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THE COSTING PROBLEM 
 
UNIFORM WITH THIS VOLUME 
 
 CDC manufacturitid ProDletn Series 
 
 Edited by EDWARD T. ELBOURNE 
 
 Nearly Ready 
 
 THE MANAGEMENT PROBLEM 
 By EDWARD T. ELBOURNE 
 
 In Preparation 
 
 THE RE-ORGANISATION PROBLEM 
 By J. E. POWELL 
 
 THE WORKERS' PROBLEM 
 
 By W. WILKINSON 
 
XTbe /■>anutacturing problem Series 
 
 THE COSTING 
 PROBLEM 
 
 BY 
 
 EDWARD T. ELBOURNE 
 
 'I 
 
 OF MESSRS. BRINDLBV AND ELBOURNE, CONSULTING ENGINEERS 
 AUTHOR OF "factory ADMINISTRATION AND ACCOUNT*" 
 
 LONDON 
 
 XTbe Xibrarp press Xt!nite5 
 
 26 PORTUGAL STREET, W.C. 2 
 

3^ 
 
 c- 
 
 PEEFACE 
 
 During the War, and since, public attention 
 has been repeatedly drawn to the value of 
 Costing, and it is felt that a useful purpose 
 will be served by presenting some picture of 
 what Costing involves — some general idea 
 of the character of the problem to be faced 
 when Costing is attempted. 
 
 One chapter — ^that on '' Approximation in 
 Factory Accoimting " — was, in all essentials, 
 written before the War, and has only re- 
 quired a little amendment of expression to 
 apply entirely to to-day's conditions. This 
 is some reminder that the Costing problem 
 is not peculiarly a War product though, 
 admittedly, in pre-War days it was only 
 here and there that it was receiving adequate 
 
 attention. 
 
 ▼ 
 
vi PREFACE 
 
 An argument running through the several 
 papers composing this book is the necessity 
 for the Technical Manager — ^the Engineer — 
 taking a deeper interest in Factory Account- 
 ing, of which Costing may be called the 
 tangible commercial expression. 
 
 The Engineer's responsibilities are becom- 
 ing so wide and so grave that he can only 
 hope to carry them ejQficiently and effectively 
 by being versed in the whole field of adminis- 
 tration, of which Factory Accounting forms 
 no mean part. This point is brought out 
 forcibly in Lieutenant Colonel O'Meara's valu- 
 able paper in Appendix " C." 
 
 The Engineer must be qualified to colla- 
 borate with the professional Accountant ; 
 and, given really intelligent collaboration, 
 the possibilities of industrial progress will 
 be greatly enhanced, and particularly the 
 Engineer will be materially assisted in develop- 
 ing more equitable and more efficient methods 
 of remunerating Labour. 
 
 The author wishes to convey his thanks 
 
PKEFACE vii 
 
 to Lieutenant Colonel O'Meara for permission 
 to reproduce his Paper on " The Functions 
 of the Engineer : His Education and Train- 
 ing " ; to the Editor of "The Engineer" 
 for permission to reproduce an article by the 
 author on '' All-in Costs " originally written 
 for that Journal ; to the Federation of Master 
 Printers of the United Kingdom of Great 
 Britain and Ireland for permission to give 
 extracts from their " Cost-finding System," 
 which has been the subject of annual con- 
 gresses for no less than seven years, and 
 finally, to the Federation of British Industries 
 for consent to quote from their Report dealing 
 with " Commercial Efficiency." 
 
 E. T. ELBOURNE. 
 
 September 1919. 
 
\ 
 
 CONTENTS 
 
 CHAPTERS 
 
 FAOB 
 
 I. The Necessity for Costing - - - 1 
 
 II. "All-in" Costs 10 
 
 III. The Fonctions op Factory Accounts - 26 
 
 IV. Approximation in Factory Accounting 61 
 
 APPENDICES 
 
 A. Extracts prom the Federation Printers' 
 
 Cost-Finding System - - - 93 
 
 B. Extracts from Report of Committee 
 
 ON Commercial Efficiency appointed 
 
 BY Federation of British Industries 107 
 
 C. The Functions of the Engineer : His 
 
 Education and Training - - - 122 
 
THE COSTING PROBLEM 
 
 CHAPTER I. 
 
 The Necessity for Costing. 
 
 Factory costing is essentially the allocation 
 of factory expenditure requisite for obtaining 
 production cost per unit of product, or unit 
 of sales, in terms of money. Cost allocation 
 results in an analysis of expenditure. 
 
 The details of expenditure take shape first 
 as administrative records and then when they 
 are given monetary values they become avail- 
 able for allocation. The interdependence of 
 administrative records and cost allocation is, 
 therefore, self-evident, and the two together 
 constitute factory accounting. 
 
 The standard of analysis that should be 
 adopted for factory accounting in any business 
 
2 THE COSTING PROBLEM 
 
 is dependent on the executive use to which the 
 resulting figures are to be put, and the useful- 
 ness of costs is the measure of the necessity 
 for keeping them. 
 
 These uses fall into four broad divisions : 
 Industrial, for discussing wages rates, 
 and estabUshing Industrial Co-ordi- 
 nation. 
 Technical, for estabUshing Production 
 
 Efficiency. 
 Commercial, for fixing SelUng Prices. 
 Financial, for furnishing interim stock 
 and work in progress values. 
 DeaHng first with the Industrial use of costs 
 for discussing rates of wages and estabUshing 
 industrial co-ordination, this is admittedly a 
 new aspect. It is a belated recognition that 
 Labour is a partner in industry with Capital 
 and with Management, and if it is to carry 
 the responsibilities and receive the rewards 
 of partnership, it must be informed of the 
 results of its collective efforts, and their 
 relation to trading results. Labour must be 
 
NECESSITY FOR COSTING 3 
 
 shown clearly the effect of wages alterations 
 on trade. 
 
 It is not necessary to discuss the propor- 
 tion of profits that shall be received by Labour 
 — ^it, however, must be recognised that with- 
 out the co-operation of Labour, industry dies 
 and Labour starves. Labour in seeking more 
 favourable treatment — 8, larger share in the 
 fruits of industry — seems to be ignoring all 
 economic aspects, and what is so tragically 
 serious, is holding back its full co-operation 
 until its larger share shall have been defined. 
 Meantime industry languishes, while high 
 prices and uncertain deliveries gravely handicap 
 us in both the international and home markets. 
 The recognition by Labour of the vital influence 
 of maximum output on industrial prosperity 
 will come all too slowly, if it ever comes, un- 
 less Labour is taken into confidence, and 
 frankly informed on both production costs 
 and market prices. 
 
 The pottery trades have set an example 
 through their Industrial Council (the first 
 
4 THE COSTING PROBLEM 
 
 established under the Whitley Scheme), and 
 the frank discussion of costs with labour 
 promises a new era of prosperity for what was 
 one of the worst organised and worst paid 
 trades in the country. 
 
 The preceding references to labour as a 
 partner in industry is not to be taken as an 
 advocacy of universal co-partnership in the 
 commercial sense. The ethical principle of 
 the partnership theory can probably be carried 
 out better by adopting collective systems of 
 payment on results that shall be mutually 
 acceptable as a profit-sharing scheme. 
 
 Obviously these suggested steps only dare 
 be taken with a very surefooted knowledge 
 of costs, and uniformity of method in building 
 up cost returns becomes increasingly desirable. 
 
