct cost of the product. Necessarily it is an averaging method and if the labor cost predominates it is almost certain to give inaccurate results. New The New Machine Rate Method is one that provides ^^^g for charging labor and departmental expenses direct to a Method process or machine so as to show the total cost per hour, or per whatever unit of measure selected, of operating the machine or process. The expenses thus charged include both those directly and indirectly related to the process or machine in question. Having found the total expense of operating a machine or process and having reduced this rate to so much per hour, the article is charged according to the time that the machine is employed upon it. To operate this plan with the greatest success, all machinery must be grouped according to similarity of operation performed by it and then each job done by a machine is charged so much per hour according to the 80 . . ' COST KEEPING SHORT CUTS nature of the operation performed. The rate for any Distribu- stated operation is determined by close observation and Burden exact prorating of the total departmental expense. Each group of machines should be considered a de- partment so that the total indirect expense can be more accurately distributed over the product. If the depart- ment includes radically different processes, it should be subdivided and the department indirect expense prorated over each division. The more nearly alike the machine work or process is in each department, the more easily and accurately the expense can be allocated and the machine rate of burden or process rate of burden determined. After this has been done, the total time of the workmen, the supplies and repairs are charged to the operations or processes. In addition to these items, charges are made for insurance, depreciation, rent and all other items in any way connected with the manufacture of the product. Ordinarily, these are indirect expenses, but with this plan they are treated as direct. Each machine or process is operated as nearly as possible like a complete little factory, being charged with the cost of labor to operate it, the cost of its repairs, superintendence, the rent of its floor space, the amount of power it takes, etc. After finding the total direct cost of operating machines or processes, it is necessary to find the total number of hours that they are operated during a certain period of time, say a month. In this way, the cost per unit of measure, whether it be hour, pound or ton, can be calcu- lated by dividing the total direct expense by the total number of units. When the direct expenses have been figured, the General general indirect expenses or those which are not directly Expense related to any machine or process, are spread over the different departments on some scientific basis. These are added to department indirect expenses. This gives 81 COST KEEPING SHORT CUTS Distribu- the total department indirect expense, which is divided Burden 3-mong the machines or processes of that department according to the total number of hours or other units of measure. The total indirect expense of a department for a cer- tain period is then divided by the total units of measure for the same period and the rate thus obtained is applied to the product of the machines or processes. Thus all in- direct expense for the department, as well as pro-rata of general expense, is included in the machine or process rate. By this plan machines or processes absorb nearly all expenses ordinarily considered as indirect and gather them together so that they can be charged directly to the product at so much per hour or any other unit of measure. When When these costs have been collected and reduced lected ^^ ^^ much per hour or pound for each machine or process, it is comparatively easy to charge the product at this rate according to the number of productive hours or the number of pounds manufactured. If "time" is the basis upon which the calculations are made instead of ''quantity" the total indirect expense for a month is divided by the total number of hours that the machines or processes have been operated during the month and in this way the rate per hour is determined. This rate is then multiplied by the total hours each machine or process has been in operation, to get the total monthly charge for each. Thus direct and indirect expenses are charged to a machine or process and reduced to a certain rate per unit of measure. An For instance, if material for an article costs 75 cents xamp e ^^j requires five hours to pass through a certain process at $1.60 per hour, including direct and indirect expense, the total cost will be 75 cents plus $8.00 or $8.75. This example illustrates the fact that all expenditures (except for material) incurred by a machine or process can be 82 * COST KEEPING SHORT CUTS charged directly to the product. Thus the total cost of an Distribu- article is easily figured when the price of the material, and jJurden time required by each machine or process through which it passes are known. This plan is one of the most desirable because it gives a rate by which the greatest amount of expense of manu- facture can be charged directly to the product in one item. Where conditions are such that it can be used, the results will be as close to the actual cost as it is possible to get them. The inventory value is obtained by multiplying the number of hours the article has been in process in each department by the respective rates per hour for each department. The totals are then recapitulated and to this grand total is added the cost of the material, giving the inventory value. The Fixed Machine Rate Method is similar in some Fixed respects to the new machine rate method. The indirect j^^^^^ ^°^ expenses, however, are distributed differently by pro- Method rating them over the entire production on a percentage, or some other basis, instead of including them in the . operating cost of the machine. The rate of direct expense charge is calculated depart- mentally either from previous experience or from an analysis of current expenses and is distributed among the different machines operating in each department. Charges are made to the cost of articles manufactured on the basis of this rate, the total of which is credited to the department expense account. The general indirect expenses are not combined with the department indirect expenses as in the case of the new machine rate plan, but are distributed on the basis of a supplementary rate, which is applied to the entire product of the factory. Anj^ method can be used for this dis- tribution such as labor hours, labor cost, etc. COST KEEPING SHORT CUTS Distribu- The actual charges to be made against each machine Burdwi ^^^ determined and then any difference between the estimated rate and the actual charges is added to or de- ducted from the general indirect expense and distributed by the supplementary rate. Thus, discrepancies between actual rate and estimated rate are adjusted. This plan differs from the new machine rate in that it is based on an estimate and assumes a 100 per cent efficiency in running the plant. When the product is charged only with actual running time of machines, which is more likely to be 60 or 75 per cent of full time, the credit to departmental indirect expense increases rapidly, and makes the cost of production appear much larger than it actually is. In order to equalize this effect, the difference between the indirect expense and the actual charges is deducted from the general indirect expenses before they are dis- tributed by the supplementary rate. In case the actual charges exceed the estimated charges the difference is Faults added. One of the faults with this plan is that the Plan general indirect expenses will decrease according to the amount of machinery lying idle, and it is possible in this way for a major part of the machinery, if idle, to reduce the general indirect expense to nothing. This is fallacious on its face, since the remaining active machinery must incur some general indirect expense. The possibility of eradicating general indirect expense is due to the inexact distribution and makes it practically valueless to the manufacturer. This plan takes no account of idle machinery, dull times or machines which run only part of the time, and is therefore practicable only in very special cases where all machines are busy nearly all the time, and turn out a more or less uniform product. The differences are accentuated because the rate is based on the assumption that the plant will run full time 84 COST KEEPING SHORT CUTS instead of taking an average rate which indicates more Distribu- nearly the true conditions in a factory. Burden The New Pay Rate Plan obtains the indirect expenses for each department separately, the general operating expense being first allocated to each department on the basis of direct labor costs before the percentage of departmental indirect expense is determined. The departmental indirect expenses are not charged as percentages to the articles turned out by these depart- ments but are added as separate rates to the wages of employes working in the departments, the amount to be added being based on the time the employe works on any one job. This plan being applied departmentally does away with one of the chief disadvantages of an average rate plan, but it is applicable only where uniform wages obtain. It is simple in that the calculations involve only the It is multiplication of the time an article is in process by the ^™^ ^ rate per unit of time, rather than a pro rata of indirect expense added to the products turned out by each depart- ment. Thus the plan has the advantage of saving con- siderable time, especially in a large plant. It likewise has disadvantages, even if it gives true cost, because it permits of no analysis of costs. All the figures are obtained in totals, thus depriving the cost department of a means to examine the cost of separate items and to suggest improvement in operations that will reduce cost. . Detailed information is exceedingly valuable to the manufacturer in order to point out leaks and weak spots. This plan fails to give it and for this reason frustrates one of the prime objects of an adequate cost system. If the management doesn't particularly want an analysis of costs, this plan can be used advantageously providing conditions at the plant in question render it adaptable. 85 CHAPTER XV Some Forms Used in Cost Systems THE following pages are devoted to the description of typical forms used in connection with cost systems now in daily use in different parts of the country. Since the variety of these forms is legion, we only attempt to give one or two of each kind, and these are given only for the purpose of presenting to the layman a general idea of their purpose and make up. It is impossible to outline a cut and dried system which can be committed to print and safely used by any- one who desires to install a cost system. All that such a book as this can hope to do, is to outline important principles and give a few practical interpretations. The conditions in different plants are so varied that the successful installation of a cost system requires special study by an expert, who has a comprehensive knowledge of costs and whose experience enables him to draw up forms suitable to the case in hand. This remark may lead some men to doubt the business expediency of a system that requires considerable initial expense to set into operation, and much patience there- after until it gets under way; but in reality, as testified by the experience of others, it is a matter of necessity, not expediency. Therefore, in studying the forms, don't conclude be- cause there happens to be an item left off that you think you need, or a couple of items added that you do not need, that there is no cost form in that particular depart- ment that can meet your requirements. When you decide to set a system going in your plant, call in an expert cost man and with his assistance learn 86 COST KEEPING SHORT CUTS in general what forms and data are necessary to operate Some it effectively and you can then draw up forms that will ^^^^ suit your needs exactly. A manufacturer who attempts to design his own forms unaided, will, nine cases out of ten, overlook some account- ing detail that later will develop into one of great impor- tance. This will necessitate a change in form or method of collecting the data, the cost of which will be as much perhaps as the service of an expert would have been in the beginning. Every time a certain kind of information is gathered together it can, in all probability, be utilized in some other way to advantage, aside from the purpose for which it was originally collected. Every department of a cost system is inter-related with some other department. A cost accountant appreciates this fact and therefore can draw up forms for one branch of the accounting that will be sufficient to embrace any information collected in this branch and useful in a related branch. Hence the neces- sity for an experienced man. A Purchase Requisition (Figure 8) is a memorandum Purchase on which is recorded the kind and quantity of a certain tio^"*^^' stock that is to be ordered, the date ordered, the order number, and similar information which varies in detail according to the plant where it is used. Its purpose is to facilitate the transaction between the purchasing agent and the factory or stock room in regard to the purchase of material, supplies, etc. If a certain department needs a new supply of material, which has been exhausted in the stock room, a purchase requisition is filled out either by the department foreman or stock room clerk and sent to the purchasing agent, who orders the stock and files it. The requisitions can be made in duplicate or triplicate, as occasion demands. When a plant employs a regular stock clerk he can make out all requisitions for replenishment of stock 87 COST KEEPING SHORT CUTS PURCHASE ftEQU/S/TJON To. Fifr^Aasirr^ Acferrf Date Qu/jr/r/rr /f/zT/CL£:S D/ir^ ^/f/yr£D Fig. 8 Purchase Requisition m/ecmsE oROEff, Hddresa ffeowsihon /^o Place Oi/r Or, /t'eftz/sif/orf A/o o/rc/ CafA^. art a// fnt/i>/ces SfZ/PO/^o-BfrO/FE DESCmRT/Ol^ ^^/j//r/Tr r/?/cf: Fig. 9 Purchase Order COST KEEPING SHORT CUTS because he keeps a record of each kind and knows when Some the low mark of any particular stock has been reached. In special cases where it is necessary to have other parties make out the requisitions, such as specification clerks or superintendents, a copy should be sent to the stock clerk in order that he may look after its receipt, inspection and disposal and make the proper entries on his records. A Purchase Order (Figure 9) contains all the neces- Purchase sary details of a bill of goods purchased by a factory, such as name and address of purchaser, order number, quantity and description of goods, shipment date, price and any other information of this nature that is deemed advisable. As many copies can be made as desired, according to the requirements of the business. There should always be at least two copies, one for the purchaser to retain and one to be sent to the dealer from whom the goods are purchased. If it is desired to keep a record of **stock ordered" according to kind, a copy of the order should be sent to ' the stock clerk that he may post to his stock record. All records of incoming material, however, should be kept separately from the records of "stock ordered.'