 Coming to the technical use of costs for 
 estabhshing production efficiency and the 
 elimination of waste, this is a most far-reaching 
 function and bears particularly on the con- 
 stitution of the administrative records, by 
 means of which cost figures are obtained. It 
 
NECESSITY FOR COSTING 5 
 
 represents an instrument of management that 
 has been sadly neglected. The neglect in part 
 arises from the absence of a manufacturing 
 policy worth calling a policy. There is not 
 the concentration on specific lines of product 
 so coromon in America and Germany, which 
 has stimulated attention in those countries 
 to any and every means whereby production 
 efficiency might be increased. Management 
 must come to be more of a definite profession, 
 and the technical use of costs a recognised 
 item in the training of an engineer or other 
 technical man quaUfying for executive re- 
 sponsibility. On the other hand. Scientific 
 Management, as practised in America, cannot 
 be said to give much inspiration to us in this 
 country. It is our privilege and responsi- 
 bility to work along different fines. If we 
 can establish industrial co-ordination we 
 shall do far better, for we have better reserve 
 strength in our workmen, and it is for Capital 
 and Management to make whatever effort is 
 necessary to get their effective co-operation. 
 
6 THE COSTING PROBLEM 
 
 The commercial use of costs for fixing 
 selling prices is the more generally accepted 
 ground for their necessity. Ignorance of the 
 principles of factory accounting and nervous- 
 ness of the expense of a proper system has been 
 responsible for substitutes of very inadequate 
 character in this connection. 
 
 Where manufacturing policy is unsound, 
 the installation and running of a cost system 
 is likely to be very expensive. If, however, 
 a cost system is first conceived as an investi- 
 gation expedient to find out the faults of 
 policy, when observation is an insufficient 
 guide, then the question of first expense is no 
 more to be considered than that of a surgical 
 operation, provided that healthy conditions 
 which can be maintained at a minimum cost 
 will result. 
 
 Quite frequently the only basis for deter- 
 mining selling prices is an estimate by the 
 technical Manager, and his estimate as likely 
 as not founded on a foreman's estimate. 
 Both know, we may presume, the essential 
 
NECESSITY FOR COSTING 7 
 
 teclinical workshop facts, but neither has had 
 the opportunity under such conditions of 
 becoming educated in the final monetary- 
 value of workshop operations. The estimates 
 are better than nothing, doubtless, but they 
 may be so misleading as to be a real commercial 
 danger. 
 
 The printing trades have recognised the 
 fallacy of these haphazard methods and 
 adopted six or seven years ago a uniform 
 system of costing which has found great 
 favour through the trade. It is proving the 
 means of putting a generally unprofitable 
 industry on to a stable, prosperous basis, and 
 points a strong moral for other trades. 
 
 The pottery trades, as already mentioned, 
 are achieving wonders in a similar way. 
 
 SelUng prices are not infrequently determined 
 by market rulings, and the knowledge of real 
 costs by an isolated firm would not necessarily 
 give it immediate advantage over its less 
 informed competitors. The main advantage 
 of cost knowledge in this connection is when 
 
8 THE COSTING PROBLEM 
 
 its lessons are understood and carried out by 
 an industry generally. 
 
 The utilisation of costs for financial purposes, 
 by providing without repeated inventory the 
 essential data of stock and work in progress 
 values for interim profit and loss accounts, is 
 obviously of the greatest possible value to all 
 businesses. 
 
 There has been a good deal of propaganda 
 lately in favour of costing, and all on the lines 
 that it should be entirely carried out by 
 accountants. If costs were only useful com- 
 mercially and financially, the case for full 
 control by accountants would be very strong, 
 but when the not less important considerations 
 of industrial and technical uses are taken into 
 account, it becomes evident that the technical 
 manager ought to determine the main issues. 
 He need not be an expert factory accountant 
 to be properly responsible for factory accourts, 
 any more than as an engineer he need be an 
 expert patternmaker to control pattern-shop 
 practice. His technical knowledge gives him 
 
NECESSITY FOE COSTING 9 
 
 an unassailable advantage in settling the 
 details and methods of collecting adminis- 
 trative records, and he should find no sort 
 of difficulty in following the records and 
 accounts through to the financial stage of unit 
 production costs. 
 
CHAPTER II. 
 
 "All-in" Costs. 
 
 There were, not long ago, references in the 
 financial Press to the " all-in " costs of rubber 
 companies. The phrase is apt, and conveys 
 a reminder to those of ns more directly in- 
 terested in engineering. In the case of rubber, 
 the appUcation of the principle would seem 
 to be easy, in that the total "all-in" costs 
 divided by the output of rubber will give the 
 " all-in " cost per unit of weight. With en- 
 gineering such a method of calculation would 
 be meaningless, except in those rare cases 
 where it is possible intelUgently to express 
 the whole product in terms of quantity or 
 weight. In the alternative, any expression 
 of " all-in " costs must be in some way indivi- 
 
 10 
 
" ALL-IN " COSTS 11 
 
 dualised to correspond with the respective 
 articles produced. 
 
 '' All-in " costs may be conveniently divided 
 into " prime costs " and " oncosts " — ^adopt- 
 ing terms that are expressive and generally 
 understood. Practice varies somewhat as to 
 where prime cost leaves off and oncost begins. 
 Whether this divergence matters depends 
 mainly on the method of applying or adding 
 the oncosts to the prime costs. The danger 
 that it will matter increases when new lines of 
 production, with their possibly very different 
 ratios of material, machine wages and hand 
 wages, are undertaken. 
 
 If these remarks are to be immediately 
 useful, it will not do to launch out into argu- 
 ments on the advisabiUty of grading oncosts 
 according to the precise equipment in use by 
 each worker. These are refinements of factory 
 accounting for consideration after an otherwise 
 sound costing system has been established. 
 Of course, not everybody remains to be 
 converted to recognising that the oncosts 
 
12 THE COSTING PROBLEM 
 
 pertaining to the use of a given macliine per 
 hour are altogether better expressed as a 
 machine charge per hour than as a percentage 
 on the wages paid to the machine operator 
 for the hour. Especially is this so to-day 
 with operators' rates constantly rising and 
 with grading according to the class of machine 
 used becoming less and less common. It may 
 be too much to ask for a general change 
 over from a wages basis to a time basis for 
 applying oncosts, even where the installation 
 of automatic machines and the disappearance 
 of a wages basis have already indicated the 
 dangers of depending on that method. Some 
 more logical system needs to be adopted in 
 most cases, and the point is to arrive at the 
 easiest compromise that will meet the situation 
 sufficiently well. 
 
 An interesting compromise of long standing 
 in Scottish circles, covering part of the problem, 
 is that of taking the operators' wages en bloc 
 for each trade or department and working out 
 the average wage paid per hour, which is then 
 
" ALL-IN " COSTS 13 
 
 charged up to each job according to the hours 
 worked. This accompUshes the eUmination 
 of variations in operators' rates and allows 
 the wages of charge hands and the like to be 
 thrown in, if thought fit, and spread in as fair 
 a way as is possible over the whole group 
 concerned. The problem of dealing with the 
 wages of supervisors, machine setters, etc., 
 becomes increasingly important with the ex- 
 tended use of unskilled labour, both male and 
 female. An appropriate question here is, 
 " Are these wages to be treated as prime cost 
 or oncost ? " The answer can hardly be 
 other than as prime cost, if the service in 
 question is confined strictly to one group of 
 workers. By the same argument the wages 
 of labourers and crane men serving a specific 
 group of workers may be held to come under 
 the heading of prime cost, and the same may 
 be said of shop viewers engaged on passing 
 the work at its various stages. 
 