* The bookkeeper can also use a copy to advantage in checking up invoices, thus making his postings more promptly and relieving the purchasing agent of the detail of checking the invoices. A Stock Received Report (Figure 10) embraces all Stock information necessary to the proper recording of incoming Rgpoj-t stock. It contains such items as number, date received, purchase order number, quantity and description, price, by whom received, by whom shipped, etc. This record is usually kept in a book, but since both the bookkeeper and purchasing agent should have copies, COST K E E P I N G S H R T C V T S Loose Sheets Some the disadvantages of this system are obvious.. It is awk- ^^^^ ward to pass a book around and also to locate the different items of incoming stock that have been recorded in it. The advantage of loose sheets lies in the fact that every department concerned with the receipt of stock can be supplied with a copy. If the record is used only for advising the bookkeeper and purchasing agent, a form should be adopted that is as simple as possible. If it is to be used in connection with the stock record it must necessarily contain information that will enable both the purchasing agent and the stock- keeper to make up their records properly. SrOC/f /fJECE/l/ED /fEPOffT Qummr /}/?nCL£S rf^oM O/FUf/^Z/O Fig. 10 Stock Received Report. Such items as weight, value, classification, bin number, etc., are generally necessary to the stockkeeper in order to facilitate posting to his stock records. C S T K E K P I N G S II O R T ("UTS If a copy also goes to the bookkeeper, the account, Some department, column, folio, etc., are indicated. If transportation charges are heavy, provision should be made on the report whereby they can be added to the purchase price of the goods, thus giving the exact cost of the stock as delivered. One of the chief advantages of a receiving report is that it makes the receiving clerk check up carefully and inspect the stock received. This guards the management against faulty stock and paying for invoices in full where only a part of the order has been received. In this way leaks are stopped, which in many cases have been very serious. A Raw Stock Record (Figure 11) gives all the neces- sary information regarding the quantity of raw stock on hand. There is one card for each kind of stock. The typical stock record card contains such information as classification or kind, amount received, date received, price per pound or piece, amount delivered, balance, high and low water mark, and so forth. The card serves as a perpetual inventory of every kind of stock, the amounts received being added to the old balance and the amounts delivered being deducted each time from the - amount on hand, and a new balance extended. All items posted to such records, both receipts and deliveries, should be taken from forms made out by responsible parties and checked, otherwise they will not reflect the true status of the stock on hand. Another reason why extreme care should be taken with these records is that, in case of discrepancies between the records and actual stock on hand, they cannot be accurately corrected. Therefore, separate forms should be used for each receipt of stock and for each requisition that comes from the factory. Never post from verbal information. COST KEEPING SHORT CUTS u J h ^ i 03 ~1 5 1 1 1 > 1 ^ ! i ^ ^ 1 .5 i 1 !o 1 - ^ ^ 1 1 \ ^1 ^ ' 1 1 1 L 92 COS T KEEPING SHORT CUTS The cards should be checked periodically by the Cards results obtained from an actual inventory and in case of pgj.j_ errors, either by over-run or shrinkage, the cards should odically be made to agree with the actual amount of stock on hand after the cause for the discrepancy has-been determined. Unless checks are made and the reason for discrep- ancies is ascertained, the records cannot be relied upon. As much care should be taken to keep the stock records in balance with the stock on hand as is taken by the cashier in keeping his cash book in balance with the cash on hand. A Bill of Material (Figure 12) is an advice to the Bill of stockkeeper that the items shown thereon will be required for a certain job. It is sent to the stockkeeper as soon as the job is begun in the factory and he issues the material as needed, the foreman signing for each issue. The foreman also makes out a requisition for each issue of stock, in order that the proper entry can be made on the stock record card. A Material Requisition (Figure 13) is used by the Material different departments of a plant for ordering raw material ^i^^' from the stock room and contains information which enables the stockkeeper to issue the^ required amount and to post it to the proper record card. Ordinarily the items are department number, date, job number, article, quantity, price, by whom received and by whom signed. The foreman of a department or his clerk usually makes out the material requisition which is sent to the stock room and then to the cost department. In this way the cost of the material can be charged to the job and the proper entry can also be made on the stock record card. Other forms of material requisitions are ruled to accommodate a number of different items that go into a 93 COST KEEPING SHORT CUTS /?£QU/f?£0 BV BILL -/Wr£">?//?Z.. DATE OEPY^O o/roE/fM? a/iss/r/c/ir/oy /j/?r/CLE Ci/^AT/rr" /f/?/-/f /fAfom^r ffECE/VEo ay Fig. 12 Bill of Material M/iTEmL /TEQU/SmON. Orc^erAb Depf /Yo ^ymJbo/ Oafe /Icc'f A/o Qm/YT/n /7£sc/F/rr/o/r v/jLOf: Oe/i\/ercc/ to De/iVsreal hy foreman Fig. 13 Material Requisition 94 COST KEEPING SHORT CUTS single job. These are used when it is not desirable to Some issue a separate ticket for each kind of material, the ^^^^ whole lot being ordered at one time. There are a multitude of forms from which to select. The one in the illustration, Figure 13, is used where only one kind of material is ordered on a single requisition. A Production Order (Figure 14) is a memorandum Produc- issued by the factory manager when a job is to be started, Order and gives specifications relating to it. It contains such items of information as order number, date wanted, date completed, description of product to be manufactured, kind of material, amount, value, etc. This serves the factory superintendent as a written statement of what he is to manufacture and eliminates verbal orders. There are numerous forms of production orders which are generally divided into two classes The first class is used when it is desired only to regulate the manufacture and record it, and the second class where it is necessary, in addition to the above, to send information regarding the job to the cost department. In the first class, only the data relating to the manu- facture of the goods is necessary, but in the latter such items as workmen's time, cost of operations, quantity of material and cost should be recorded. When an order necessitates operations that must be performed by different departments simultaneously, sub- production orders are issued outlining the work to be d^e by the respective departments. A copy of the order should be sent to the stockkeeper so that he can properly superintend the disbursement of raw material. The order assures him of the correctness of the material requisitions that are sent in by the different departments working on the job. The Time Ticket (Figure 15) is a memorandum that Time shows how much time a workman has spent on a job, and it is used as a means of ascertaining labor cost of jobs, 95 COST KEEPING SHORT CUTS Ospr DATE PnODUCT/ON ORDER, //o 0£SCRJPT/ON' qMNT/rr FffJCE: /RM0U7vT Daji/t/r£n td /juTHOff/zoj ay Fig. 14. Production Order T/ME TICKET DEfflRTMENT WOKKMflNS //jRM£ Z7/77Z- Wbff/OffJA^ Mo. O/fOEff No, Symbol BoxAb. M). T^ECES. /iccou//r/Yo. Op£Rfir/o/\/ Time: FfflTE: /jMOl/fyT Hourly' Mu^otreo Oocl/tps Qmt^ Remarks T/M£ ^r/7/rreo T/ME F//V/SHED Eh n eMnt/^ O. K, Fig. 15. Time Ticket COST KEEPING SHORT CUTS preparing comparative records by workmen, furnishing Some data for adjusting piece rates, distributing labor cost by ^^^^ account^, departments or workmen, checking pay rolls and so forth. pf The information given on a typical time ticket, is, workman's number and name, date, time job is begun, time job is finished, pieces finished, operations and all other information required by the conditions under which the goods are manufactured. In a well regulated factory, the foreman gives a time ticket to every productive workman when he begins a job and records thereon the time started. This is done either by hand or by a time stamp. When a job or opera- tion is finished, the foreman records the time finished and starts the man on another job, issuing a new ticket with the starting time for the second job or operation. Or the time of starting the second job or operation may be noted on the old ticket, according to the kind of ticket used. The time ticket may be issued for the operation, the job, the day or for a series of jobs that cover several days. On this account a great variety of time tickets is extant, but the object of them all is practically the same, viz., to indicate how much time each man is employed on a job or operation and to give the manager a line on his efficiency. Since time tickets embrace information that is related directly to cost, the kind of ticket will depend, in large measure, upon the kind of cost system in operation. In some factories they use time tickets as shown in A Card the illustration. A separate ticket is used for each opera- tion. These are adequate for the day rate and piece rate systems of paying men and give the cost department information whereby the cost of each operation can be posted on comparative records, together with information that indicates the efficiency of the men. This feature is brought out clearly in the description of the Cost System given in Chapter XIX. 97 COST KEEPING SHORT CUTS ^ $ 1 ■§ 1 1 i K ,^ ^ ^ ^ / 1 ; k \ ^ 1 vj 1 I vj 1 . / ^^ 1 <^ I N >^l ^ % f: 1 k. ■^i Qi ^i o d fc r . tt: ^ \ c^ i: Cj ^ ::> c^ f:- jb n B^ ^ ^ ^ ^ 1 S ct- j J ^ / .k ^ I ti ^ ^ o a fa Z s O 100 COST KEEPING S;H O Jt^ ; ;C^ P - T S The Finished Stock Record (Figure 18) gives the Finished article or part, the date, the classification, high and low R^orj water mark, the amount on hand, the amount disposed of, and the balance. The object of this record is to Morm the finished stock keeper at all times as to the quantity of each kind of stock on hand. By extending the balance after each issue of finished parts or shipment of finished product, he can tell immediately whether or not it has reached the low water mark. If the supply is low he can notify the factory manager, who in turn starts an order for a new supply. This information is especially valuable where staple parts are kept in stock and are drawn on contin- uously for erection into a finished product. The information regarding receipts of finished stock can be taken from the production reports and the dis- bursements can be obtained either from requisitions or from sales sheets or shipping orders. From time to time, as the stock of parts runs low, a physical inventory should be taken and the records adjusted to agree with the stock on hand. A Cost Record (Figure 19) shows the cost of each Cost part or article manufactured and includes the direct labor cost, the indirect labor cost, the cost of material, the name of the article or part, the operation, the quantity finished, etc. This information is arranged in column form, the items of cost being recorded opposite each operation. A footing of the material and of the direct and indirect labor cost columns, on the completion of the last opera- tion, gives the total of each of these costs for the com- pleted part or article. A recapitulation of these totals gives the total cost. Some cost records are ruled to show comparative costs and defective work, also the selling price and gross profits. 101 C .43 i^^$.?r. : ;*K.'¥ M -P I :N G SHORT C V T S FMSHEO 3WCK ff5C0frO. ^o Nax/mi/m Article • - AUnirm/m fiMou/vr ff£CEjv£:o flMour/r w/rHOf?flWfi/ a/iLflfVcf: 1 D/jrc quflA/rtrK ff/JT£ ZfAfomM q(/Mnry /f/7/r ^j^oi/j/r Oi/fl/\/my frfire /JAtOl/^^ Fig. 18 o/?D£:/?/^o COST RECORD, /^cct a/o D/\TE STARTEO. DATE FINISHED OEISCRIPTIOr/ _.l Mj fc's STAffTEiL J/Of K's a£ST/iorEa- .. _^v6 TER/AL /'cs E//^isf/E/y MA Qu/iNnrr /riA/o ' AMOUNT L/^BOR 1 HOURS A MOUNT buroejV rOTAL J /?£MAfeKS rOTAL COST R\/Ef€a6 1 E COST PER ' 1 Fig. 19 102 C S 1^ K K E P I X (i S II () U T C U T S OFLfiATION D/iTE. Wkmf/o. noff£ces uoms moi/A/r /r/fr^ 1 Hoa/^ j/'^b • • Fig. 20 Cost Record of Operations. Reverse side of Cost Record Card shown in Figure 19. COST K E E P I N G SHORT CUTS 1 1 1 1 1 ^ / 1 ) ^ ^ 1^ vl ^ ^ |f 1 s ^ ^ £ Ju i ^ 1 "" 1 fcf ^ X k i^ tt $ ? ^ ^ 1 1 ' Uj -J ^ ''I t^ k '5: 1 ^ 0) CO O 104 COST KEEPING SHORT CUTS ^.^ "M (V* O ^ k I- s> ^1 s fc 13 3 % c;« ^ ^_ 1 " ^ 1 . 1 o I COST K !•: !•: V I \ (; s ii o w r cuts The reverse side of the same Cost Record Card is so Some ruled that the cost by x)perations can be recorded. This ®™^ affords good data for comparative purposes, especially as between day and piece workers employed on the same kind of work. (See Figure 20.) Another form of Cost Record is shown in Figure 21. There is perhaps a greater diversity of forms for this record than for any other, a distinct form being necessary for practically every individual plant. The form of this record, as well as that of other records already enumerated, depends entirely upon the cost system that is used. It is because of this inter-relation between the make up of the form and the cost system that the services of a cost expert are so necessary. To the mind that has never made a study of costs this statement is hard to understand, but it is nevertheless true. A satisfactory cost system cannot be installed unless it has behind it a man thoroughly acquainted with the subject and all of its ramifications. A web rotary printing press is a complicated piece of machinery to the lay mind, but note how smoothly it runs and the beautiful work it turns out. Likewise a complete cost system appears a hopeless mass of detail to the uninitiated, yet when set in motion by the man who knows, it becomes a great satisfaction and safeguard to the management of a plant. At the end of the month a statement should be prepared Factory that shows the Expenditures of the Factory by accounts, ^^^l^ The illustrations in Figures 22 and 23 are typical statements of this kind. They give an analysis of expenses relative to factory operation, including amounts expended for direct and indirect labor and material. Forms may be used on which the expenditures for the factory can be summarized either as a whole or by departments. 