 The wages of the actual machine operators 
 or bench hands may be usefully described as 
 
14 THE COSTING PROBLEM 
 
 " direct wages," while the wages of charge 
 hands, machine setters, viewers and helpers 
 may with equal advantage be described as 
 *' secondary wages." The wages factor of 
 prime cost consists, then, of two elements, 
 direct and secondary. Speaking generally, the 
 direct wages of each job is ascertainable with 
 close accuracy by booking the time taken on 
 each job. In the case of secondary wages, 
 it is not equally feasible to book the time 
 spent on each job, and some arbitrary method 
 of distribution has to be adopted. A flat 
 or common percentage on the direct wages 
 is the easiest course, and may be fairly near 
 the mark, but the better course is to enter 
 secondary wages as a flat charge per hour of 
 direct labour in the respective groups. 
 
 There is an imperative necessity to dis- 
 criminate between groups of labour according 
 to the variations in secondary wages. Thus 
 machine work generally involves a different 
 ratio of secondary wages from that of hand 
 work. Difierences, again, can probably be 
 
" ALL-IN " COSTS 15 
 
 demonstrated between various machine de- 
 partments, and, again, between various classes 
 of machines — ^particularly according to whether 
 the operators are skilled mechanics, setting their 
 own machines, or merely machine minders. 
 Only local circumstances can determine how 
 far discrimination must go to achieve suffi- 
 ciently accurate prime costs. In many cases 
 the merging of all machine work as one group 
 and all hand work as another may be a 
 satisfactory compromise, and obviously sim- 
 phfies the arithmetic of costing and estimating. 
 It must be left to local judgment, and perhaps 
 local convenience, to decide whether the 
 secondary wages shall be applied to the respec- 
 tive direct wages as a percentage or extended 
 at a determined rate per hour of direct labour. 
 After wages prime costs come material prime 
 costs, and the character of these is fairly 
 obvious, viz., that they represent the cost of 
 material directly expended on the product in 
 question. Some would charge up files, waste, 
 oil, etc., as material prime cost, but this tends 
 
16 THE COSTING PROBLEM 
 
 to confuse the issue, and gives a different 
 basis for costing from that available for esti- 
 mating. Of course, these incidental supplies 
 might be distinguished as secondary material, 
 but they have no sort of relation to the direct 
 material, either as to weight or value. The 
 clearest course is to treat this secondary 
 material as an item of oncost. 
 
 As to charging up direct material, there is 
 room perhaps for a little discretion on two 
 points, first, whether any rebate shall be 
 allowed for the swarf or cuttings, and, secondly, 
 as to the price to be used. For tendering 
 purposes current market prices must be taken 
 into account, and even prospective prices with 
 the markets so unstable. For costing pur- 
 poses, strictly speaking, the average purchase 
 price per unit of weight should be taken, and 
 this average should be in respect to the 
 purchases for the whole contract concerned, 
 if they can be identified. Alternatively, if 
 material is taken from general stock, the 
 average purchase price to be used will be that 
 
" ALL-IN " COSTS 17 
 
 of the balance of stock at the time of appro- 
 priation. These considerations are far from 
 academic at the present moment, though 
 their influence in given cases may not be great. 
 Before leaving this discussion of the scope 
 of prime costs, it is necessary to refer to the 
 question of defective work. The cost of 
 defective work has to figure somewhere in 
 the *' all-in '' costs, and the best place is 
 as an item of prime cost, the argument being 
 that defective work varies for each class 
 of work, and it may be most misleading to 
 treat such costs as a matter of oncost to be 
 spread generally. Commonly, this prime cost 
 of defective work merges in the total prime 
 cost of each job, and this is well enough when 
 these totals are used to average out the prime 
 cost per article correctly finished. There is 
 a risk of not allowing sufficient for the con- 
 tingency of defective work when estimating, 
 if only through lack of data as to what defective 
 work does cost in given classes of work or 
 even for the production as a whole. Reliable 
 
18 THE COSTING PEOBLEM 
 
 data as to defective work can only be obtained 
 when the shop organisation is thorough with 
 regard to the control of replacement material 
 and the viewing of the product at various 
 stages. 
 
 Turning to the question of oncosts, it is not 
 difficult to have a clear enough idea of what is 
 involved if the point already made is remem- 
 bered, viz., that "all-in'' costs consist of prime 
 costs pliis oncosts, and consequently that 
 on-costs represent all costs that are not prime 
 costs. It will be convenient to divide on- 
 costs into two groups, viz., production and 
 conamercial. Production oncosts will cover 
 all expenses pertaining to production up to 
 delivery of the finished article to the ware- 
 house or point of despatch. Commercial 
 oncosts will cover all other expenses. It is 
 a short-sighted poHcy that would hmit oncosts 
 to anything less than the inclusion of every 
 normal expense, however indirectly connected 
 with the manufacture or disposal of the 
 factory's product. The inclusion of abnormal 
 
" ALL-IN " COSTS 19 
 
 expenses may be unwisely heroic, but it is 
 not possible to suggest any line of demarca- 
 tion without full knowledge of each case. 
 The all-important point is that no expense 
 item shall be omitted from oncosts as being 
 met out of profits or on any other ground. 
 The question, moreover, of how the year's 
 accounts are presented to the shareholders 
 does not afiect the point. '* All-in " costs 
 must include all costs irrespective of where 
 they appear in the final accounts. 
 
 Further, production contingencies such as 
 replacements under guarantees, development 
 and experimental work, writing down of bad 
 and doubtful stock and so on, must be ad- 
 mitted as costs to be reserved against in 
 arriving at the total of production oncosts, 
 even if not actually incurred at the time of 
 making up any period's accounts. 
 
 As to the dividing line between production 
 on-costs and commercial oncosts, whilst this 
 is not of such outstanding importance as to 
 require working out to a very fine point, the 
 
20 THE COSTING PEOBLEM 
 
 more nearly it is reached the more valuable 
 will be the resulting figures for comparing 
 difierent periods. Obviously, consistency is 
 imperative if comparison is to be made, and 
 the line of division adopted must be such as 
 to make consistency attainable. 
 
 Assuming that the production oncosts have 
 been properly segregated, the next point is 
 how to determine their apportionment to the 
 various contracts or lines of product. This 
 is a very considerable proposition to tackle 
 with any pretence to scientific treatment, 
 and after striving to the uttermost to arrive 
 at an accurate method, honesty will compel 
 the admission that the incidence of production 
 oncosts can only be approximated to a moder- 
 ate degree. However, because a degree of 
 error remains after adopting the most careful 
 methods, it does not follow that any method 
 is good enough. The most common way of 
 applying production oncosts is as a flat per- 
 centage addition to the prime cost wages, 
 no distinction being made between machine 
 
^'ALL-IN" COSTS 21 
 
 work and hand work, and no regard paid to 
 the length of time occupied at the machines 
 or benches. As to the latter point, it may be 
 argued that since the wages paid bear a definite 
 ratio to the time worked, this method gives 
 results not far from accurate. As to that, 
 some discussion has already been given in 
 connection with secondary labour, and a 
 further point may be added here, viz., that 
 overtime allowances, war bonuses and the 
 like go to swell the wages paid without pro- 
 portionately increasing the appropriate burden 
 of oncosts. It is not difficult to appreciate 
 that the basis for applying production oncosts 
 should be the time worked, and, further, that 
 discrimination should be made as between 
 different conditions of work. 
 