107 COST KEEPING SHORT CUTS s 1 1 Q) ^ , ^J ^ ( ^ ^ k ) 1 ^ •^ s t^ ^ «j ^ ^ 1 ^ <*- ^ It: ^ ^ k CT) ^5: ^ "^ -vl Itf y J^i ^ ,<^ :x. k 1 • c^ o 1 1 s« -O 60 O 108 COST KEEPING SHORT CUTS The cost price of the goods sold during the month. Some the inventory at the beginning and end of the month, ^^^^ the amount of finished goods on hand, amount in process and so forth, can also be recorded. The statement may be made comparative by ruling columns for the expenditures during the corresponding months of the previous year. An ordinary ledger may be used for keeping these accounts, but a regular factory ledger as described later, is better adapted to the purpose. The tabulation of items to this statement is nothing more than copy work. By placing the statement in the adding machine carriage, the items can be added and listed very quickly. The advantage of using a machine for this kind of work lies in the fact that it does it more rapidly than it can be done by hand and the totals are always correct. A Cost Record of Sales (Figure 24) shows an abstract Cost of sales made during the month and a classification of of^g^Ies the different articles sold. It may be ruled to include cost of labor, material and burden. Some of the records are ruled so that individual sales can be posted and others are ruled for daily totals. The .adding machine is very useful for tabulating the items on this kind of sheet. An Inventory Record is a record that shows the total amount of stock on hand and its value. The illustration in Figure 25 is a typical inventory sheet that gives the quantity, price and value of every kind of raw stock, semi-finished material and finished product on hand at the close of the year. In preparing inventories, care should be taken to include goods in process. - Where the inventory is used in connection with a stock and cost system it should be divided into raw material, goods in process and goods finished. 109 COST K p: p: p I N G SHORT C U T g Some P'orms The amount and cost of raw material should be entered on stock cards or sheets according to kind. The posting is made in the balance column, which, if the stock cards have been properly kept, will agree with the balance obtained by deducting the last amount of raw material issued. CNTERED BY UX^-^^A^ v?/ CAi 1 rn flK v>^ '^ vJ^***.^^ii^ PRicrn Ry ^. S^ 1 5.7 8 13.5 2 1.30 a^c^^^^ ' ^ ^^-t^ /- -" — =^ 5.0 3 1350 20.29 — 0£a...^ ,o-',-u-i3-/'/ 3 0.9 5 13.7 5 4 2.5 6 .5 1 13.7 5 .7 OA:..^ y(J&..,^ '/g ^^ 4.2 9 12.5 5.3 § a&^ 5.5 3 12.5 6.9 1 k^ 21 2.0 1 125 2 6 5.0JL uj^..t>6r 7.2 9 12.5 9.11 1.1 d 13.7 5 1.6 4 co/iu^- .6 2 13.7 5 .8 5 a&^-cjc 2.9 6 13.7 5 4.10 ^€^ l.*9 1-3.7 5 3,7 4 a^c^-c^ 3 4.8 9 13.5 4 7.1 2,619^2* J f Fig. 25 Inventory of Raw Stock The goods in process, their cost and last operation performed upon them, should be entered on a cost sheet by order numbers. The quantity and cost of goods finished should be entered on the finished stock record. no CHAPTER XVI Final Disposition of Cost Figures UP to this point we have taken into consideration the various elements that constitute cost of pro- duction, together with numerous modifications that arise under varying conditions. First we explained how wages are paid, then how inventories are taken, how raw stock is handled, how burden is distributed and the kinds of forms used in keep- ing the cost records. This naturally leads to the inquiry, "What is done with the cost figures after they have been collected.'^" They must be posted either as debits or credits to certain accounts. Therefore, it is necessary to design a System of Distribution that will provide accounts to which all productive and non-productive labor, material, general and other expenses can be charged. It should be arranged so that charges can be made against each depart- ment and also against any shop or production order, so as to give an accurate analysis of cost. All material requisitions and labor tickets pertaining to a production order should bear the order number, and on the labor tickets the department number should also be recorded. If the order is for plant repairs or better- ment, both requisitions and labor tickets should bear the number of the department for which the repairs are made or the improvement done. By thus identifying the labor ticket or requisition for material with a job and depart- ment, it becomes comparatively easy to distribute the cost to the department account and to the job. As has been pointed out before; it is absolutely necessary to draw a distinct line between the selling and manufacturing end of a business. The cost to make ui COST KEEPING SHORT CUTS Final goods is one thing, the cost to sell is quite another, and if tT(fn of *^^^ ^^^^ ^^ borne in mind from the outset a great amount Cost of confusion will be avoided, igures rpj^^ following "Card of Accounts" is typical of a large manufacturing business and is so arranged that all accounts, including selling, manufacturing and general expense items, are segregated into their proper groups. A "card" for a large business has been selected because it shows what is necessary for accurate accounting in big concerns and at the same time includes all of the fewer accounts which are necessary to smaller concerns. For instance, out of the forty-one general accounts shown, a small concern could select possibly fifteen or twenty which would answer all its requirements. All of the general accounts, shown on this card, that present any difficulty in understanding are described briefly, so that a little study of them should give the reader a very clear idea of what each one is intended to include and how it is used. CARD OF ACCOUNTS CAPITAL ASSETS 1-^Patent Account 2— Good Will Account. 3 — Real Estate and Building Account. 4 — Special Tools Account. 5 — Plant Machinery and Equipment Account. This includes all machinery, shafting, pulleys, belts, standard bench tools, boilers, piping, ventilators, motors, etc. 6 — Patterns and Drawings Account. This includes all patterns, drawings and blueprints necessary to the manufacture of the product. 7 — Inventions Account. This includes cost of experimental work and development of new features. 8 — Factory Furniture and Fixtures Account. This includes all furniture, fixtures and apparatus necessary to the factory. 9 — Office Furniture and Fixtures Account. This includes all articles of this nature pertaining to the general office equipment. 112 COST K E E P I N G S H O R T CUTS FACTORY INVENTORIES Final Disposi- 10 — Raw Material and Supplies Account. tion of This includes raw stock, millwright and small tool stores, pack- ^P^^ ing cases, etc., which may be treated as separate accounts where ^ the nature of the business demands it. 11 — Finished Parts Account. This includes all finished stock and accessories which can be treated as separate accounts when necessary. 12 — Miscellaneous Inventory Account. This includes scrap, inventory adjustments, dismantled machines, etc., which may also be treated as separate accounts. 13 — Work in Process Account. This includes all parts and sections of a product that are in process of construction, together with all labor and material expended on them. 14 — Experimental Work in Process. This account includes all labor and material expended on experi- mental work. FACTORY OPERATING ACCOUNTS 15 — Operating Expense Accounts. (Distributed over all Burden.) These accounts consist of such items as building and machinery expense, electric light, power and heat, a separate account being - kept for each. 16 — Factory Production Expense Accounts. (Distributed over all Production Department Burden Accounts.) These accounts cover such items as inspectors' school, nickel plating, finished stock, stock order and standard departments. 17 — General Factory Expense Accounts. (Distributed over all Burden Accounts.) - These accounts cover factory managers and foremen, purchas- ing department, janitors, receiving and raw stock departments, time and cost departments, tool supply department, printing and stationery, replacement of tools and machinery, drayage and mis- cellaneous freight and express. Under each of the Factory Operating Accounts are the following sub-accounts: Salaries, labor supplies, repairs, light, heat, gas, furniture and fixtures, insurance, taxes, etc. 113 COST KEEPING SHORT CUTS Final FACTORY BURDEN ACCOUNTS. Disposi- tion of 18 — Repair and Construction Burden Accounts. Cost These accounts cover such items as millwright and carpenter Figures departments, tool designing, inventions, tool and pattern making, experimental work, etc. 19 — Manufacturing Department Expense Accounts. These accounts cover all of the various manufacturing depart- ments, testing, inspecting, cleaning, assembling, polishing, japan- ning or painting and shipping departments. Under each of the Manufacturing Department Ex- pense Accounts are sub-accounts for salaries, non-pro- ductive labor, supplies, repairs, light, power, gas, heat, overtime allowance, etc. 20 — Pay Roll Accrued Account. 21 — General Ledger Account. INVENTORIES OF FINISHED PRODUCT. 22 — Finished Product at Factory Account. 23 — Finished Product with Agents' Account. 24 — Models Account. 25 — Advertising and Stationery Stores Account. 26 — Accessories to Product Account. CURRENT ASSETS AND LIABILITIES. 27 — Accounts Receivable Accounts. These accounts cover agents' accounts, miscellaneous personal accounts, reserve for doubtful accounts, accrued interest, etc. 28 — Bills Receivable Accounts. These accounts cover bills receivable and reserve for doubtful notes. 29 — Cash Accounts. These accounts cover cash in bank, petty cash, postage fund, paymaster's fund, etc. 30 — Capital Stock Accounts. These accounts cover capital and treasury stock. 31 — Accounts Payable Accounts. These accounts cover such items as audited and unaudited vouchers, accrued taxes, bills payable, prospective commissions, cash on unfilled orders, reserves for depreciation, etc. 32 — Surplus Accounts. These accounts cover profit and loss, surplus and dividends. COST KEEPING SHORT CUTS SALES AND COST OF SALES. Final Diaposi- 33 — Sales Accounts. tion of These accounts cover sales of the product and accessories. Cost together with cancellations and exchanges. Figures 34 — Cost of Sales Accounts. These accounts cover all costs for selling the product and its accessories. 35 — Other Income Accounts. These accounts cover the income from such sources as rents, interest, discounts and miscellaneous inconje. SELLING AND DISTRIBUTING EXPENSES. 36 — Commission Account. 37 — Repairs Account. 38 — Allowance Account, 39 — Freight and Express Account. 40 — Other Accounts. These accounts cover all expenses incurred for general sales department, agencies, advertising, etc. There are sub-accounts for each of these accounts, such as salaries, supplies, postage, traveling expenses, tele- phone, telegraph, taxes, insurance, rents, conventions, etc. GENERAL AND ADMINISTRATIVE EXPENSES. 41 — Administrative and General OflSce Accounts. These accounts cover expenses for the president, general mana- ger and assistant, together with expenses for the various admin- istrative departments. There are sub-accounts for each of these, covering officers' salaries, office salaries, supplies, postage, heat, light, power, taxes, insurance, depreciation, repairs, trav- eling expenses, donations, janitors, etc. Where sub-accounts are used it is customary to number them from "1" upwards and to designate them by writing the general account number followed by a dash and the sub-account number. Thus, referring to the "Card of Accounts" at the division headed "Factory Burden Accounts," the salaries paid in the manufacturing 115 COST KEEPING SHORT CUTS DAPimL . SELLING AND GENL. EKP. INCOmE AND REVENUE 1 CAPITPiL L/AB/L/T/ES \ \ 1 /ACCOUNTS REC'BLE \\ \ ■ / / 1, ACCOUNTS. PAY'BLE \\\ / / / BILLS REC'BLE / / BILLS PAY'BLE \\\ \ / // / 0/^SH \\\\ /// / SURPLUS \ 'm/ / 1 CMTROUNG ACCOUNTS ^ERAL LEDGL 1 2 CONTROUNG ACCOUNT DR. i CR CRDR DR. C/t CR \ DR mnrnRY Ca^TmiNG ACCOUNT LEL ^GER ^^ ^^^^ Raw •STOCK SUPPLIES ^"/7 \^ SHIPPING EXPENSE / / . FINISHED PftRJS STOCK y / PRODUCTION DEPARTMENT BURDEN \ WORK PROGRESS GENERAL EXPENSE \ F^PAIR'>^'CONSTR. DEPARTMENT BURDEN Fig. 26 Diagram of Factory Accounts. 116 COST KEEPING SHORT CUTS department would be designated by account No.'* 19-1," Final the "19" referring to manufacturing department and the tiorfof ' "1" referring to "salaries," which is the first of the sub- Cost , Figures accounts. Since the factory department of a manufacturing business is a very important part of the establishment, it is customary to segregate all items pertaining strictly +^ the factory into a factory ledger. This ledger is divided into groups of accounts adapted to the line of business for which it is used. For the purpose of illustration, the following outline of a typical factory ledger is shown. By careful study it will be seen that several of the accounts in this factory ledger correspond to the factory accounts mentioned in the general "Card of Accounts." All other accounts for the selling and administrative end of the business are kept in the general ledger or ledgers. FACTORY LEDGER ACCOUNTS Group l^Controlling Account. General Ledger. Group 2 — Raw Stock and Supplies Account. a. Raw Stock Stores. c. Packing Cases. h. Millwright Stores. d. Small Tool Stores. Group 3 — Finished Parts and Stock Account Group 4 — Work in Process Account Group 5 — :General Expense Account a. Building Expense. e. Heating. h. Machinery Expense. /. General Tool Expense. c. Electric Light and Power, g. General Factory d. Gas, Fuel and Lighting. Expense. Group 6 — Repairs and Construction Department Burden Account a. Machine Shop. d. Pattern Shop. h. Tool Making Shop. e. Electric Shop. c. Carpenter Shop. Group 7 — Production Department Burden Account a. MiUing Machines. e. Assembling. h. Screw Machines. /. Erecting. c. Punch Presses. g. Inspecting. d. Drill Presses. Group 8 — Shipping Expenses. COST K E E V I N G S H () 11 T C V T S Final The factory ledger bears the same relation to the tfon of general ledger as the various subsidiary ledgers or accounts Cost bear to the general ledger. igur«'^^ A general scheme of this relation is illustrated by the diagram in Figure 26, in which the factory ledger and subsidiary accounts are represented as separate books. It is not necessary, however, to have separate books, except in large manufacturing concerns where it is more convenient to do so. In a small concern the various subsidiary accounts, including the factory ledger accounts, may be subdivisions of the general ledger, although it is generally desirable to have a separate ledger for factory accounts. Beginning with the Factory Ledger in the diagram it will be seen that the typical accounts comprising this ledger are. Raw Stock and Supplies, Finished Parts and Stock, Work in Process, General Expense, Repair and Construction Department Burden, Production Depart- ment Burden and Shipping Expense. All of these accounts converge into a Factory Ledger Controlling Account to which their total debits or credits are posted and which forms the door of exit, so to speak, from the Factory Ledger. The corresponding door of entry to the General Ledger is a similar Controlling Account, with the exception that the debits and credits are the reverse of the debits and credits in the Factory Ledger Controlling Account. The various subsidiary ledgers for the general accounts also have corresponding controlling accounts in the gen- eral ledger similar to the one illustrated for the Factory Ledger. In this way the total debits and credits for all subsidiary accounts are gathered into the general ledger. But since this book treats principally of factory costs, our attention will be devoted to the Factory Ledger. The first account covers raw stock and supplies used in connection with the factory output and all other 118 COS T K K K P I N G SHORT CUTS material in the nature of factory supplies. This account Final is debited for all stock and supplies received into the tion^of^' factory and credited for all that is used. The credits are Cost obtained from the material and supply requisitions. igures The account for finished parts and stock covers finished manufactured parts and all stock which is purchased in finished condition, but which is only a part that goes into the finished product. It is usually known as semi-finished stock. This account is debited with all receipts and credited with all disbursements made on requisitions for finished parts or stock. The Work in Process account covers all unfinished parts or products in the factory, being debited with all labor, burden and material used, and credited with finished parts or products. This account is the most active of the factory accounts since practically all the material and labor expended is controlled by this account. The General Expense Account covers such items as are shown in Group 5 of the Factory Ledger "Card of Accounts," and is debited with all general expense items and credited with the total amount that is distributed . between the Productive Department Burden Account, Repair and Construction Department Burden Account and Shipping Expense Account. The Repair and Construction Department Burden Account covers such items as are shown in Group 6, and is debited with indirect labor, supplies, repairs, general expense, etc., and credited with the total amount dis- tributed to Department Burden Accounts on the basis of productive hours. (This basis is used, of course, in only those factories using the labor hours' method of Burden distribution.) The Production Department Burden Account covers items as shown in Group 7, and is debited with indirect labor, supplies, repairs and general expense and credited with the total amount distributed to work in process. 