 To recommend this is much easier than to do 
 it, and as an alternative a percentage-on- wages 
 plan may have to be adopted that discriminates 
 to a certain extent. Thus, for a given period 
 the total machine hours and total hand hours 
 of direct labour can be computed, and the 
 
22 THE COSTING PEOBLEM 
 
 ratio of the two totals adopted as the ratio 
 for apportioning those items of production on- 
 costs that do not clearly belong wholly to one 
 or other class. The apportionments of the total 
 production oncosts can then be worked out as 
 percentages of the respective total direct 
 wages. This method discriminates in a 
 rough-and-ready way between machine and 
 hand work, but not as between departments, 
 while it fails adequately to get over the diffi- 
 culty of the operators' varjdng wages rates 
 per hour worked, and quite fails to meet the 
 case of automatic machines. However, this 
 seemingly crude compromise can be made to 
 serve as a valuable guide in preparing tenders. 
 Reference must now be made to a class of 
 expenditure, viz., that on drawings, patterns, 
 jigs and special tools, which will be outside 
 the scope of either prime costs or oncosts if 
 treated as capital expenditure. At the same 
 time, a high rate of depreciation on such 
 expenditure should be included as an item 
 of production oncosts. As, however, such 
 
- ALL-IN " COSTS 
 
 23 
 
 expenditure will hardly be in equal proportion 
 for all classes of work, and further, as its 
 capital value for new lines of product may be 
 a very doubtful quantity, there is much to be 
 said for treating this class of expenditure as 
 prime cost, separately grouped for each con- 
 tract, but not necessarily or usually carrying 
 a production oncost charge. 
 
 The suggestions that have been made may 
 now be tabulated in their simplest form : 
 
 Prime Cost : Material, less rebate for \ 
 swarf 
 Machine wages — direct 
 
 „ „ — secondary 
 
 Hand wages — direct 
 
 „ „ — secondary 
 Defective work 
 Drawings, patterns, jigs 
 and special tools 
 
 Production Oncost : 
 
 On direct machine labour 
 On direct hand labour , 
 
 The sum total of these items gives the total 
 cost of production. 
 It will be noted that no charge has been 
 
 Total 
 I Cost of 
 Production. 
 
24 THE COSTING PKOBLEM 
 
 suggested on material to cover storage, hand- 
 ling, etc., the argument being that neither 
 weight nor value is a satisfactory basis for 
 such a charge. Further, if all such expenses 
 are included in the production oncosts and 
 apphed accordingly on the basis of direct 
 labour — ^preferably, of course, time taken 
 rather than wages paid — ^the method is simpler 
 and the result not more inaccurate, to say the 
 least of it. 
 
 Some firms and some trades, notably the 
 printing trade, recognise interest on capital 
 invested as an item of cost. 
 
 Apart from questions of interest on capital 
 and profit, the total cost of production may 
 be considered as equivalent to the purchase 
 price that a merchant would pay for an article 
 ready for sale. Pursuing the same illustra- 
 tion, the conunercial oncosts stand for the 
 merchant's own costs, and there seems 
 small scope for arriving at any basis for 
 applying the commercial oncosts other than 
 as a flat percentage on the total costs of pro- 
 
" ALL-IN " COSTS 26 
 
 duction. If there is ground for discriminating 
 as to purely selling expenses, the rebate on 
 one line of product must be made good from 
 some other line or lines of equivalent total 
 value. The safer course may be to admit 
 the average or flat percentage of commercial 
 oncosts on total cost of production in all 
 cases, but to discriminate as to the reasonable 
 expectation of profit in addition thereto, 
 according to the circumstances attaching to 
 each tender. 
 The final tabulation is then as follows : 
 
 Total cost of production V' All-in '"i 
 Average commercial oncosts j Costs 
 Profit 
 
 j Price. 
 
CHAPTER III. 
 
 The Functions of Factory Accounts.^ 
 
 As this is in the nature of an introductory 
 paper it may not seem out of place to define 
 what is to be understood by " factory." 
 
 A factory may conveniently be defined as 
 a group of workshops under one management, 
 engaged as a whole in the manufacture of one 
 or more products, but an ordinary motor 
 repair garage, for example, would not be a 
 factory, because it is neither departmentahsed 
 nor is it engaged in the manufacture of any 
 product. Some of the small workshops es- 
 tablished for the manufacture of odd Unes of 
 goods, usually not engineering products, have 
 
 1 Based on lecture given to the Chartered Accoun- 
 tants' Students Society of London. 
 
 26 
 
FUNCTIONS OF FACTORY ACCOUNTS 27 
 
 laid too early claim to the description " fac- 
 tory " and created a prejudice against the 
 adoption of the term for larger and more 
 complex businesses. A very large number 
 of factories are engaged in some branch or 
 other of engineering, but on account of the 
 prejudice against using the word " factory," 
 such factories are more generally called 
 " works." 
 
 There is behind this an attempt to differ- 
 entiate between the factory engaged on mass 
 production — ^that is, repetition work — of more 
 or less standardised goods, as compared with 
 the works engaged on general production 
 to ever- varying designs. The view is held by 
 professional engineers that working to chang- 
 ing designs constitutes a higher branch of 
 engineering than mass production, and the 
 main objection one would urge is that, from 
 an economic point of view, it is in the direction 
 of mass production that the salvation of 
 British industry Ues. There is, of course, a 
 grave risk that, with the more general adoption 
 
28 THE COSTING PROBLEM 
 
 of mass production methods, engiDeering 
 science may suffer. Hence the greater respon- 
 sibilities thrown on the technological colleges 
 to provide for a much more extensive training 
 of engineers. In any case, variety in pro- 
 duction, while it induces an adaptability of 
 method as shown to such excellent purpose in 
 this country on munition work, does not of 
 itself provide the equivalent of academic train- 
 ing, and the very diffusion of workshop effort 
 tends to hinder improvement in design and 
 method of manufacture. 
 
 This is a slight digression that may not at 
 first hearing appeal to accountants, but the 
 question of manufacturing poUcy is one of 
 vital importance to the well-being of industry, 
 and, therefore, of all accountants dealing with 
 industrial concerns. 
 
 To return, we shall be on safe ground if we 
 consider " works " and " factory " as synony- 
 mous terms, descriptive of the complete 
 manufacturing establishment, while the term 
 " workshop " or " shop " may be applied to the 
 
FUNCTIONS OF FACTORY ACCOUNTS 29 
 
 several departments which together constitute 
 the factory, or it may be to an isolated, 
 separately run department. This distinction 
 is recognised by the Home Office in the title 
 of the Factory and Workshop Act. 
 
 Having laid down what we are to under- 
 stand by " factory," we come to the considera- 
 tion of the expression " factory accounts." 
 
 Most of you will have been taught that the 
 only factory accounts outside the financial 
 accounts — ^that is, those pertaining to the 
 ordinary Trading and Profit and Loss Accounts 
 — ^are the Cost Accounts. You may, there- 
 fore, have jumped to the conclusion that 
 factory accounting is only another name for 
 cost accounting, cost-keeping, or costing. To 
 my mind this is far from being the case. 
 