119 COST KEEPING SHORT CUTS Final The Shipping Expense Account covers all items inci- tion of dental to shipping, and is debited with all such expenses, Cost exclusive of freight and express, and credited with the igures j-Q^-g^j amount that is distributed to the cost of the prod- uct shipped. While the above explanation of a factory accounting system is more or less in skeleton form, it gives a good general idea of the system of distributing the numerous debit and credit items and show§ how the results are finally disposed of. In one of the following chapters, in which the routine and statistical phase of a cost system is treated, are described the methods for handling the cost data with a view to finding out the exact cost of each unit of the product. 120 CHAPTER XVII Cutting the Cost of Keeping Costs "O^EE that roomful 'of clerks," said the manufacturer ^^ with a sweep of his hand, as we looked over the cost ^"^^ department of his factory, "that costs us $15,000 a year." There's the rub — the cost of running a cost depart- ment is a constant irritation to the man who has yet to realize that it costs to be safe. Yet this premium which must be paid to be safe — to know that you are getting the product at the right cost — is nothing but the insurance premium in another guise. Pay it the business man must — either in salaries to cost keepers or through decreased profits on sales. But too frequently he does not handle his cost keeping work with that concrete sense of values which he shows in handling the making and selling of his product. Whether producing figures or frying pans, the prin- ciples are the same. A cost expert of national reputation for his successful handling of many knotty cost-of-production problems, said to a committee of the stockholders of a company in trouble: "One of the objections raised against cost systems is that after incurring considerable expense incident to the inauguration of such a system, some manufacturers have discontinued the use of the system after a com- paratively short period. There can be but two explana- tions given in such a case. The first one is, that the management did not comprehend the system and its underlying principles. The second reason is, that the system was defective in design, and the underlying prin- ciples were either not basic, or else wrongly applied. Defects of this character in a system usually ifivolve such 121 COST K E R P I N G S II R T CUTS Cutting an amount of clerical labor as to make the system, to a Costs gJ'^^t extent, impracticable. They are traceable to two principal causes, one of which is that the one designing the system attempts to figure out a plan of cost finding from a bookkeeping standpoint, without any reference to, or knowledge of, factory conditions governing the manufacture of the product. The other cause is due to the fact that those in the immediate charge of the enter- prise are unfamiliar with accounting and the preparation of statistics, and are unable for this reason to see at the outset the impractical features contained in the system. In other intances a half-hearted effort is made to in- augurate a system, and the slightest resistance eliminates the desire of the manufacturer to continue his plans along these lines, merely because a few difficulties are encoun- tered during the first few days or weeks.*' There is no doubt but that the cost of conducting a cost system is important. Common But let US apply the same common sense we use in solving the problem of gaining efficiency in a factory, to the lowering of the cost of handling the statistics and facts in an office. Let us use machines for the work that machines can do more quickly and accurately than men. A great economist has said that "a man should not be kept at any work a machine can do better." Acting on that dictum has made the commercial world over again in an hundred years. We have come to accept it everywhere but in our offices. There we still keep production down to a hand- work basis. We take men out of the factory by adding automatic machinery, and we add new men to the office force to take care of the increased work and output. We see signs of a change. It has been slow. 122 C () S T K K E P I X G S II () R T (' V T S When business men realize what the Burroughs means Cutting to all the figure-handling work of a business, the machines Qq^^^ will become as common as typewriters. It is just plain everyday common sense that it should be so. In any cost department where figures have to be handled, this labor-saving machine should be introduced. The cost department must employ a number of clerks for the purpose of handling the figures, statements and statistics. These statistics are made up from figures gleaned from many sources. These figures must be recapped by special headings and then statistical sum- maries made from these recaps. There are two chances of error in every handling of figures : First — In putting down the figure. Second — In making additions, multiplications, sub- tractions and divisions. You can't afford to take chances. Where the fraction Taking of a cent — in such a business as a foundry, for instance — may be the difference between profit and loss, work must • be right. The manager who has his costs checked and counter-checked for possible error, is really making the very figures by which he gets his costs, cost him from twenty- five to sixty per cent more than they should. It doesn't matter how simple and eflficient the cost system, without a Burroughs, it is more expensive than it should be. If the work in any cost department were figured out on a piece-work basis, it would be easy to find out just how much it costs to handle every item. You pay the clerks on a basis of time — by the week or month. It is obvious that a rapid, accurate man can handle a greater amount of work to a satisfactory con- clusion than a slow, inaccurate man. It is right here that the Burroughs Adding and Listing Machine demonstrates its utility in any cost department. 123 COST KEEPING SHORT CUTS Cutting The regular Burroughs can accurately handle 160 (^Q^g^g items a minute. There is probably not a clerk in your employ who can set down figures and accurately add them up at the rate of 40 a minute. Therefore the machine can work four times as fast as your most expert clerk. Remember, the Burroughs prints the figures and has a total just as soon as the figures appear on the sheet. But the average operator in an office cannot handle the machine as fast as it will operate. Let us say, for instance, that the clerk can handle a machine at the rate of 80 items a minute, which means that the machine and the operator are twice as fast as the fastest clerk without the machine. The gain in time, therefore, in handUng 1,000 items — and leaving out of consideration the vital matter of accuracy — is one that can very quickly be reduced to a dollars and cents basis. If you would check the items your clerks handle in every operation for even a single day, you would realize just how much this machine means. We We know cost departments with these machines where the daily increase of work has been handled through a period of six months to a year without increase in the force. In other places, where the work was more station- ary in volume, the work has been handled more quickly and accurately in a third to a half less time. In short, the Burroughs means a gain in money -saving efficiency in every line of work that the cost department handles, just as an automatic machine means a saving in time and a gain in efficiency in the factory. You cannot afford to pay men to handle figures that a machine can handle better, because it can handle them more quickly, and with less man aid; better, because it is absolutely accurate, while men are but relatively so; better, because it furnishes you with neatly printed sheets; better, because 124 K now COST KEEPING SHORT CUTS it is cheaper; better, because it frees your best men from Cutting drudgery, and lets them do the thinking, planning, doing q^^^^ of things that mean bigger results to the business. Bear these facts in mind when considering the cost problem in your business. It is the solution of how to get the cost facts with the smallest expenditure of time and work. 125 CHAPTER XVIII The Burroughs Machine and How it Helps the Cost Keeper BEFORE entering upon a description of the actual operation of a cost system it is well to describe briefly the machine which plays such an important part in the economical handling of the hundreds of items that must be accounted for. The Burroughs Adding and Listing Machine is a me- chanical device which adds, lists and tabulates numbers and amounts more quickly and accurately than the work can be done by hand and mind. It is something like a typewriter, only a little heavier, more compact and box shape, as shown by the illustration, and it is operated by a handle at the side or by a touch bar connected with an electric motor. See Figure 27. The keys on top are arranged in columns on a sloping keyboard. The mechanism is so constructed that the depression of a key, which stays down until released, does nothing more than set the machine. It is necessary to pull the handle or touch the bar before the item thus " set up " can be listed and added. The advantage of this is that it permits the operator to correct a wrong item when necessary before it is added and listed. When an item is set up incorrectly, the correction button marked "C" restores the keys to normal position, otherwise the handle pull restores them automatically after the item has been added and listed. The button marked "C" (Figure 27) is a general cor- rection button and is used when the whole item is to be corrected. The row of buttons at the top are individual column correction buttons and are used for correcting an error in one or more figui'es of an item. 120 COST KEEPING SHORT CUTS KEYBOARD BUTTON VARIABLE SPLIT DEVICE Fig. 27 Keyboard View of the Burroughs Duplex Cost Machine Electrically Operated. Time Amount Dep ' t 18^/ 8% 2.3 5 s% 2.0 1 1 2 3.7 9 6 1.5 1 6% 4.7 7 16% 4.9 3 1 3.0 7 S% 2 2 .3 5 - Fig. 28 Example of Cost Machine work showing how Time and Earnings are added and listed simultaneously. 127 COST KEEPING SHORT CUTS Fig. 29 Three-quarter View of the Burroughs Cost Machine Electrically Operated. ADJUSTABLE STOPS LEVER TO PASTE CARRIAGE BA(; CASE SCREW STOP ROD HOLDER Fig. 30 Rear VieW of the Burroughs Machine Showing the Carriage and its Principal Features. 1«8 COST KEEPING SHORT CUTS The button marked "E" is an eliminating button. The When it is depressed in connection with an item, the item jviLchin^ * can be listed but not added and the symbol {'11') printed at the side of it will indicate this fact. This button is used when department or account numbers are set in at the top of a list of items. Figure 31 illustrates this feature. Dep' t 16-//- >:^ 1 2 .4 2 S 2.2 4 2.2 4 2.5 4 2.7 5 2.4 5 3.1 2 3.2 2 2.6 5 1.9 7 2.1 1 2 .4 2 S 2 5 .2 8 -''- Fig. 31 The button marked *'S. T." is used for taking sub- totals. When it is depressed and the handle is pulled, the amount which had been accumulated in the machine is printed, but not cleared from the machine. This is shown in Figure 31, the sub-total being printed at the bottom of the first column and carried forward to the top of the second column. The button marked "Total" is used for getting totals. When it is depressed and the handle is pulled, the total in the machine is transferred to the paper and the machine is cleared. A star (*) is printed opposite all totals and an (s) opposite all sub-totals in order to distinguish them from other items and from each other. The total button should always be depressed and the handle pulled before an addition is begun. Thus any amount that may be in 129 COST KEEPING SHORT CITS . SUMMARY OF PIECE WORK DAILY TOTALS ■ FOR WEEK ENDING 12-11. 1909 | DEPT FRIDAY SATURDAY MONDAY TUESDAY WEDNESDAY THURSDAY TOTAL , « « * » * . * 1 6 6J2 4 6 5.3 5330 61^3 7 1.3 6336 3 8 1 .1 5 * s 27.56 2 2»0 2 4.6 2936 30X30 3130 1 6 5.4 2* 3 6 3.4 5 75O0 6 2.4 B4.C0 8 33 8 23 6 4 7 0.91* 4 1 4 2.45 13 2.4 5 15530 1 4 4 .0 6 1 5335 15 2>*5 8 8 0.4 6* 5 1 5 4.6 7 1 6 3.6 5 1 3936 1 5 0.3 J 6 4.6 1 5 5.7 8 92736* 6 6 3.5 6 5 53 7 5 3.0 6 1.3 5 71X30 6 23 6 367X34* 7 5000 4BA5 49XD0 5 9.7 9 5 1.45 5137 3 10.2 6* e 36.56 3 0.0 33XD0 35X30 4 1>40 40.47 216X3* 9 4 0.0 4836 41.46 4 1.05 52X30 39X30 26 2X37* .10 2 5.6 4 1.3 2938 2736 31>J0 31X38 1 8632* .11 4 3.5 5 0.0 4 1.9 9 4 430 4 4.60 40X39 2 6 4.6 8* .12 15.45 2 2.4 17.45 16A5 17.3 5 20X)0 109J.0* .1 3 2350 1837 3 1.46 3 23 3 2.4 30X30 1 68.43* .1 4 36.50 32X36 2837 3 7.45 40O0 4 1.08 2 15.6 6* .15 4 2.4 4 0.0 4 1.00 4 0X30 45X30 4 2.6 2 5 1.0 0* ^6 2 5.0 2 3.0 5 8 7.46 28.46 2 6.4 5 3 7.0 6 16 7.4 8* J. 7 1 3336 13036 1 4 2.4 5 1 2 5 .4 5 1 2837 15437 8 15.16* .18 4 2.4 5 4 1.3 4 3838 51X33 4137 4.0X3 8 255X35* .1 9 7 3.4 5 7 33 6 3.8 9 7 23 7 2.3 4 7 5.6 6 431.14* .2 2455 82X50 2 6.4 6 2 6.3 5 2 4.7 6 31^0 1 5 53 2* .2 1 5 3.6 7 4 33 6 5 23 7 5 2.3 5 23 3 48£8 3 3.31* .2 2 7 4.34 7 2.3 7 1.3 7 0.0 7 5.00 7 7.7 7 4 4 0.71* .2 3 4 6.0 4 2.4 5 3 9.6 8 5 0.0 5-1X3 5 23 3 281X6* .2 4 6 5.0 6 2.4 5 6 1.00 5 23 7 6 5.6 7 6535 3 7 0.24* .2 5 1 5 2.3 1 4 5.6 1 4 5.0 1 6 2.4 1 6 33 6 1 05X30 873.86* .2 6 12 3.5 11130 15 0.0 5 1^030 1 4 2.6 8 15 330 8 1.7 3* .2 7 52A5 4836 3 2.0 4936 4837 5 8.8 8 2 9 1X3 2* .2 8 4 7.6 6 5 2.4 5 3130 4 2.4 5 51X30 6130 2 8 63 6* .2 9 15>J5 2 2X)0 1 230 1 2.4 4 2 23 80X30 1 4.8 9* JO 3 23 6 3 5.0 2 2.6 6 3'1X3 5 4 130 27X37 18 9.6 4* .31 5 3.4 5 4 8.45 4 2.0 4 1.40 5736 3 7.6 7 28033* .3 3 3 63 6 2136 41J5 4 0.0 4 13 5 4 2.6 6 223X8* 1,90439* 1,841^4* 180238* 1,893X36* 2,0 3 3.7 6* 1,973^8* 11.4 4 8.6 5* Fig. 32 The machine carriage permits of tabulations similar to the above. This is a miniature reproduction of actual work. Note its neatness and uniformity. 