 The interpretation I am asking you to place 
 on factory accounting is much more compre- 
 hensive than costing. I have in mind the 
 whole activities of the factory which have in 
 any way to find expression in money values. 
 Perhaps I shall convey my point if I ask you 
 
30 THE COSTING PROBLEM 
 
 to think of the factory accountant as if he 
 were the factory trustee. He falls notably 
 short of standing in that position because he 
 does not have administrative control, but his 
 monetary accounts have to cover practically 
 the same field as if he had, and, moreover, 
 ought to be based on records primarily de- 
 signed to serve the factory management. The 
 factory accountant has to account for the 
 entire factory expenditure, and because of his 
 responsibiUties for their accuracy he must be 
 cognisant of every step in the administration 
 of the factory, and particularly of the means 
 and methods adopted for compiUng the factory 
 records requisite for costing purposes. When 
 he has acquired this knowledge there is a dis- 
 tinct danger that he may imagine that he is, 
 after all, the administrator, and under certain 
 circumstances, by his pushfulness and grasp of 
 figures, he may arrogate to himself many of 
 the duties of administrator. He will, however, 
 be well advised not to trespass on the domain 
 of the factory administrator, be he general 
 
FUNCTIONS OF FACTOEY ACCOUNTS 31 
 
 manager or works manager, whatever the 
 temptation. Factory administration requires 
 technical knowledge of the processes of manu- 
 facture, of the design or constitution of the 
 product, and, not least, adequate standing 
 with the labour employed. 
 
 The engineer, or other technical expert, is 
 the man fitted to be administrator ; let him 
 do his own job. If we consider the adminis- 
 trator as the creative artist, then the factory 
 accountant may be said to be the art critic. 
 
 Factory accounting, properly conceived, 
 stands on a high professional plane and affords 
 unlimited scope for intelligent co-operation 
 with engineers for the great benefit of industry, 
 and, therefore, of the whole country. 
 
 Factory accounting, in the sense I wish to 
 put it before you, has not had proper recog- 
 nition from either engineers or accountants. 
 The engineer has commonly not mastered 
 sufficiently the science of factory administra- 
 tion to have time or inclination to interest 
 himself in factory accounts, and has not 
 
32 THE COSTING PROBLEM 
 
 appreciated that the factory records, by which 
 costing becomes possible, are his responsibility 
 in any case and should be his great oppor- 
 tunity to enable the accountant to give him 
 the costs of production in the most usable form. 
 
 The outlook is altering to-day. There is 
 the insistent call for greater efficiency in in- 
 dustry, and both the engineer and the account- 
 ant are coming to understand the necessity not 
 only for joining forces but in sparing no pains 
 in training themselves for the responsibilities 
 of their respective work. 
 
 To my mind there is something pitiful in a 
 skilled accountant being content with dry 
 books of accounts without having any real 
 appreciation of the workshop world of human 
 activities which find concrete expression, or 
 should do, in the accounts. 
 
 I would hke to see the factory accountant 
 as a super-accountant rather than that the 
 cost clerk, however estimable, should claim 
 rank as factory accountant without adequate 
 accountancy training. The perfect co-ordina- 
 
FUNCTIONS OF FACTORY ACCOUNTS 33 
 
 tion of engineer and accountant calls for 
 educated, highly trained men on each side. 
 
 Having tried to indicate something of the 
 status of factory accounts, let us turn to the 
 various functions possible to a factory account- 
 ing system. I say '* possible " advisedly, 
 because the administrative conditions in some 
 factories would not lend themselves well to 
 such a conception. 
 
 Factory expenditure necessarily falls under 
 one or other of the following heads : 
 Purchase of goods. 
 Payment for services rendered. 
 But it is convenient to recognise as a third 
 head : 
 
 Remuneration of employees, 
 
 although this is really only a subdivision of 
 the second head. 
 
 For convenience, these three sections may 
 be referred to as : 
 
 Materials, 
 
 Disbursements, 
 
 Wages. 
 
34 THE COSTING PROBLEM 
 
 Materials, as a term, covers all purchases of 
 a concrete character in contradistinction to 
 disbursements, for which no goods have to be 
 handled. The division is not usually made, 
 but it is distinctly useful that it should be 
 made. 
 
 Under the heading of materials there are 
 
 several distinct functions to be provided for : 
 
 (a) That all purchases shall be based on 
 
 properly authorised requisitions, stating 
 
 the purpose for which the goods are 
 
 required. 
 
 (&) That exact records shall be made of all 
 
 goods received. 
 
 (c) That no invoices shall be passed for pay- 
 
 ment except for goods properly ordered 
 and received in good condition and 
 correct to specification. 
 
 (d) That vouchers from responsible persons 
 
 shall be required for all goods issued to 
 the workshops, irrespective of whether 
 the goods were specially purchased for 
 a given job or purchased for stock. 
 
FUNCTIONS OF FACTOEY ACCOUNTS 35 
 
 (e) That the quantities and value of goods 
 issued conform to the estimate or bill 
 of quantities, when laid down before- 
 hand, and alternatively be subject to 
 investigation. 
 
 (/) That the vouchers for goods issued, in 
 whatever form, shall furnish sufl&cient in- 
 formation to enable the cost of the goods 
 to be allocated to the correct account. 
 
 {g) That quantity and value records of stores 
 receipts and issues shall be kept so 
 as to furnish a continuous inventory, 
 which shall be tested at frequent 
 intervals by actual stocktaking of 
 selected items, apart from an annual 
 stocktaking. 
 
 (h) That materials passed to the shops in 
 bulk for detail issue within the shop 
 shall be dealt with through a sub-store 
 and proper account kept of the ulti- 
 mate disposal. Timber sent to the 
 carpenters' shop, and bar steel to 
 smithy are typical cases. 
 
36 THE COSTING PROBLEM 
 
 (j) That the comparisons of cost with esti- 
 mates shall be kept by process, com- 
 ponent or contract, as may be required 
 by the Management. 
 
 (k) That indirect material costs — ^that is, 
 all material that does not enter directly 
 into the product — shall be analysed by 
 departments and processes, in accord- 
 ance with the requirements of the 
 Management for administrative pur- 
 poses, covering in that the details 
 of departmental expenses necessary 
 to the computation of departmental 
 efficiencies. 
 
 (I) That all items of loose plant passed into 
 shop service shall be kept under survey 
 and proper control exercised under the 
 instruction of the Management as to 
 their loan to the operators . The records 
 necessary to this end being utilised for 
 annual inventory purposes subject to 
 verification. 
 
 (m) That proper track shall be kept of each 
 
FUNCTIONS OF FACTORY ACCOUNTS 37 
 
 item of fixed plant, and provision made 
 for reporting on its depreciation and 
 obsolescence. 
 
 The functions arising under the head of 
 disbursements are practically restricted to 
 those of allocation to the correct accounts. 
 
 The following are representative items of 
 disbursements : 
 Rent. 
 Rates. 
 Taxes. 
 
 Insurance Premiums. 
 Stafi Salaries. 
 Wages of workmen employed away 
 
 from the factory. 
 Outward Transit Charges. 
 
 to which may be added for convenience 
 
 Depreciation. 
 
 Interest on Capital, 
 All transit charges are in the category of 
 disbursements, but it is better to treat '' in- 
 wards transit charges on goods purchased " 
 
38 THE COSTING PROBLEM 
 
 under materials, as being part of the cost of 
 the goods, as it undoubtedly is. 
 
 The allocation of rent, rates, taxes, and 
 insurance premiums are matters dependent 
 on the extent to which oncost is departmen- 
 talised, but in any case the factory accoimts 
 must embody some fair and proper basis for 
 apportioning these expenses, as factors in the 
 costs of production. The same remark applies 
 to stafi salaries with this addition, that factory 
 accounts should furnish periodic data for stafi 
 comparisons against volume of output. Each 
 member of the stafi, apart from managerial 
 staff, should keep a diary of the character of 
 work, if not the actual work, done. The 
 factory accountant should allocate the salaries 
 according to these diaries, duly confirmed. 
 
 Turning to the heading of wages, the func- 
 tions to be provided for are extensive : 
 
 (a) That all engagements shall be properly 
 authorised by the Management, and the 
 rates of pay duly authorised in each 
 instance. 
 
FUNCTIONS OF FACTORY ACCOUNTS 39 
 
 (6) That employment records shall be kept 
 as to trade, department, dates of start- 
 ing and leaving, and any intermediate 
 changes. 
 
 (c) That accurate records shall be kept of 
 
 employees' attendance (i.e, timekeep- 
 ing) as constituting the basis for com- 
 putation of time wages. 
 
 (d) That all overtime and working at ex- 
 
 ceptional hours shall be authorised. 
 
 (e) That records shall be kept of each em- 
 
 ployee's work as to time spent on each 
 job, according to methods laid down 
 by the Management, and reasonably 
 acceptable both to foreman and workers. 
 
 (/) That the job references to which time 
 is booked shall be in line on the one 
 hand with the Management's scheme 
 for instructing the shops as to the work 
 to be done, and on the other hand with 
 the scheme adopted for analysing fac- 
 tory expenditure. 
 
 ig) That certificates shall be furnished, pre- 
 
40 THE COSTING PROBLEM 
 
 ferably by independent shop inspectors 
 or viewers, of the amount of work done 
 by each employee on manufactm'ing or 
 productive operations, the certificates 
 to show how much was accepted as 
 correct, also how much was inacceptable, 
 on what grounds, and at what stage of 
 manufacture. 
 
 (h) That comparative data shall be kept of 
 shop performances by operations and 
 by individuals as may be desired by 
 the Management. 
 
 (j) That where payment is made by result 
 as in piecework and premium systems, 
 the payment shall be accurately com- 
 puted from the viewing certificates (g) 
 according to the authorised piecework 
 price or time limit. 
 
 (k) That where two or more operatives are 
 associated on the same piecework or 
 premium job, the share of each member 
 of the group shall be separately com- 
 puted and paid direct. 
 
FUNCTIONS OF FACTORY ACCOUNTS 41 
 
 (1) That wages having been computed ac- 
 curately shall be made up accurately 
 and paid out to the correct person. 
 
 (m) That the extra pay, or balance of earn- 
 ings, due to payment by results, over 
 the guaranteed time wages, shall be 
 separately recorded, and statistics fur- 
 nished accordingly to the Management as 
 to departmental, and, if required, indivi- 
 dual piecework or premium eflSiciencies. 
 
 (n) That departmental records shall be kept 
 of wages expended against wages value 
 of output so as to establish departmental 
 output efficiency statistics. 
 
 {p) That separate records shall be kept of 
 direct and secondary wages expendi- 
 ture on manufacturing processes — direct 
 wages referring to actual operations on 
 machine or bench, and secondary wages 
 to auxiliary help, notably supervision, 
 inspection or viewing, and personal 
 assistance — distinction being made 
 throughout as to overtime allowances. 
 
42 THE COSTING PROBLEM 
 
 (q) That the direct wages cost records shall 
 give the time taken equally with the 
 wages expended or incurred so as to 
 provide a time basis for the appUcation 
 of shop charges or oncost. 
 
 (r) That means of continuous comparison 
 shall be established between esti- 
 mated wages costs and actual wages 
 costs — ^also as between previous wages 
 costs and current wages cost. Or, 
 alternatively, according to the in- 
 structions of the Management, on the 
 basis of time taken instead of wages 
 cost. 
 
 (s) That to enable comparison with esti- 
 mates costs shall be kept by operation, 
 process, component, or order, and sub- 
 division of order, as may be required by 
 the Management. 
 
 (t) That indirect wages costs, that is, all 
 other than direct or secondary costs, 
 shall be analysed by departments and 
 processes, in accordance with the 
 
FUNCTIONS OF FACTORY ACCOUNTS 43 
 
 requirements of the Management for 
 administrative purposes. 
 Having set out the functions arising under 
 the three headings of Materials, Disbursements, 
 and Wages, we come to the stage where the 
 dissected figures of each division have to be 
 arranged and combined as may be necessary 
 to arrive at the proper costs of the respective 
 items of product. 
 
 The elements entering into production costs 
 are : 
 
 Materials. 
 Disbursements. 
 Wages Direct. 
 Wages Secondary. 
 Shop Charges. 
 By shop charges is meant the oncost or in- 
 direct cost of producing the work in question. 
 The total production cost may be defined 
 as the cost of the respective products up to, 
 and including dehvery to, the warehouse in 
 finished condition ready for sale. 
 The cost of selling the product is quite 
 
44 THE COSTING PROBLEM 
 
 distinct from the cost of production, and where 
 various articles are sold through the one selHng 
 organisation, the costs of production will have 
 no uniform relation to the respective expenses 
 of selUng. 
 
 Apart from strictly selUng expenses, there 
 are other expenses which do not usually fall 
 within the purview of factory accounting, such 
 as general office work, correspondence, and 
 financial accounting. Buying and estimating 
 may be considered, under some circumstances, 
 to be factory expenses. 
 
 In engineering work the total ^production 
 costs usually call for subdivision under the 
 following heads : 
 
 (a) Net Production Costs. 
 
 (6) Costs of Drawings, Patterns, Jigs 
 
 and Special Tools, 
 (c) Costs of Errors and Defects. 
 {d) Costs of Final Inspection, Packing 
 and Despatch. 
 It is a very important function of factory 
 accounts that these subdivisions should be 
 
FUNCTIONS OF FACTOEY ACCOUNTS 45 
 
 kept, although as a matter of fact the cost of 
 errors and defects (c) is rarely obtainable except 
 by estimate, on the basis of which the other 
 divisions are adjusted. As to the last item (d), 
 the inclusion of delivery expenses is a matter 
 of convenience rather than principle, but no 
 principle is sacrificed in associating these ex- 
 penses with the production costs proper so 
 long as they are kept distinct. 
 
 It happens in many factories that the pro- 
 duct of one department, e.g. iron foundry, 
 becomes the raw material of another depart- 
 ment, say the machine shop. These condi- 
 tions involve what may be called " Inter- 
 mediate Process Accounts," dealing with the 
 whole output of the particular intermediate 
 department, and this output has to be taken 
 on charge according to the production cost 
 arrived at through the respective Process 
 Account and then debited through a stock 
 account to the respective sales order, or, it 
 may be. Manufactured Stock Account for 
 which the process product is used. 
 
46 THE COSTING PROBLEM 
 
 The cost accounting procedure for process 
 product, manufactured stock product, or con- 
 tract, does not vary so mucli in principle as in 
 method, and it is necessary that the factory 
 accounting system shall make these variations 
 in method dovetail perfectly with the Works 
 Profit and Loss Account. 
 
 The ultimate disposal of intermediate pro- 
 cess products, such as castings, and of manu- 
 factured product, such as the finished com- 
 ponent parts of a machine, involve very vital 
 issues ; it is one of the most important func- 
 tions of factory accounts to record suitably 
 the assembly of components and the despatch 
 of all goods whatsoever from the factory. 
 