130 COST KEEPING SHORT CUTS Fig. 33 No. 9 Burroughs Fig. 34 No. 11 Burroughs ISl COST KEEPING SHORT CUTS ELIMINATING KEY ISUB TOTAL KEV TOTAL KEY Fig. 35 , Keyboard View of the Burroughs Duplex Adding and Listing Machine. f/flMES 7^0/V. TU£S W£0. WUffS FRI s»r TOTALS. ^9H.S-H.J^ 300 2.9 5 30 2.7 5 3.0 2.8 17.5 0T 'J:ATAou^ 3.2 5 3.0 3.2 5 2.8 5 3.2 5 2.8 1 8 .4 OT 1? OTcCts^n^ 2.9 5 3.10 310 3.0 3.10 3.0 18.2 5T f3'iir(r<^^ 2.7 5 3.2 3.0 3.10 3.15 3.0 18.2 0T ^^:H'aXci 3.0 3.2 5 300 2.9 5 2.9 5 3.10 18.2 5T trn.TT^^mo 3.0 3.0 3.2 3.0 2.8 2.8 5 1 7.8 5T /\ d^.'^AArU 3.2 5 3.0 3.10 3.0 3.0 Crand 3.0 Tofat. 18.3 5T 1 2 6.8 09 Fig. 36 Sample of Duplex work showing how the machine is used for preparing a weekly pay roll. 1S2 COST KEEPING SHORT CUTS the machine will be thrown out and not be added in with The the items that are to be totaled. If there is no amount Machine * in the machine the star alone will be printed. The star is ySi signal to the operator that the machine is "cleared for action" and also a safeguard for the accuracy of his totals. The illustration in Figure 30 shows the machine car- riage, which closely resembles a typewriter carriage. The arrows indicate its principal features and the tabulated sheet in Figure 32, as well as many other sheets of similar nature that are reproduced in this book, show the kind of work that it can do. The illustrations in Figures 33 and 34 show two styles of Burroughs Machines, namely, the nine-column (No. 9) and the eleven-column (No. 11). These machines are illustrated for the purpose of pointing out two of the styles of Burroughs that are used in Cost Departments. Another style is the No. 9 Duplex, shown in Figure 35, together with a sample of its work. (Figure 36.) To all appearances it is the same as the regular machine The (the illustration closely resembles a No. 9), but it is con- "^ ^^ structed with two sets of adding wheels so that the • totals of any number of groups of items can be obtained and also the grand total of all the groups at one operation. In other words, a total pay roll for each department of a plant can be secured and by shifting a lever and pulling the handle again a grand total for all departments can be printed. Or, the total weekly or monthly earnings of each workman and grand total for all workmen can be obtained at one operation. The fac-simile illustration in Figure 36 shows a sample of Duplex work. It is impossible to outline every operation in a cost system where an adding machine can be used to advan- tage, but we can give suggestions and illustrations where it has been applied in our own and other cost departments that will show the versatility of a Burroughs. 188 COST KEEPING SHORT CUTS The While we build a number of different styles, it doesn't Machme signify that each style is cut out for its own little batch of work and no more. The difference in styles consists principally in the difference in sizes ranging from 6 column machines to 17 column machines, and embracing special features that are intended to handle special work. The machine we ordinarily advocate for a cost depart- ment is the Burroughs Duplex Cost Machine of 15 columns with electric drive, 1^3^ inch carriage and arranged to add amounts of earnings and time (either in hours and }/i fractions or in hours and minutes), at one operation. The fraction keys constitute the special feature of the cost machine, but this in nowise interferes with its adding and listing ordinary amounts, or its capability for tabulating final results on statement sheets, or whatever report forms are necessary. Take for instance the machine shown in Figure 27, which is the Duplex cost machine. 18-//- 3 7)/ 1 2.6 5 4 4)/ 1 4.4 5 5 4 1 8.6 5 3 5% 1 1.4 4 5 4 1 8.0 5 7 2 1.3 5 4 4)/ 1 5.6 3 2 7 1 1 2 .1 4 - Fig. 37 When it is desired to add workmen's time and amount of earnings, from the labor tickets, by workmen, accounts, departments or other classifications, the operator first 134 COST KEEPING SHORT CUTS .1 Burroughs ^"^ Machine prints the reference number, using the ehminating key The to prevent it from adding. He sets the time in left hand section and the amount in the right hand section. Then by touching the electric contact bar both items are printed on the paper and added. The second pair of items is taken off in the same way, and so on until all items for the classification have been added and listed. Then by depressing the total button and touching the con- tact bar, the two totals are printed as shown in the illustration. Note the department number, the listed items and the totals in Figure 37. Now, suppose he wants to add some requisitions for material to find the cost of material for a certain job. He uses the right hand section of the machine and runs off the amounts as shown in Figure 38. Again, suppose there are some extensions to be made. For in- stance, 3425 pieces at $2.14 per hundred and 1495 pieces at $4.12 per hundred. These extensions in- *^'^^ volve multiplication which can be done very quickly on the machine, getting an absolute proof of the work. The right hand section is used for these operations and the calculations come from the machine as shown in Figure 40. By pointing off the result the proper number of places, the amount in dollars and cents is obtained. The decimal points in this case are represented by the vertical lines which are put in by hand. One of the greatest advantages of a listing machine for such work as this lies in the fact that every step of the calculation is printed on the paper. When the operation has been completed the work can be quickly proved, first by inspecting the amounts listed (these representing the Job 6 3 3-/^ 3.3 5 4.5 5 1 2.0 5 2.3 6 4.0 2.5 5 3.2 5 1.4 5 3 3 .5 6 ^ 135 COST KEEPING SHORT CUTS No. M. 13.3 6 Hours 3 4 $/Sl.2 5 DIME Savings Bank Bank Hours, 9 to 3. Saturdais, 9 to 12 and 6 to 8 p. m. Capital, - - - - . $500,000 Surplus and Undivided Profits, - 275,000 Stockholders' Additional Liability, - 500,000. Guarantee Fund for Depositors, $1,275,000 Griswold Street, cor. Fort Street l^9i 'Woodwarii Avenue n74 Jefferson Avenue 407 Gratiot Avenue DETROIT, -- MICH. Fig. 39 Pay envelope showing a workman's Number, Time and Earnings recorded with the Burroughs Adding Machine. 186 COST KEEPING SHORT CUTS 3 4.2 5 1 4.9 5 3 4.2 5 • 1 4 .9 5 3 4.2 5 1 4 9 .5 3 4.2 5 1, 4 9 5 .0 3 4 2 .5 1, 4 9 5 .0 3, 4 2 5 .0 1, 4 9 5 .0 3, 4 2 5 .0 • 1, 4 9 5 .0 7,3 2 9 .5 - 6,1 5 9.4 0-^ The Burroughs Machine Fig. 40 multiplicands), and then counting the number of times the amounts have been repeated, thus checking the multipliers. A very little practice soon makes a machine operator quite expert in multiplying, and when once he has mas- tered the operation he will never give it up. If it is desired to enter the amounts of pay on the envelopes, the machine can do it quickly. See Figure 39. The operator places the envelope in the carriage and turns it up to a certain point, which his eye soon becomes accustomed to, thus enabling him to do it very rapidly. Then he sets the workman's number in the left hand sec- tion (ignoring the fraction column altogether) depresses the eliminating button and pulls the handle. Then he sets the time in the left hand section and the amount in the right hand section. A touch of the bar lists both items and adds only the amount. The envelope is turned out and another inserted, the The number, time and amount being set down on it in the same manner. When all the amounts have been set down, the total that shows on the adding wheels. should agree with the pay roll total. If it does, the pay roll clerk knows that the correct amounts have been printed on the envelopes and that there is no necessity for checking Envelope 137 COST KEEPING SHORT CUTS Fig. 41 Pay Roll prepared with a Burroughs Adding Machine, showing master sheet containing the names. The time and earnings are added and listed simultaneoulsy. 138 COST KEEPING SHORT CUTS them back to be sure about it. If the total by depart- The ments is desired, each total can be noted as soon as the Ma^chin^ ^ last envelope for each department has gone through the machine. In cases like this, the Duplex Machine enables the operator to secure the total for each department and a grand total for all departments without recapitulating the department totals. We made a test of this method with a number of envelopes, and found that the amounts could be written by machine and the total checked much more quickly than it was possible by hand. The illustration, Figure 39, shows an envelope prepared by the Cost Machine. Then the pay roll clerk may want to prepare a pay roll sheet recording workmen's hours and amounts. He inserts the pay roll sheet in the 12}^-inch carriage, which will accommodate sheets up to that width and runs off the time and amounts, adding the amounts only. All that is necessary is to set the number in the left hand sec- tion and the amount in the right hand section and touch the bar. The machine does the rest as shown in the illus- tration. See Figure 41. Hours and amounts of both day and piece workers can be added and listed at the same time with the Duplex Machine, securing totals for each and a grand total of both. The illustration, Figure 42, shows how this work is done. The items opposite the symbol (?) are for Fig. 42 piece workers and are ■k * 5 4 % 1 2.3 6 4 5/2 1 5.0 39 1 3.0 1 4 Q-^l^ 1 7.5 5 • 54 1 8.0 4 i 'A 1 9 .4 5 1 1 7 /2 1 1 .4 i 1 3 8 '/a 6 1 .4 s 1 5 3 % 4 5.3 6 T 2 9 2/4 1 Q 6.7 6 * COST KEEPING SHORT CUTS The added in the lower counter, while the other items are for Machfne ^^^ workers and are added in the upper counter. The first total opposite the " s »» jg for piece workers, the next total opposite " t *' is for day workers and the last total opposite " * '* is the combined total of day and piece workers. When the cost keeper wishes to prepare his summary or report sheets he places them in the machine and runs off column after column of figures, just the same as he would do on a typewriter, with the added advantage that he can print a total of each column as soon as the last item has been listed. See Figure 32. A These are a few of the many things that one Burroughs Only ^^^^ Machine will do, and we call your attention to them in order to impress upon you the fact that it is an all round assistant in the Cost Department and not a machine whose special features limit its capacity for work or one that is to be used for " adding " only. Where a cost department is large and can use several machines more economically than one, we usually advo- cate that some of them be cost machines and some regulars. Under these conditions one, two, three or more clerks are often delegated to the task of getting total time and earnings of workmen, and need the cost machine for this special class of work, while others are employed in straight adding and listing of material requisitions, or in making extensions, which can be done on regular machines. However, when only one machine is to be used in a department and time and earnings are to be added and listed, pay rolls prepared, extensions made, etc., the Duplex Cost Machine should be installed by all means, because it is far better adapted to all the different classes of work that will be required of it. 140 CHAPTER XIX Cost System in the Burroughs Factory THE Cost System in the Burroughs Factory will be made clearer by first giving a general idea of the route raw material takes, and describing the two distinct processes necessary to complete an adding ma- chine. The first process consists of converting the raw material into finished parts which are ordered in lots ranging from several hundred to several thousand, according to the quantity we have found advisable to keep on hand. These parts, after having been inspected, are turned into the Finished Stock Room. The next process is the assembling of the parts into the complete machine. Our cost records take into con- sideration both of these processes, the two being handled along very similar lines. The diagram in Figure 43 gives a good idea of the route that raw stock takes through our factory, from the time it is received in the Raw Stock Room until the completed machine is received in the Shipping Room. All orders for new machines or parts originate in the Superintendent's oflSice. When the finished stock keeper discovers that a certain part has reached the low water mark, the Superintendent's oflBce is notified and the Production Order for new parts is issued, the order being sent to the foreman of the department that is to perform the first operation upon it. A cost record card is sent to the cost keeper notifying him that the job has been started. A requisition is also forwarded from the Superinten- dent's oflSce to the raw stockkeeper, notifying him that a certain amount of stock will be withdrawn by the foreman 141 COST KEEPING SHORT CUTS A Cost System for that job. When the foreman receives the material, one or more of his men perform the first operation upon it, and he sends in their time tickets to the Cost Depart- ment and passes the partly finished product on to the next department, after it has been O. K'd. Each department that performs an operation on it sends its time tickets to the Cost Department. As soon as the last operating department has finished the job, the parts are sent to the Finished Stock Room and the Cost Department is notified that the job has been finished. The Cost Department can then recapitulate the labor cost of the job, the material cost and figure the burden, getting the total cost of the job. Rm STOCK /? y^M r r aJ f<'G:3o FOREMAN'S 0. K. / ;o.. .^^o» .,„.. %a^ BURROUOHS AOOIMO. MACHMI CO. FACTORV rORH HO. ■» Fig. 48 Each workman turns in a time ticket on completion of each job or operation 150 COST KEEPING SHORT CUTS a 1 1 1 : 1 . j 1 i ; i 1 1 i U ■. ■. X : j i ; j : 1 j : . i i : « MINI 1 i j -1 8 i i j j i i i i ; ; 1 M 1 M z i i 1 j ■ ■ i i kl z 1 1 : j ! i i i • : ! z ; ; i j ! i 1 1 i ! 1 : : i [ : 6 >> ° < z i ^ i 1 i : = i c ° 1 1 I i i ; i i : i i i ^ c« o. i ! \ E 1 \ \ 1 o i i U : 4> < C . i > 1 — flc I'll JZ U M s s O Q ' : t 2 Ma ORI .. A.O 1 ^ i • > i ! i btiCO 1 i 1 c p « H i 1 i tot •o O i i z •o < 1 1 i i < "^ M M 5 tA 1 i 1 {: y ' 4= P i i 1 i t bjD i o i i 1 1 i S " ^ (t i j 1 i Ih : 1 j i 3 ,00 1 i 1 i 1 i 3 - i I 2 1 j ! i h ' 8 i s i ; 1- y z 6 1 5 3 ; I s § 1 ? < i •* S 3 M 1 I' - O ji I o i 5 " T K C X H I) u a ouosau 1S03 6 'S o o o 161 COST KEEPING SHORT CUTS O s D -I < E ill < < z < < i S * 1 t 1 5 1 I I 1 < z 111 z X :5 1 IS < Q V) !;; 8 z hi O a m « s 3 Z u o n: 2 * ^ cc s 2 3 I Z (T 3 O a I m a 3 I c 2 c bJ 1- O u,0 o +-> PQ « 152 COST KEEPING SHORT CUTS In our factory a separate time ticket is made out for A each operation, one man turning in from one to a dozen System tickets a day, according to the nature of his work. The foreman's clerk makes out a ticket for each work- man when he begins a job and checks the time on the tickets at the completion of the job. The various jobs, operations, departments, etc., are identified by numbers on the time ticket. We use two different kinds of time tickets, one for day workers and one for piece workers. The day workers* ticket is shown in Figure 48. The piece workers* ticket is similar, but is yellow instead of white and is made out in duplicate, the original having a carbonized back to save using carbon paper. These tickets are arranged in pads, every other one being carbonized, with a duplicate between each so that no extra time is re- quired in filling them out. The reason for using duplicate tickets for piece workers is that it facihtates the checking of the pay roll. The single ticket serves for day workers as will be shown in the description of checking the pay roll which follows : Every morning the time tickets for the previous day are sent to the time keeper, who sorts them by depart- ments and then by workmen. The first thing done is the checking of the extensions on the piece workers* tickets. The day workers' tickets are checked by another process which is described in detail later on. After the piece work ticket extensions have been checked, both they and the day work tickets are added and listed at separate operations on the Duplex Machine, which secures the day*s total of hours worked and amount earned by each workman and at the same time automat- ically recapitulates these totals, giving the total hours and amounts for all the day workers and all the piece workers in the department. 153 COST KEEPING SHORT CUTS A Since there are 9^ working hours in a day, the total System ^^"^^ ^^ esich workman, as shown on the adding machine slip, should be 9^ hours. In case it is not 9^ hours the time keeper knows that either the ticket was made out wrong or that the workman did not put in the whole day. Any undertime is immediately checked by comparing it with the workman's clock card, on which is registered his time of entry into the factory. OAll.Y PROOF RF.PORT TIfpt No // n^rr / - 2.S~- '/O ACCOUNT NUMBEK HOURS AMOUNT HOLRS ^ 29 'U 4 7.0 PRiCEDINC DAYS ALLOTMENT fQ32. '/4 3o3 »? lo 32 'U 9 34 *DD KEW RMPLOYXS 9 % / 9S la 12 '/a. S 23 CHANCES OF RATEf IS 425. 'U f2S Ol TXJTAL lO^Z 3oS o^ /6 Joo '/z 9Z OS DEDUCT: EMPLOYES QUIT f9 h 4 oo 17 /97 '4 S3 92 ^3 29 /v // 7o PRESENT ALLOTMENT lOZZ 'h 3o/ Oi^ ADD OVERTIME AND ALLOWA^^ES 10 '/z 2 36 PIECE WORK TOTAL /03:^ 3o3 4o DtDKI LATEs'i ABSEHTFES 6 'k / 9S TOTAUS /OZ6 Vz. 3o/ ^S PAY ROLL /026 /2 3o/ V^ it7Si>t.l.'HjlH.aill'.i>^ : 1 Fig. 51 Daily Proof Report. This, however, does not show why the workman did not work all day and for this purpose we use a "Daily Proof Report" and a Time Keeper's Daily Report, as shown in Figures 51 and 52. It is obvious that if all the day workers in a depart- ment, whose daily earnings for full time are known to the cent, are present, that the total amount of time they will put in and the amount of money they will earn can be known. These items of time and earnings, based on the assumption that all the men work the full day, are shown in Figure 51, opposite "Preceding Day's Allotment." 154 COST KEEPING SHORT CUTS TIME-KEEPER'S DAILY- REPORT. ^ Department No /.? Date L..Z. ^..Z.. .f? LIST AND CLASSIFY UNDER PROPER HEADING ABSENT, LATE, PASS OUT QUIT, STARTED, OVERTIME & ALLOWANCE. AND CHANGES OF RATE. NO. NAME HR'S AM'T NO. NAME HR'S AMT ^T^iljLA^i ^ ^ ^ f XZiZ^^X /a (^}a^KJL<^ f^ ^/ ^ / r^ co-^^^<^ % <^ (OyfJ.^^ fe /p ^ ^/^ -^dLu/ttur ^ /i^i of / ao m ^/h&^eju4^ e) 9o lio UTLeer Z fk .^^^ ^^ /r ILI LAJle^L^y^ (>'A / t£ TIME-KEEPER FOREMAN 208835 Burrougha Adding Machine Co. Factory Form No. 377. 1 Fig. 52 Time Keeper's Daily Report 155 COST KEEPING SHORT C UTS A Now in case any of the day workers are late, or absent, System ^^ ^"^^> ^^ ^^^ employes come in, these facts are noted on the time keepers Daily Report for each department. These reports are made out by the time keeper from the clock cards and from "discharge" and "new employes" slips, which are sent in each day by the foremen. They are then O. K'd by the foremen of the various depart- ments. See Figure 52. This report refers both to day workers and piece workers and gives the reasons for any undertime that may appear on the adding machine slip previously described. Only the lates, absentees, quits, etc., for day workers are transferred to the Daily Proof Report. On the report in Figure 52 is shown a new employe at $1.95 per day, who is added to the allotment. Next come two employes who have quit, which takes away 193^2 hours and $4.00 in earnings. The next item shows 10 hours and $2.36 to be added for overtime and the last item shows 6}^ hours and $1.95 to be deducted for lates. Compare the items in Figures 51 and 52. After making these additions and deductions, the remaining 10263^ hours and $301.45 is allotted for the current day and should agree with the grand total for day workers on the adding machine strip. If the department is one having both day and piece workers, the total hours and amounts for piece workers are entered on the Proof Report in a space alloted for that purpose and included in the current day's allotment of hours and amounts. This system not only checks the day workers' tickets, but catches errors in filling out these tickets and prevents any being lost. It also checks the pay roll for day workers. The piece workers* pay roll cannot be checked until the end of each week, when the pay roll is made up. The time put in by piece workers, however, is checked against 156 COST KEEPING SHORT CUTS BURROUGHS ADDING MACHINE CO. DETROIT, MICH. 191- TO THE TIMEKEEPER: Mr PAY FOR THE WEEK ENOINQ. SHOULD BE AS FOLLOWS:^ DAY WOKfC ?/// .....,s,/.. PIECE WORK. TOTAL. M,3J2.. *.«.« i^.. «.». .^<^^-!. ^^^^i^.. B. A. M. Co. Korm 45! Mm-3 2»-IO 0. M. A T. Co H'*^ Pig. 53. Employe's Claim Ticket PIECE WORK RATE . DATE CTul.lJSio svM.No. Q03y^D / REMARKS: #/J" 1 DEPT. NO. OPER. NO. OPERATIONS Date PRICE PER lOO DXTE PRICE PER 100 / /O/ 5Uc£^ .08 Fig. 54. Piece Work Card 167 COST KEEPING SHORT CUTS Burroughs > Addi >ek Endln ime ng Machine Co. „ DEC 15 1910 No. 850 Nj Rate ^2^ Hours C^^ Amount ) // Si (piece work amounts shown in rc» Additions Total Deductions Net Amount Due w* IN OUT IN OUT IN OUT ?oT.Is FBI 6.27 I2;28T~" SAT 6:30 IZJO! ^ SUN 1 MON 6;Z5 12:25 TUES 6:30! 12:29! WED 6:29 \l'\'^ THUR 6:27 f2:20 Rece irad PaymenL B. A. M. CO. FACTORY FORM NO. 892 Q- M. * T. CO. Fig. 55 Clock Card 158 COST KEEPING SHORT CUTS the clock cards daily and any undertime or overtime is A accounted for on the time keeper's Daily Report. System After the checking has been completed, which by the way is accomplished in very short time, the day workers' tickets, the duplicates of the piece workers' tickets and the Daily Proof Report are sent to the Cost Keeping Depart- ment, where they are used in figuring the cost of the var- ious jobs and in making the labor distribution to accounts. The time keeper then files, by workmen's numbers, the original copies of the piece workers' tickets in an ordinary cabinet file behind guide cards, which bear the numbers of the workmen. They remain here until the end of the week when the pay roll is made up. Then they are taken out and added on the machine, getting the total time and earnings for each man. The total time for each man is then checked against the time shown on his clock card and the total earnings are checked against his claim ticket, which is turned in previous to making up the pay roll, and shows what he has calculated to be his earnings for the week. See Figure 53. In case there is a discrepancy of more than five cents between the time keeper's total and the workman's calculation, the time keeper refers the matter to the foreman for adjustment. After the weekly totals for the piece workers have been checked, the amount is entered on the clock cards from which the pay roll is prepared. The total earnings for day workers are entered on the day workers' clock cards by extending the total number of hours worked and the rate per hour. There is a cabinet containing rate cards, similar to that in Figure 54, on which is written the rate per hundred or per piece for every part manufactured. These are referred to from time to time for checking the rates entered on the piece workers' tickets, it having been found un- necessary to check all the tickets daily in this way. U9 COST KEEPING SHORT CUTS A The Burroughs Pay Roll Sheets are tabulated on a System Duplex Cost Machine, which has two complete sets of adding wheels or counters, enabling the operator to record the hours and amounts of earnings for both day workers and piece workers and at the same time to accumulate the total hours and amounts for day workers and piece workers, together with a grand total for both. This is all done at one operation, the work appearing as shown in the columns on the left hand side of the pay roll sheet in Figure 56. In order that this work may be done in one operation, the keyboard of the Duplex Cost Machine is split into three sections, one of which records the rates of day workers, another adds hours and fractions of hours and the other the amounts earned. This is done by setting up in the hour section the number of hours put in by a workman and in the amount section the wages earned and pulling the handle, both items printing and accumulating. In case a rate is used it can also be printed at the same time the hours and amounts are printed and added. The two counters comprising the Duplex mechanism are controlled by a little lever located at the left hand side of the keyboard. By means of this equipment the machine can add and list the hours and earnings of both day and piece workers and secure the total hours and earnings for both in one operation. When the machine is to be used for ordinary adding and listing, the upper counter is thrown into operation by shifting the Duplex control lever into the upper position. When necessary to use both upper and lower counters, as when the earn- ings for day and piece workers are added and listed at one operation, the upper counter items are entered with the control lever in the upper position and the lower counter items are entered with the control lever in the lower posi- tion. The lower counter items are distinguished from the former by the little dot and bar, shown in the illustration. 160 COST KEEPING SHORT CUTS Furthermore, it is possible to accumulate items in the A upper counter and to print the total of these items and at gystem the same time clear the upper counter for another addition and transfer the total into the lower counter. This is accomplished by setting the Duplex control lever in the upper position and using the transfer total button instead of the regular total button. When the machine is work- ing this way the lower counter acts as a kind of reservoir for the totals accumulated in the upper counter and thus automatically recapitulates a grand total for any number of totals that may be printed with the upper counter. The grand total may be printed at any time by shifting the Duplex control lever to the lower position and then depressing the regular total button and pulling the handle. The working of this machine as applied to pay rolls will be more clearly understood by following the method described in preparing the Burroughs Pay Roll. The first thing the operator does is to clear both upper and lower counters. This is done first by shifting the Duplex control lever into the lower position, pressing the total button and pulling the handle and then repeating the operation with the control lever in the upper position. This gives assurance that both counters are cleared for action. All piece workers' time and earnings are then added in the upper counter and all day workers' rates, time and earnings are added in the lower counter, the items being taken directly from the clock cards. (Figure 55.) Upon listing the last item, the control lever is shifted to the lower position and a sub-total taken. This opera- tion prints the total day workers' hours and earnings. Then the control lever is moved to the upper position and a transfer total is printed which prints the piece workers' total hours and amounts. Since the printing of the sub- total does not clear it from the lower counter and since the total in the upper counter has been transferred to the 161 COST KEEPING SHORT CUTS BURROUGHS ADDING MACHINE COMPANY SHEET NO. 1 » o OEPT 8 » PAY ROLL FOR WEEK ENDING I ,19 . 19.11* Pltct «>.> DAV »ORk A0OITlO^i. DtrxCTioss ««V«KS LMCLOIti' ""'dcT' lU. H— A— H.^ A— »-. A*.- ! : i 5 4 18.5 8 900 1 8.5 8 32 2 4.00 : 80 1 24J30 22 53il 94 1 1.83: 1 5.7 802 803 I 1.83 1 5.7 3 4''i 1 1.9 3 y. 5 805 1 1.88 4 9 '/. 17.5 8 ' 806 17.5 8 1 3.3 5 807 13.35 2 X 6.80 : • ■^ 608 1 0.8 22 1X15 : 1-9.0 8 809 810 1.05 19.0 8 I 7.87 k 15 8 1 1 I 7.7 2 4 8 i 1 5.7 8 812 1 5.7 8 5 Jk 1 8.3 7 813 18.37 2* 1 2.9 6 : 814 1 2.96 26 34 14,04 : 17.2 1 815 8 16 I 4.0 4 17.21 4 4 ■/. 15.6 2 817 1 5.8 2 13.54 813 I 3.5 4 24 I 2.9.6 : 819 18.9 6 19J7 820 I 9,37 1 8.69 821 1*8.69 I 7.19 822 17J9. 