 Up till more recent times it was a very com- 
 mon practice for ** prime costs " to be spoken 
 of as representing the whole art of costing. 
 " Prime Costs," as you will know, covers the 
 material and wages directly entering into the 
 manufacture of a given product. There was a 
 certain honesty about not going beyond prime 
 costs in any cost records, because any sub- 
 
FUNCTIONS OF FACTOEY ACCOUNTS 47 
 
 stantial accuracy in allocation seemed to stop 
 short at that stage. Further than that, a 
 generation ago the indirect expenses of fac- 
 tories, in relation to wages paid or time worked, 
 were considerably less than they are to-day, 
 and accuracy mattered less. The output is of 
 course much greater now, by virtue of im- 
 proved machinery and methods. 
 
 The importance of closely approximating 
 the incidence of shop charges is beyond all 
 question. Those who are not famihar with 
 present-day factory accounts will appreciate 
 this point better if I mention that shop 
 charges in an engineering machine shop may 
 easily amount to as much as 150 per cent, 
 on the direct wages. While it is a straight- 
 forward function of factory accounts to estab- 
 lish the totals of factory expenses by depart- 
 ments, it is by no means so simple to arrange 
 for the apportionment of these expenses to the 
 specific product. Owing to the difficulty of 
 this apportionment many crude methods have 
 had a wide vogue. In certain cases, as, for 
 
48 THE COSTING PROBLEM 
 
 instance, ship-building, at one time the shop 
 charges were applied as a percentage on the 
 material, plus wages. The relation of working 
 expenses to the value of material used is 
 erratic, to say the least, in its operation, and 
 probably had its origin in affording a means 
 of lowering the percentage necessary for dis- 
 tributing the working expenses. There are 
 considerable differences in practice as to where 
 the line should be drawn in regard to prime 
 costs, hence you will find startUng differences 
 in different factories in the percentage used for 
 distributing shop charges even on the basis 
 of wages only. The lower percentage is no 
 criterion of production efficiency, and nothing 
 short of the total production cost can be com- 
 pared as between different establishments. 
 
 It will help us a little to realise the volume 
 of works expense items if I set down a few of 
 the principal ones : 
 Building Service, 
 
 Repairs and depreciation of buildings, 
 
 transportation plant, and shop fixtures ; 
 
FUNCTIONS OF FACTORY ACCOUNTS 49 
 
 heating and lighting expenses ; building 
 attendance, e.g, cleaning roofs, windows, 
 etc. ; rent, rates and taxes ; fire insurance 
 and prevention. 
 
 Power Service. 
 
 Repairs and depreciation of power plant 
 and transmission equipment ; power gene- 
 ration expenses ; plant attendance, e.g. 
 oiUng ; belting attendance. 
 
 Tool Service. 
 
 Repairs to patterns, jigs and special tools ; 
 repairs to loose plant ; tool dressing and 
 sharpening ; annual loss in value of loose 
 plant. 
 
 Material Service. 
 
 Store and warehouse expenses ; material 
 testing ; interdepartmental transportation. 
 
 Departmental Service. 
 
 Plant removals and alterations ; accident 
 compensation ; National Insurance ex- 
 penses ; general suppUes ; overtime charges ; 
 general labouring ; shop supervision and 
 inspection. 
 
60 THE COSTING PROBLEM 
 
 Administration Service. 
 
 Works management and administration, 
 including factory accounting ; drawing 
 office general charges ; works stationery, 
 printing. 
 
 Contingency Service. 
 
 Estimated guarantee liabilities on year's 
 products ; development and experimental 
 expenditure not carried forward at end of 
 year ; reservation for bad and doubtful 
 stock. 
 
 When you think of the variety in the charac- 
 ter of these expenses you will appreciate the 
 difficulty of apportioning to each item of pro- 
 duct its correct and proper share. Where 
 you have mass production of only one item, 
 the matter is perfectly clear, and whatever 
 error may arise in deaUng with the works 
 expenses departmentally, this must correct 
 itself when the various departmental totals 
 are merged together finally. These ideal 
 conditions of manufacture do not obtain in 
 
FUNCTIONS OF FACTORY ACCOUNTS 61 
 
 many cases, so that one must budget for some 
 variety in the product. In some old-estab- 
 lished firms the variety of product is appalling, 
 and such firms cannot hope to continue what 
 must prove a suicidal policy under post-war 
 conditions. Even where the complete product 
 may be standardised and produced by repe- 
 tition methods, there is a necessity, particularly 
 in engineering, for the costs to be taken out 
 of individual components. Where these com- 
 ponents are sold as spare parts, the necessity 
 for accurate costing is obvious. 
 
 But, apart from that, if there is to be true 
 criticism of production efficiency, then the 
 total production costs are required for each 
 component for comparison from time to time. 
 Improvements in design take place ; changes 
 in methods of manufacture are put into effect ; 
 the materials used for the component may be 
 altered ; and all these variable factors have 
 to be catered for. It is not sufficient to give 
 attention merely to the prime costs. For 
 example, and the instance is not exaggerated, 
 
62 THE COSTING PROBLEM 
 
 in the manufacture of components of motor 
 cars there are instances in some designs where 
 the engineer has the alternative of having a 
 forging made and machining the forging or, 
 on the other hand, of machining the com- 
 ponent out of the soHd bar. It may happen 
 that the methods and costs of machining 
 the forging will differ very materially from 
 the case of machining the bar. The bar may 
 even lend itself to automatic processes, in 
 which case the wages of the operator or the 
 time taken in machining, and the appropriate 
 shop charges, would not be comparable with 
 the cost where the machining requires indi- 
 vidual attention. 
 
 Most people have suflBcient acquaintance 
 with the inside of engineering machine shops 
 to understand that there are great differ- 
 ences between the sizes of machines, great 
 differences between the types, and, as a 
 matter of fact, between the power consumed. 
 If you have a planing machine which occupies 
 so many square yards of floor area, the 
 
FUNCTIONS OF FACTOKY ACCOUNTS 53 
 
 man working it will not be paid more, it 
 may be even less, than the man working a 
 lathe taking a tenth of the space. If you were 
 the owner of that machine shop and were 
 letting the machines out for hire to be worked 
 by other people, you would, from your obser- 
 vation, without any accounts to guide you, 
 expect more money for the hire of the big 
 planing machine than you would for a small 
 lathe. You would argue that the planing 
 machine must carry more in respect to rent 
 of land and buildings alone, for, obviously, 
 if you had your shop full of planing machines 
 you could get fewer machines in than if you 
 had other smaller machines in the same shop. 
 You would not be content to take your hire 
 on the basis of the wages paid to the man, 
 because his wages have nothing to do with 
 the capital invested in the machine, the pro- 
 vision for depreciation and obsolescence, the 
 room it occupies, the power it takes, or the 
 cost of repairs. If you, as the hypothetical 
 landlord, would not take the same for each 
 
64 THE COSTING PROBLEM 
 
 hour the respective machines are worked, why 
 are these distinctions so commonly overlooked 
 in working out cost figures ? The reason is 
 not far to seek. It is the trouble entailed by 
 investigating the merits of each particular 
 case ; and then, again, having investigated 
 the matter and having arrived at some standard 
 rates, there is the further trouble of applying 
 them. It is so easy to take all the expenses 
 for a shop and apply them as a flat percentage 
 on the direct wages. You or your client may 
 argue that if other firms do the same, more 
 elaborate analysis is unnecessary. You are on 
 all-fours with them in tendering for new work. 
 That is all right until one of your competitors 
 wakens up to the fact that there are such great 
 differences in the actual cost of providing and 
 running machines, and embodies his better 
 information in his tender. He will discrim- 
 inate and let you have the work on which the 
 flat rates understate the real cost, while 
 he takes the less costly work at prices profit- 
 able enough to him, which you, by adopting a 
 
FUNCTIONS OF FACTORY ACCOUNTS 55 
 
 fiat rate method, would not feel justified in 
 quoting. 
 