28 I 5.3 Z: 823 15J2 40 2 1.60 : l"8.7 5 324 825 2 1.60 18.7 5 1 6.6 9 826 1 6.8 9 33 17.8 2 = 1 5.2 1 828 17.8 2 1 5il 30 16.ZC: 829 1 6.2 24 1 2.9€ : 830 1 2.9 S 29 1 5.6 6 : 831 1 5.66 16.9 3 832 16.9 8 1 7 .3 6 833 1736 6 7 3'<, 1 8 7.0.0 5 1 20: 5 2 2J0S5 o 10 9'* 3 J 5.2 5 T 168 3 5 2 2.2 5 • Fig. 56 162 COST KEEPING SHORT CTJTS lower counter, it is obvious that the lower counter now A contains an amount equal to the sum of both. By shift- gygteu, ing the control lever into the lower position again and taking a total in the usual way the grand totals of day and piece workers' "1683" hours and "522.25'* are printed. The cards are then turned through again and the workmen's numbers and net amounts entered at one operation, only the amounts totaling. This work is done on the upper counter, the operation being identical with that of a regular machine. - Next the additions and deductions are added and listed and the sheet is proved by checking the grand total of earnings plus additions against the total net amounts, plus the deductions. After the items have been run on the pay roll sheet, the clock cards are re-distributed to the card racks where each workman secures his card and signs it. He then presents his card as a receipt at the pay master's window and receives his pay. The cards are afterwards filed and kept for a limited time and the pay roll sheets are placed in a loose leaf binder, serving as a record of the amount of money paid to the employes in the different departments. • No names are recorded on the pay roll sheet. This has been found unnecessary, because the clock card is the original source of entry and also serves as a receipt from the workman. In case any dispute should arise the clock card is consulted rather than the pay roll sheet. By doing away ^with writing the names we have greatly simplified our pay roll and made it possible to prepare it in much less time. The eflSciency of the system can be judged by the fact that it takes care of some 1400 men weekly and has been in successful operation for more than a year. We also prepare a pay roll summary each week, showing only the total amount of money paid out for labor in the different departments. This summary is made up with the adding machine as shown in Figure 57. COST KEEPING SHORT CUTS SUMMARY OF PAY ROLL o FOR WEEK ENDING 12-11, 1909 OEPT SHEET DAY WORK PIICC WOBK TOT.. DEDUCTIONS .NET AMOUNT DUE «• * i4 2 6 1 .9 9 2 6 1.9 9 .2 3 6455 6455 6455 .2 4 52 350 52350 52350 .25 1 5 5.6 6 7 3 650 8 9 2.16 1.15 6 9 1 1 .2 6 1 66.45 1 6 6.4 5 5O0 1 6 1 .4 5 .2 7 22350 89455 1.1 1 60 5 1.1 1,60 5 .2 8 1 6 3.4 5 L32555 l,4g9O0 1.4 8 9O0 .3 9 8 8.45 8^.4 5 lOO 8 7.45 30 1,2 0.0 1,2 coo 1,20000 o 31 1,52500 3.525O0 3.6 2 1.521.38 3 2 15 3>i5 500O0 65ZA5 653.45 1^26335* 11,746.40* 24,01 1.75* 6B.18« 23^94357* Fig. 57 , Summary of Pay Roll made on a Burroughs Adding Machine 1Q4 COST KEEPING SHORT CUTS The first thing done upon receipt of the workmen's A time tickets in the Cost Department is to sort them by gystem departments and accounts and get the total number of hours and the amounts for each account in each depart- ment by adding the tickets on the adding machine. These totals are posted in the columns on the left hand side of the proof reports for the various departments and the grand total of the totals for the various amounts on each card must agree with the current day's allotment, as shown by the total hours and amounts which have been entered by the time keeper on the right hand side of the ca^d. In this way the daily distribution of labor, by accounts and departments, is secured and checked. See Figure 58. In case the proof report is for a department in which both day and piece workers are employed, the total hours and amounts for the piece workers are entered in spaces allotted for that purpose by the time keeper, so that in the distribution of the day and piece workers' tickets by various accounts the grand total will check against the grand total that appears at the lower right . hand side of the proof report. After this operation is completed, the time tickets are filed in cabinet files behind their respective cost record cards and continue to accumulate day by day until the cost keeper receives notification, in the form of a box card which follows the job through the factory, that the job has been completed. The proof reports in the mean- time are filed in a separate compartment, and the six cards for each department, covering one week, are recapit- ulated at the end of the week, in order to secure the weekly labor distribution by departments and accounts. Figure 58 shows proof reports for a week and Figure 59 shows a sheet on which these proof reports have been summarized, giving the total hours and amounts for department 5 and accounts 15, 10 and 22 for one week. 105 COST KEEPING SHORT CUTS DAILY PROOF REPORT. dept nc ._ Date L Z DAILY PROOF REPORT. oept no._b5::_ date HOURS AMOUNT A? /tei^ i2,£? /^■y PRCCeoING DAVS ALLOTMENT HOURS AMOUNT /^JZ 3il ^ I I HOURS AMOUNT /^ /OS i2^ ^ PREC ED ING DAYS AL L OTMENT /(jTjg __ 3^ ^7 HOURS AMOUNT DAILY PROOF REPORT. Dept No ft- v^ HOURS AMOUNT /qT* /go ^ 23 1* PR EC EDING DAYS ALLOT MENT /^^i? ^ Jjg f^ HOURS AMOUNT DAILY PROOF REPORT. ~jj-j^r~ — /^\ ffm 22Y**\ PRECEDING DAYS ALLOTMENT | //jg^ | ^ | ^^Yf_ -1-^ DAILY PROOF REPORT. 1j ^-| f^l I— ^ 11 77 4^^ PRECEDING DAYS ALLOTMENT HOURS AMOUNT l.£^^^2^fL DAILY PROOF REPORT. lA. /CO ^. d^ PRECEOINO DAYS ALLOTMENT M2. 34^ V ^ ^ PLUS NEW EMPLOYEES ^ S-o Jz.tk'A MINU S EMPLOY E ES QUIT PLUS OR MINUS CHANCES Of RATE PR ESENT A LLOTMENT JJLL % J^L PLUS OVERTIME AND ALLOWANCE MINUS. ABSENT AND LATC /Lf\ % \ ^^ \ ^ payroll] /^f\%\ J^l^y Hurroufttn Adding Maililne fo. Fsclorj Form No. 137 Fig. 58 Daily Proof ReporLs for one week for Department 5 COST KEEPING SHORT CUTS WEEKLY SUMMARY OF LABOR DISTRIBUTION FOR WEtK ENDING ll-T. 1909 MPT MD DCTAILS [ ACCOUNT TOTALS J OEPARTMINT TOTALS NOS. HOURS j AMOUNT HOURS AMOUNT HOURS AMOUNT 5 <, 1 5 10 2'A 105 100 9 8^ 99 100 2358 241 5 ^300 2 2.6 2 2.7 7 2300 604% 139.10* 1 42 16 •J7'A 4 1 4 3714 9.2 4 7.9 2 8.2 5 9j02 8.8 8.2 23 3% 51^3» 2 -^ 37 2154 35 2 5 37 2 4 5% 5.9 4 4.7 9 55 550 5.9 4 5.3 9 15014 3306» 9 8 ay. 22359« 1 8 256 251J4 340 24 5 24 7V4 ,3 5 1 5 6.3 2 55.28 5 2.8 5 3.9 54.45 5 5.2 2 1 490H 3 2 7.9 7 • 1 4 7 1 72 7 5'A 70 70 71 2201 2 2.3 2 ^3.41 21.70 2 1.70 2201 4 2 914 133.15* 1 2 1 9'A 1914 1 9% 19'A 19'A 19'A 60 5 60 5 60 5 605 605 605 117 3,6.3 0» 1 3 11% 27 2 5% 29 30 30 75 6 6.4 8 6.18 6.9 6 7.2 7.2 17 3'/. 4 15 e* 1 7 4 314 4 4 4 5 39 3 9 ft 4 0. 9.9 5 1 0.1 2 10.3 5 8.9 7 909 92 250% 5 7.6 8* 246114 5 9 6.6 8* Fig. 59 Miniature reproduction of a Weekly Summary of Labor Distribution prepared entirely with the Burroughs Adding Machine. The hours find amounts are added and listed simultaneoulsy. 167 COST KEEPING SHORT CUTS MONTHLY SUMMARY OF LABOR DISTRIBUTION FOR 4 WEEKS ENDING 11 -28. 1 909 •eCOUNT DETAILS 1 BURDEN ACCOUNT TOTALS ( TOTAL HOURS AMOUNT HOURS 1 5 5 6 4 y. 610 6 1 5 V4 6 3 1 13 9 10 1 4 6 .4 1 4 7 .6 6 1 5 1 .4 4 10 114 7 1 2 1 4 'A 132 1 1212 2 6 3 .8 1 2 7 9.3 4 3 3.8 3 278.76 5 6 3.2 1 2461 5 8 4.6 0* 22 3 7 5'A 410 3 9 8 'A 360 1 16.4 1 1 2 7.1 12 3.4 6 111.6 1,1 5.3 4 9 4 'A 1,12 5.7 4* 1 8 6 1 49054 14 5 6 1 4 3 2 Vt 1 488 3 2 7.9 7 3 3 0.3 2 3 15.1 5 3 2 7.3 6 367i8 2, 3 5 .6 9 154354 3 89914 47837* 2,138.91* 4,2 2 4.6 0* 7 2 3 4 1'/. 2260 2 19 854 2 50 7-1720 7 3 3 .2 7 3.6 800.0 1,075.20 5 3 6 7/4 1,290.80* 9 1110 1 1 1 3 14 1 1 2 5 '/4 114 2 . 2 4 4 .2 2 4 4 .9 7 24736 2 3 1 .2 4 2,7 3 1.10 920 a9 4 4.0 0* 1 3 3 654 32 1 3 4 5'A 315 9 8.08 1 2 .7 3 11056 10 0.8 9 3 2.3 4 4 490% 9 8 7.97* 1 6 3 6 1'A 550 571% 569 17 407 17 050 1 7 7.2 4 17 6.3 9 3 9 5.6 1288 4 12.16* 17 780 787 7 92 'A 760 2 4 1 .8 2 4 3.9 7 2 4 5.6 8 2 3 5.6 6 5 1.2 2 2 2 5 2/4 6 9 8.2 0* 2 2 2 1 'A 2 23 1 2 2 5 1 '/4 3'2 6 4 8 4.3 3 4 9 0.8 2 4 9 5.2 8 4 9 7.2 92130 311914 967X35* - 1,9 123 , 8;619JD6 •894 3% 3 5 1 6 1 V4 1,967^3* 9.267.81* 17.88 6.67* Fig. 60 A Monthly Summary of Labor Distribution made with a Burroughs Adding Machine. The hours and amounts are added and Hsted simultaneously. 168 COST KEEPING SHORT CUTS The summary sheet also includes labor distribution A for department 6 and accounts 18, 14, 12, 10 and 17, gystem which is taken from similar proof reports for department 6. At the end of the month the four weekly labor distribution summaries are recapitulated for the monthly summary in such a way that the monthly totals of labor distribution are shown for the various departments falling under the different accounts. Thus in Figure 60 the upper part of the sheet shows the labor distribution for account 15, which is the first item in the left hand column and is divided to cover Departments 5, 10 and 22. In this way we secure the total amounts of labor to be posted to the various accounts in the factory ledger. The posting is done once a month. In addition to the labor distribution by accounts, we keep a record of the distribution to sub-accounts, as shown in Figure 61. In this case the account, No. .74-05, refers to the repairs on tools and dies for the screw machine department. While the regular monthly distribution will show the total labor and burden to be charged to account 74, it does not analyze it sufficiently; hence the use of the sub- account distribution cards. The sub-accounts for repairs are closed monthly and the time tickets, covering the labor for this purpose, are sorted first by accounts and then by sub-accounts, then by departments, and the total hours and total labor for each department are secured with the adding machine and posted on the card. Then from these cards the entries can be made to the sub-accounts in the factory ledger. When a job has been completed all the time tickets. Figure 48, and material requisitions. Figure 62, referring to that job and which have been filed behind the cost record card, are first sorted by departments and then added and listed on the adding machine, securing the total labor cost for each department that has worked on the job. 169 COST KEEPING SHORT CUTS OPERATING EXPENSE SUB-ACCOUNTS no. 7^ OS ....... ScAJLu^ "hLojJr.. cS^A^ !".?;„., (&/u,U^^ ^-0^*^ y (&.U^ 5^7/ DEPT. HOURS LABOR f BURDEN TOTAL MATERIAL MONTHLY 1 TOTAL 1 f/z6 / z •?? 3Z z, ..A. 13 .^^.... / 24 oa Iz m ^77 ft 4 9/ S4 4 38 as ,, SI /77 77 - ■ . *. M. CO.-l47»-»0O-*-I0-T 8. P.-COST-P. • ». 1 Fig. 61 Operating Expense Sub- Accounts Card ORDER Ho fr.. SYMBOL™ /.oh SUPPLY REQUISITION. .-,..,......DATE 7/ZSj/± ._>CC'TNo. // QuAMTrrv %ff DES0R1PT10N Value ^^ DELIVERED TO , _JJ3_ DELIVERED BY J3l :?^*^. Burrouftts >•£ K^civn* CoJMrtorT ( Fig. 62 Supply Requisition 170 COST KEEPIXC; SHORT CUTS COST RECORD lot no DATE OF ORDER- ^" ^-/O NAME OF PART STARTED IN_.--'Z— ^^ .DEPARTMENT :[-_; DESCRIPTION OF MATERIAL OR PARTS UStD JMBER PARTS WANTED NUMBER PER BOX »BER PARTS TRANS F D MO. PARTS FINISHED ^ oo //cT G96 DATE DUE NUMBER OF BOXES y NUMBER PARTS DESTROYED I DATE REC'D FIN. STOCK Fig. 63 SYMBOL a LOT NO. Z LABOR & BURDEN COST /-aco/1:^7 )ATE DEPT HOURS LABOR BURDEN Ij SUMMARY 3 3S/4 i // jJ-\''^\ DETAILS ITEM TOTAL 7 / 91 / LABOR Zo 8o -, 7 7 / IS / 27 ZS s *»s ___4^^ fO BURDEN // /o LESS ITEMS TRANSF D F O F. O F O F O F O MATERIAL 92 /? ^ rz^ 124 Of i 1 i-J UNIT COST • ' ' O L_J 1 J I^BO _ Fig. 64 171 COST KEEPING SHORT CUTS A Cost System These totals are then posted to the back of the cost record card, Figure 63, as shown in Figure 64, which in this instance is a cost record for a dash symbol. The cost cards for straight and dash symbols are blue and white, re- spectively, in order that they may be easily distinguished. The object of securing the total labor cost by departments is for the purpose of extending the burden, which varies according to the de- partment. After this burden has' been extended, the total labor, material and burden are entered on the right hand side of the card and the grand total shows the cost of the job. Then by dividing this grand total by the number of parts turned out, the cost for the part is secured. The number of parts and their cost having been secured in this manner, they are transferred to the cost keeper's record of finished stock, as shown in Figure 69. This record is kept by the cost keeper, in order that all finished parts may be charged out at their cost. The cost of parts often varies, according to the conditions under which they are manufactured, the market price of raw material, etc. The stockkeeper also keeps a perpetual record of the finished stock, but does not record the Fig. 65 ^ost, his record having to do with -:< 3.0 .8 6.0 2.0 4.0 2.0 3.0 5.0 3.0 1.0 2.0 2.0 3 3 .8 - 3 9.8 2.0 4.0 6.0 6.0 4.0 6 6.0 6.0 7 9 .8 s 9 9, 9 6 6 .2 . 4 6 .0 - 172 COST KEEPING SHORT CUTS quantity only, as shown in Figures 67 and 68. The card A shown in Figure 67 is his record of what we call straight gystem symbols, meaning those parts which are of one piece only, and the card shown in Figure 68 is the record for dash symbols, which are parts composed of two or more pieces combined. In this connection attention should be called to the use of the adding machine for checking these records. Figures 65 and 66 show the actual adding machine work to check completely the straight and dash symbol cards, respectively. The method is as follows : Add the amounts delivered and take a total. Then add the balance on hand at the beginning of the period and the quantities received and take a sub-total. Then add the complement of the total amounts delivered and the remainder should agree with the last balance of the "In Stock" column. Since the items are carried over to the back of the cards, when the face has been filled, the machine is indis- pensable for securing a quick check on the last balance before carrying it over to the back of the card. When a requisition is made on the finished stock room for straight symbols, the amount is entered on the finished stockkeeper*s record and the requisition forwarded to the cost keeper, who enters the cor- responding amount, together with Fig. 66 the price, on his record. 173 'l' 4 0.0 4 0.0 8 .0 " 4 0.2 4.0 1 2.0 1 2.0 8.0 4.0 8.0 4.0 8.0 4.0 8.0 4.0 4.0 1 2 .2 s 9 9, 9 2 .0 4 .2 "''^ COST KEEPING SHORT CUTS STRAIGHT SYMBOL 3^^"^ ^^ HIGH MARK 6 ENTERS DAS H /-3it'>- LOW MARK /J.OOO AMOUNT USED IN FOLLOWING STYLES AND CONSTRUCTIONS: PCS. STYLE C0M8T. PCS. STYLE CONST. PCS. STYLE CONST. PCS. STYLE CONST. ( 7 cut / 9 aie ORDERED II RECEIVED 1 DATE r QUANTITY |LOT PAN NO. QUANTITY SCUPPIB ^ DELIVERED IN STOCK /-/-// b^ c,^ //^OAo / s i.o „ t" fsss4- tf-oo 4oZo n f'U i'4-9ot ioo 42ZO It !" /VVVA *f-oo fS-aAo A¥ g% ioo (>oZo Z7 r' '33ft 4oo Zo •^M'l /^ /USiJ tf-oo SoZo 1 1 tooo ^oZo 1 ._H..oo.o..c-..co.™...... ......... Fig. 67 174 COST KEEPING SHORT CUTS DASH SYMBOL / '36^^ #y CONSISTS OF / 34.i^^f / 3iiL / JrS-^L'^ / (b 3^;^. / os-j^ 1 / 3 iZ^^^^ic/^ 1 s39^o /o / 3oo S/^fo ' /«- 9o ,3^no 1% Cioo 3ooo Zoo :iion ^/,c tfoo il4-oo IS- too a^oo 2o 3oo /oo ■ ^oo o It wy%\ 6oo\ ^^oo •••" 1 Fig. 68 175 COST KEEPING SHORT CUTS d z z u u < en Q liJ I (/) z u. u. Q UJ q: N UJ _l >- -I m 2 5 2 u z 1 Q Q u D 0) z a 5 < § « ^ Q * ^>s. «9 QK NO CO \ ^ \ u 5 0. 5- t * « 2 < 3 O o O o ^ Q ^ Q o v^ ^ -^ < Q UJ > UJ 1;! z D l\ r Ci ^ "■■(> Csj •>^ i ^ 1 z o vo O- ^ \o J0 ■s. « 176 COST KEEPING SHORT CUTS In the case of dash symbols the raw stockkeeper issues A these upon requisition, but it is not necessary to forward SyTtem the requisition to the cost keeper, because the cost record card, covering the assembhng of these d^-sh symbols into sections, shows the number of dash symbols that are required for the job, together with the number of sections to be made, so that after the job has been completed he can make the proper deduction for the parts that make up the dash symbols from his stock record by making a simple calculation from data furnished by the cost card. The cost keeper's stock records and those of the finished stockkeeper are checked against each other -from time to time in order that no discrepancies may creep in. For the purpose of illustrating more clearly several of the adding machine uses in connection with time tickets. Figures 70, 71 and 72 are shown. Figure 70 shows five tickets, representing work that has been done in Department 18 and chargeable to Account 31. These constitute only a part of the total labor expended on a job, but show the amount expended on Symbol 416 in Department 18. Since Department 18 carries a rate of burden different from any other depart- ment working on Symbol 416, it is necessary to separate the tickets for this department into a group to themselves, and then add the labor hours to get the total. This addition is shown in the upper half of the adding machine example, the total being 22 hours. The burden rate per hour for this department is 17 cents. The 22 is then multiplied by the 17, as shown in the lower half of the example and the total burden, $3.74, is secured. Problems like this arise continually in our cost depart- ment and are handled with great speed and accuracy on the machine. Figure 71 shows a group of five time tickets for day , workers, the extensions of which are to be checked. The first ticket has 2 hours at 28 cents per hour and an earning 177 COST KEEPING SHORT CUTS A of 56 cents. This extension is checked as shown in the System ^^^^ problem at the right-hand side of the illustration by. multiplying the 28 by 2 on the machine and pointing off two places by drawing a line with a pencil or pen. The next ticket is checked in a similar manner, using 5.^5 instead of 534 and pointing off the result four places. A pile of tickets can be checked in this way, recording the results on the adding machine tape and afterwards reading back beginning at the top of the tape and with the first ticket. Fi'gure 72 shows five time tickets, the extensions of which are to be checked. In this case, however, the tickets are for piece workers and therefore the extensions result from multiplying rates per hundred by the number of pieces. The same method is used as in Figure 71, the adding machine figures being checked back, after running off the extensions for a batch of tickets, one after another, on the tape. . These examples will give an idea of the immense amount of time and labor that can be saved in handling hundreds of tickets daily. 178 COST KEEPING SHORT CUTS Fig. 70. Five Time Tickets for Account 31, together with adding machine list of workmen's earnings and calculation of burden. 179 COST KEEPING SHORT CUTS Fig. 71 Five Time Tickets for Department No. la and Adding Machine slip showing multiplication of time and rate in checking the earning of each workman. 180 COST KEEPING SHORT CUTS TIME TICKET Z^ KMAN'S No. 2-9ro ACCOUMT I .^6- i TIME TICKET AOL ^,-.«u-.JL.^ Symbol U // ^-ys-*/- H /- Operation i>'U No. Pieces y^ ^7^7 AcCOUMT No. 3/ \?bi ^.0 12.0 12XD0 1 2.0 1 2000 l\8 0O0* 2 7.6 8* 4.9 3 4.9 2 4.92 ■ 452 4.92 49J20 4 9.2 l\2 3X)0* 2 7.6 7* 50X)0 50j00 50X30 50O0 ■7 Time Finished j:^^- &:o. FOREMAN'S O/K. Fig. 72 ' Five Time Tickets for Department No. 27 and Adding Machine slip showing the multiplication of the number of parts by the rate per hundred in checking the earning of each workman. 181 Valuable Data CHAPTER XX Information for the General Manager THE following forms illustrate valuable d-ata that is collected and tabulated by the adding machine. This information is very instructive for the man- agement and is brought together in a way that enables the manager of a plant to gather, at a glance, the status of his business, both regarding costs and sales. The sheet illustrated in Figure 73 shows how a monthly summary of materials charged to various accounts can be recapitulated on the Burroughs Machine. This is secured by sorting every week all material requisitions on com- pleted jobs by accounts and recapitulating them on the machine. By using a Duplex Machine the totals for each account and the grand total for all accounts are obtained at one run. The facsimile sheet in Figure 74 is a Cost of Produc- tion Report that is collected from data furnished by the cost department. The amounts are fictitious but illus- trate the principle. They show the number of various kinds of machines manufactured during the month, their cost and the average cost per machine. A glance at this sheet gives as much information as an hour's study of a detailed cost record. The illustration in. Figure 76 is a comparative state- ment of sales. The amounts are fictitious but the sheet, when made up of actual figures, shows the number of hand machines made, the styles, value, cost and profit on each style, both for the current month and for the corres- ponding period the previous year. A statement of this kind is easily prepared on the adding machine and furnishes valuable data to the man- agement. It is a growth indicator that can be read in a 182 COST KEEPING SHORT CUTS REPORT OF RAW MATERIALS AND SUPPLIES USED o STORES FOR 4 WEEKS ENDING. 1 1 -28. 1 909 | ACCOUNT WEEK ENDING WEEK ENDING WEEK ENDING WEEK ENDING 11 -a» WEEKENDING TOTAL «i>. ' 1 15336 1 6 3.4 5 16 8.6 7 13436 6 2 0.2 4* 2 430O6 4 2 4 .0 4 0.0 5 2 3 .4 1,777.4 6* 3 1 3 4 .6 1 6 0.0 19 4.6 7 10436 5 9 3.8 3* 4 1 5 6.0 6 18,6£)7 1 3.0 5 1 6 6.6 6 61 1.84* 5 5,0.6 7 84£)5 7 33 7 1 2.0 3 220.32* 6 766X)7 73430 7 3 6.7 8 7 4 5.6 2,9 8 2.95* 7 3 2 0.3 5 22030 40035 i 0430 1.C4 5.7 0* 8 4 4 6.6 50000 47430 2 6 4 .4 6 1,68535* 9 3 6 5.6 6 374.07 264X55 4 10.2 4 1,414X52* .10 157.88 1 0437 1 4 6.7 8 1 8 0.8 9 5 9 0.12* .li 78jOO e0X)0 9 03 6 6 6.09 ^14.6 5* .12 1 00X)0 103>V0 10435 1 4 4 .6 45 235* .13 7 5.6 6 8 0.6 6 7536 2 0.45 2 5 2.3 5* .14 3 6 5.6 6 411.30 2 5 5.7 264.45 1,2 9 7.11* .15 53450 To 6.7 8 202»5 23 336 1.377.29* .16 24j00 1 2 0.6 7 14.7 2 11.3 5 1 7 0.7 4* J.7 .18 1 7437 275j06 1 4 4 .4 4 1 7037 7 6 4.6 4* 9 7.7 8 7.7 8 7 6.9 1 2£) 5 3 6 6.4 3* .19 2 4 4.6 29930 2 8 6.6 7 2 8 7.7 6 l.l"l833* £0 2 8 7.6 7 290X>0 23430 233.44 1.0 4 5.61* J31 1 3530 1 8430 17036 13 4.6 6 2 5.16* .2 2 5 4 5.6 5 8 8.0 5 53336 53330 2,2 0.71* .23 20436 3 2X)S 204X)5 A02A6 1.1 13.1 2* .24 2 2.2 2 5 6.7 7 2 4 6.7 2 4 5.6 6 95133* o .2 5 1 2 23 a 1 6 6.8 8 1 3 6.3 5 1 2 2£l5 5 4 7.7 8* %1 74J33* Si604.63* 5,7 4 1.6 6* 5^619^8* 24,1 40j03< Fig. 73 Report of Raw Materials and Supplies prepared with a Burroughs Adding Machine. COST KEEPING SHORT CUTS COST OF PRODUCTION o MACHINES MANUFACTURED MONTH ENDING 11-30. 1909 STYLE AND CONSTRUCTION QUANTITY COST COST PER MACHI ME MONTH YEAR MINIMUM * * 6--X .12 1,10 6.6 4 9 2.2 2 9 1.3 9 0O4 6— H J.4 1, 8 2 4 .9 13 0.35 1 2 9.31 1 2 7^0 7 6-H .12 1.8 3.9 6 1 5 0.3 3 1 5 2.4 6 15 0.4 4 7-H 21 2,786.07 1 3 2.6 7 1 3 3.0 1 3 1.2 5 7-G JZO 3.2 4 8.8 16 2.4 4 1 6 5.3 5 1 6 2 .0 7 7-H .1 4 2,2 7 3.0 4 1 6 23 6 1 6 0.8 6 1 5 9.0 9 7— H-El . 22 4,3 4 3.6 8 197>»4 19855 1 9650 9-H .15 2,7 85.95 1 8 5.7 3 1 84>t6 1 8 3.2 9— H-El. .15 2^4 7 0.7 2 3 1.3 8 2 3 0.31 2 2 8.3 3 9-G 1.6 7 3«S,001.£4 1 9252 29651 1 9 1 .3 9— G-El . 2.0 6 4 8,2 2 6.6 6 2 3 4.11 2 3 5 .1 7 2 3 2.0 4 9-H 2.3 5 4^3 6 6.7 6 19 3.0 5 1 9552 1 9 0.2 4 9— S&n-El. 1.9 6 4 6,455^3 2 3 7-.0 2 2 3 7.3 3 2 3 1.0 4 9— H-El . 2.40 5 4,2 6 6.4 2 2 6.11 2 2 5.16 2 2 0.0 6 9— K .7 5 16,5 8 4.7 5 2 2 1.13 2 2 2.7 7 216.33 9-K-El. .3 7,5 3 2.70 2 5 1 .0 9 2 5 0.1 2 2 4 7.0 6 9— S&N-K-El. .12 3,2 5 4.7 6 2 7 1 .2 3 2 7 2.4 1 2 7 0.13 .1 1-H 1>»6 3 2, 5 3 9 .0 3 2 2 2.8 7 2 2 2.4 7 2 2 .0 4 .1 1— S&ll-H •43 9.7 2 3.0 23130 2 3 2.14 2 3.1.0 3 il--H-El. J51 6^7 18.7 5 2 8 1.2 5 28451 2 8 0.3 .1 3-H .13 2,79636 2 3 3.0 3 2 3 3.6 6 2 3 1.12 •13-H-El. 4 1,1 SBAa 2 8 2.1 2 2 8 5.7 5 2 8 0.2 3 J. 5— Stll-H ^a 2^392.00 2 7 6.0 2 7 3.1 3 2 7C.0 4 .15— SMI-H-El. 1.6 3 4 7, 6 1 2.3 2 9 2.10 2 9 0.13 2 8 5'5 J. 5— S&K-K-El . .9 5 3 1,4 4 5.9 5 3 3 1 .0 1 3 3 2.1 4 3 2 8.2 2 .1 6— VS-H-El . .4 2 13,12 2.90 3 1 2.4 5 3 1 0.6 6 3 7 .0 4 .1 5— VS-K-El . .17 5,6 4 4.3 4 3 3 2.0 2 3 3 2.2 8 3 3 0.0 5 o S 5— H-ACT-El . .16 5^45952 3 4 1.2 2 341^10 34056 .15— H-Shut-El. .14 2 0.0 ON- 4,664.10 4 6 9,579.64* 3 3 3.15 3 3 0.0 2 3 2 8.2 4 Fig. 74 Production Cost Report made on the Burroughs Adding Machine. The descriptions are written with a typewriter. 184 COST KEEPING SHORT CUTS o COMPARATIVE STATEMENT OF SALES CURRENT MONTH CORRESPONDING PERIOD LAST YEAH I satcm COST or SALES mtOFIT . »-" SALES raoriT outirriTY lUMt -- -/ »>UIC • • . . « . > 3 -17 ^82535 3il73.12 652.23 4 1 4 2i6«355 ^14235 52120 6-n J22 ^52455 4,52435 1,00000 20 4, 5 4 >1 3i782.94 7Z1A6 6-12J ZX £i256O0 4,134.50 1.121>»0 i8 3.4 6 032 2.82707 63325 7-B 32 e.83450 7,3 6 2.25 1.4 7 2.2 5 25 6i2 5 5.7 5 ^1 32.75 112300 7-12i 35 1Q53450 8153434 acooie 27 6,7 5 621 £i643£8 1,11233 9-10 1.7 5 6eil34J0O 54,4 12.60 13.721.40 1.45 3 9,9 4 73 3 4,5 8 2.9 5 ^36455 9-l2i 1.3 3 49,52430 4 1,9 12.0 9 7,61 2>«1 125 37,5 4 3.75 32,40920 ^13435 9-12J-SI 125 5C1245aO 4 1.2 8 23 9 e,9 6 2j»l 1^2 4Z1C50.40 3 4,7 153 5 7,33435 9-18-SI 1..5 58,02035 45^87930 12,14125 120 48^232X30 4C1337>I5 7,94435 Xl-12i 16 ^805.75 5^84035 96520 4.2 4,84430 4,05955 78435 11-12J-SI 3t 13H43JJ5 11,4 2 1.8 3 1.7 2 1.4 2 22 9,3 6 24 8iC'l6.7 1,345.40 11-12-i-Sint 12 ^405^5 4,61738 7 8 7.6 7 40 4,225X30 3,46634 7 5 6.6 6 13-I2i e 3^803^5 3^269.25 53420 6 ^7 2j0 4 2188^0 513>«4 13-12i-Smt 23 9,9 2 5£0 4200.70 1,72430 42 £i704X38 4,65938 1,04430 15-121- SB li3 46^17500 4^05433 %J2 0J.7 1j0 2 45194458 3et58»3i r.35 j30 15-l8-srf 26 1^5 2X35 1C1602XJ5 1.90000 23 lCi9 3 2£2 9,29 837 J.63<>»5 l5-l2i-SBt 35 1613 2 23 1M88J27 2^13423 29 i.0,*56A6 9,3 3 60 6 1.1 20^0 lV12i-VS 35 19,23330 14993^5 2,24036 31 1^281£2 13,6 4 83 6 £^633^4 15-18-73 26 14,30639 1^366^5 t9 4 0.10 24 1564046 11.53736 210230 15-12i-ACI e 4,244;a0 3;28338 9 6 0,4 2 15-12i-Sht 4 %3463Q 1,7 6 4X3 8 5 8 2^2 1052* 4 1 8^7 7 5^0* 35(i95951* 67.8 15^9* 8.63» ?iai8 9 44 9* 264,23331* 4^66038*' o ^ Fig. 75 This Comparative Statement of Sales is a valuable index to the growth of the business. All except the description is tabulated with the Burroughs. 185 COST K E E P I N G i jS H O R T CUTS COMPARATIVE STATEMENT OF EARNINGS MONTH ENDING 11-30. lOOgj o PARTICULARS CURRENT MONTH || COR. PERIOD LAST YEAR | JAN. 1, 09. TO DATE | AMOUNT AMOUNT TO ••ica AMOUNT 2 0.1 5 e 7 5, 4 5 2.6 5 rapor i Hibbon 1^2 4 7.2 5 ^0 3 2.0 5 2 6^301.40 nachlno Parts 4,6 6 83 3kl 11^0 46,321.20 Repairs 2,1 6 25 1,862/47 2 £i 1 6 5 .0 7 Total 2 6,8 6 0.6 7* 182,62233* 1^0 9 1.6 4 6,8 2* Deduct loss on Stands 7 2 5^0* 6 2 0.2 6* 7,0 0.2 5* Gross Earnings 206^1 35J27* 18^0020 7* £^0 9 1,6 4 6,8 2* Deduct Expenses * «• it Selling & Distri- buting General t Admln- IstratlTe Machines under Guarantee Machines ' DlsnantlAd 7 7,567.20 6 9, 4 6 0J3 2 7 9,451J20 2 4,300.28 16^76150 2 5 1.2 0.0 5 4,25055 1.260J37 3^721.20 1,0 7.6 4 1.4 6.2 3 12,6 8 7.7 9 Total Expenses 10 7,3 7 8J3 4* 9?. 9 5 05 2* 1,0 8 4,7 4 5.2 7'' Net Earnings ftrom operations. 961757X)3* 89,05155* 1,006,90155* o A Fig. 76 Comparative Statement of Earnings made with an adding machine and a typewriter. 186 COST K i: E PING SHORT CUTS COMPARATIVE STATEMENT OF SELLING AND DISTRIBUTING EXPENSES PARTICULARS TOTAL CURRENT MONTH COR. PERIOD LAST YEAR JAN. 1 TO DATE j AMOUNT I TO »»L£S AMOUNT .YOSALtS AMOUNT . TO S/U.tS cor-rissions * ^ .. o Ifcchlne Sales Rebnllt Sales Foreign Saleo tiachlne Rentals 11Q46530 17,320.40 16y4 62X)0 762>i0 9 9,2 4 3.4 5 15,335.34 iaC30.50 7 2 2.4 4 I,00a3^4.45 1 53^45 2>»5 1 5a23050 7,335O0 SALAHIES 2^432>15 2 1,16 5\3 4 2 14,62350 MACHII.-E REPAIRS 9,2 5 6.4 7.94450 8 9.4 5 2.30 FREIGHT & EXPRESS 5,6 7 5.7 8 6 2 4 .4 1 5 250 3 7 5.8 4,9 3 3.3 5 1,2 5 4.30 7 5O0 8852 6£34500 41,23450 1,4 2 3.4 2,2 5 0.30 DUTY ~ra~Machlne8 On Pmtg & Stany On Repair Parts PRIOTIHG and STATionsirr OFFICE SUPPLIES 1,60000 8 9 2.7 5 1.4 3 2O0 7 5 OOO lSi345O0 7,5 3.4 POSTAGE 1,43153 1,243.^5 13,5 2 3.4 4 TELEGRAPH etc. 2 9 0.16 24356 1.845O0 TPJIVELIIIG EXP. 1,2 4 1.7 5 1.C5 35 5 10,1120 TAr^ES & IBS 1,87557 1.786O0 18,5 5 5.3 3 ADVERTISIMC 4,275>»0 '54 2 3>»0 4^23050 HALF TOIIES etc. 5 3 250 4 8 6.6 6 4,2 4 5.6 5 COHVEHTIONS 6 9i.3 8 2 230 5^22050 SALESMEH'S SCHOOlJ 43650 4756 5 2 1.3 45O0 2,74450 522O0 KAGAZIHES o SALESIEH'S PRIZES 6 3 3.4 7855 4 2 2J0 50O0 6,3 4 55 73450 STREOPTICAD inSCEI,LAIIE0U3 4 21.3 4 252.45 3^503/45 TOTALS 196^174^1* 1 75k314/41* l,868il02J7* Fig. 77 Another machine-made statement that is exceedingly valuable to the management. COST KEEPING SHORT CUTS o INVENTORIES DETAILS MONTH tNOlNC COR. PERIOD LAST YEAR AS A T DEC. 31. 1908 OUANTITY v»Lue QUANTITY VALUE QUANTITY VALUE Faotory Style 3 * .2 3,4 4 6.2 .1 6 a? 5 6.9 6 .17 2.9 2 9.2 7 4 .1 6 ^485.1 2 .13 2,C19.16 .14 2. 1 7 4 .4 8 6 .1 8 2;9 5 8.12 .15 2 4 6 5 .1 .1 6 " 2, 6 2 9 .4 4 " 6 .19 3v2 7 3.8 9 .2 3,4 4 6.2 .21 3,6 1851 " 7 .2 3 4,14700 .2 3,770.00 .2 1 3,9 5 65 " 7 .21 3i677.31 .16 2,8 1.7 6 .17 2,9 7 6.6 7 9 .7 4 1 8,9 6 8.4 2 £5 l'i,C9 0.15 .6 3 \l 6,1 4 8.7 9 " 11 31 8^9 10.3 3 .3 8,6 2 2.9 .3 2 9,19 7.7 6 " ^3 .12 3i 19 6.8 .12 3.1 9 6.8 .15 3,9 9 6.0 " .15 .46 13^9 01.6 6 .3 3 9,9 7 2.9 3 .4 2 12.692.82 Total Paotory 2.7 9* 64,964.65* 2.3 0* 5 3,1 4 9.9 6* 258* 6 0,3^2.4 4- * * « «- ~ V Agenoles Style 3 4.9 7 8 5, 6 3 8 .0 7 3.8 8 6 6,8 5 6.2 8 3.9 2 6 7,5 4 55 2 4 2.8 5 4 4,266.20 25 3 ae 3 0.0 2.4 6 3 6.208.72 6 4.4 72,309.60 3.7 6 6 1,7 9 1.8 4 3.61 6 2,61 354 6 4.3 5 74,954.85 3.2 3 5 5,6 5 6.13 3.3 5 6,86 2.30 " 7 17.6 3 3 1,7 6 0.0 16.6 6 314,04 lOO 17.2 2 324,597. 7 18.7 5 3 2 6^3 31.2 5 17.6 7 3 9,4 19.3 7 18.11 3 1 7, 1 2 4 .2 1 " 9 40,42 X03^C85£6 3 8.8 7 996,354.71 3 8.4 4 9 8 5,33252 " .11 1 1.3 5 326^233X35 12.4 4 3 5 7,562.92 13.2 2 3 7 9,9 8 2.4 6 " .1 3 3.7 9^568.00 3.7 7 10Q432.80 4.11 10 9,4 9 0.4 " .15 1 8.6 6 5 6 3,9 2 3.8 6 16.3 3 4 9 3i 5 8.9 3 1455 4 3 9,7 155 5 Total Agenolea 127.05* 2,962070.74* 119.11* 2,794,4 5 3.98* 1 19.14* 2,7 8 1.4 7 2.2 2*- llodela .6 3 19,7 5 25 5 51 15,61 2O0 55 16,91350 o Finished Parte Vork In Frooeee Raw Stock & Sup, Small Toole etc. Paper S> Rlbbone So rap # 16 0,0 5 2.0 153,201.25 141,32650 1^3 5 5.7 5 2 4,302.12 1,87550 15£i2 14.12 14 7,6 2 1.3 13 5,406.25 14,22150 2 0,1 2 1^0 1,25000 15 7,333.25 15 1.22350 1 3 6, C 2 4 .2 2 15,C1 0.00 2 0, CI 2.2 1. 3 1 1 .3 3 Total 4 9 6,113.12* 472^63457* 4 8 0,9 1450*' Grand Total I3 0v4 7~ 2i5 4£i9 0,9 6* 121.92* ^337,05051* 12 2.27* 2^3 3 8,7 2 2.6 6*' Fig. 78 The quantity and price of the numerous items going into the inventory can be quickly and accurately recorded with the Burroughs Adding Machine. COST KEEPING SHORT CUTS very few minutes. If the growth is healthy, well and good, A but if there is a dropping off in any line, it is shown up gystem immediately. Figure 76 is a comparative statement of earnings, which, for obvious reasons, contains fictitious amounts. It is in the nature of a general recapitulation and is com- parative, showing the resiilts for the current month and same month the previous year. The comparative statement of Selling and Distribu- Compari- ting Expenses in Figure 77 is a general summary of ^^"^ expenses of all kinds for the year to date, the current month and the corresponding month the previous year. The monthly inventory of machines in Figure 78 shows the quantity of the different styles on hand, both in the factory and in the agencies, together with the value. The same information is also given regardmg the inventory for the corresponding month the previous year, and the number and value of machines in factory and agencies at the end of the previous year. This record is a handy guide for the distribution of - machines between factory and agencies, as well as a comparative record of this distribution. Such records are valuable to us and emphasize the fact that with an adding machine it is possible to prepare statistics of this nature with very little extra expenditure of time and labor. Any manufacturer would like to have similar informa- tion about his business, but deprives himself of it because he thinks it costs too much, and his conclusions are correct unless he is operating an adequate cost system. A cost system of the right kind, however, automatic- ally produces the vital information so that the preparation of summaries and comparative statements of costs, etc., is merely a recapitulation and tabulation of the items with a machine. 180 COST KEEPING SHORT CUTS A When a machine handles the details, it is possible to System operate a cost system at far less cost than the value of the information given. Without a machine this is practically impossible. 190 THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. THE PENALTY WILL INCREASE TO SO CENTS ON THE FOURTH DAY AND TO $1.00 ON THE SEVENTH DAY OVERDUE. *^m DEC 17 imb 8Jan'56FW JrtNO 1 Q 5c v^ m ItkWCO LO J AN fi lm ■ ^Wf^^: ^^C^gt JSO LD 21-100m-7,'40 (69368) i SAYLORD BROS. MAKERS 5YRACl!'^E, - NY. PAT ja;. 21 , '900, .#^ ?'vfev.a X:.-: ■■•'V'i¥!th'i