 I have earlier in this paper referred to the 
 necessity for the factory accounts to record 
 the time taken on actual manufacturing opera- 
 tions, because time is a much better basis for 
 applying shop charges than the wages paid. 
 Wages are usually taken as the basis, because 
 it is easier. Taking the case of a machine shop, 
 if all the operators are paid the same rate and 
 if all the machines are running at a similar 
 cost, then a percentage on the wages paid 
 might seem to be reasonably accurate. If the 
 piecework or the premium system is in opera- 
 tion, the wages paid provides a very mis- 
 leading basis, and if the rates differ, for 
 instance if there are apprentices employed, 
 then similarly wages are not a consistent basis 
 for distributing the expenses. Again, out- 
 side mass production, the machines in one 
 shop are rarely identical in type or in running 
 expenses, so that a fiat rate, whether applied 
 on basis of wages or applied on basis of time 
 
56 THE COSTING PROBLEM 
 
 taken, will be proportionately inaccurate 
 according to the variation in the machines. 
 While there is no difl&culty in recognising the 
 virtue in having what are called " individual 
 machine rates " for each machine, which take 
 into account all the individual factors pertain- 
 ing to that machine, yet it involves a con- 
 siderable elaboration in the factory accounts 
 to put these individual machine rates into 
 force. Consideration has, therefore, to be 
 given as to whether the expenses of obtaining 
 the greater accuracy that machine rates give 
 is worth while. Each factory has to be con- 
 sidered on its own merits in this and nearly 
 every other aspect of factory accounting. 
 
 There is another aspect coming into the 
 picture to-day, calhng for the recognition, 
 as a proper item of cost, of the interest on 
 capital invested in land, buildings, and plant, 
 and employed for manufacturing purposes. I 
 am referring in this to the fact that labour 
 is asking, and, in some industries, has actually 
 obtained, the right to see production costs. 
 
FUNCTIONS OF FACTORY ACCOUNTS 57 
 
 This being the case, if the interest on capital 
 invested in plant is not included in the pro- 
 duction costs, then it will go to boost up the 
 trading profits and capital 'per se will have a 
 harder task in estabUshing its right to a mini- 
 mum remuneration, apart from the rewards 
 of Management, which may or may not be 
 synonymous with Capital. While it is true 
 that interest on capital is not to be disbursed 
 unless there are gross profits from which it can 
 be met, yet it is misleading to neglect this 
 interest as an item of cost. Accountants 
 hesitate to include interest as an item of cost, 
 arguing that it is an anticipation of profits, 
 and some of them even extend the reasoning 
 to depreciation, making the charge for depreci- 
 ation contingent upon the gross profits. Of 
 course, the position as regards depreciation 
 is that it is possible to share the burden of 
 depreciation according to the fat and lean 
 years without sacrificing the essential writing 
 down of plant values against the time when 
 the plant will have to be disposed of as being 
 
58 THE COSTING PROBLEM 
 
 scrap or obsolete. Whatever the financial 
 practice of a firm is, there is no reason why 
 factory accounts should not include interest 
 on capital employed in production, as 
 well as provision for depreciation and obsol- 
 escence, on lines agreed with the Manage- 
 ment as sound for the particular business in 
 question. 
 
 I have not referred so far to the interlocking 
 of the factory accounts with the financial 
 accounts. This is, of course, a vital condition 
 of factory accounts, if they are to be accepted 
 as proper accounts and not merely memoranda. 
 It is fully recognised by accountants that 
 factory accounts should be interlocked with 
 financial accounts, and the time seems to be 
 coming when company directors will be pre- 
 pared to have their accountants audit the 
 factory accounts equally with the financial 
 accounts, hence the necessity for accountants 
 thoroughly studjdng the underlying principles 
 on which a factory accounting system should 
 be built. 
 
FUNCTIONS OF FACTORY ACCOUNTS 59 
 
 I have discussed elsewhere^ how seriously 
 approximation enters into factory accounting, 
 and the consequent imperative necessity for 
 co-operation with the engineer if the cost 
 figures are to have their maximum rehability 
 and usefulness, whether as to selUng prices, 
 production efficiency, or manufacturing policy. 
 
 1 Chapter IV. 
 
CHAPTER IV. 
 
 Approximation in Factory Accounting.^ 
 
 Factory accounting is quite usually in- 
 terpreted as meaning costing, or cost keeping 
 or cost finding, whichever you will, and is 
 apt to be dismissed as a subsidiary or memor- 
 andum system of accounts that does not 
 pertain to the accounting system proper. 
 
 It is seriously misleading to consider factory 
 accounts merely as cost accounts, for factory 
 accounting means much more than that ; it 
 means a system of both records and accounts 
 that deals fully with the entire expenditure in 
 and by the factory (considered apart from the 
 selling and commercial departments) and with- 
 
 1 Based on Lecture given to the Chartered Accountants' 
 Students Society of London. 
 
 60 
 
APPROXIMATION 61 
 
 out which the financial accounts must lack 
 adequate foundation. 
 
 In manufacturing businesses generally there 
 is far too little recognition of the wisdom and 
 importance of separating the system of factory 
 accounts from that of the financial accounts. 
 
 The view seems to be taken that any expen- 
 diture that appears in the financial accounts 
 — ^and it must all appear there — can quite 
 adequately be dealt with there, or, inferen- 
 tially, the accounting system is defective. 
 
 Financial accounting systems as usually 
 adopted are not necessarily defective in them- 
 selves, but rather they become defective by 
 trying to accompUsh more than they are con- 
 structed to do. Perhaps we shall get a better 
 conception of the point of the present con- 
 tention if the financial accounting system is 
 considered as applying to the merchanting 
 aspect of a manufacturing business, and that 
 the factory accounting system, argued for 
 here, is the system that will account for the 
 works or factory expenditure as if the factory 
 
62 THE COSTING PEOBLEM 
 
 had a separate ownership and was selling to 
 a merchant at net cost price. 
 
 I venture to suggest that there is a most 
 important field of work before professional 
 accountants associated with manufacturing 
 concerns in arranging the accounts in each 
 instance in the two divisions here mentioned. 
 Each division will be equally linked up with 
 the final Profit and Loss Account. Each 
 division must be completely organised and 
 its accounts be susceptible to audit. 
 
 Having declared briefly the field to be 
 covered by a system of factory accounts, I may 
 remind you that on the efficiency of that 
 system depends correctness of the figures 
 entering into the annual Balance Sheet relative 
 to stock of materials, work in progress, and 
 plant. Those figures have usually more bear- 
 ing on the net profit or loss on the year's 
 trading than the bank balance, and yet how 
 crudely approximate are stock values fre- 
 quently, even where the auditor expresses 
 himself as satisfied with their accuracy. The 
 
APPEOXIMATION 63 
 
 truth is that, without a complete system of 
 factory accounts, including in that term both 
 the basic factory records and the cost accounts 
 built on them, the auditor is helpless to do 
 more than take such obvious precautions as 
 he can against over- valuation. Such an atti- 
 tude may be acceptable from a commercial 
 point of view, but there is no guarantee that 
 over-valuation has been in reality avoided 
 except as to stock having a definite selling 
 price. 
 
 In considering the subject of Approxi- 
 mation in Factory Accounting, I will not 
 pretend to discuss how far you may safely 
 depart from the truth, but rather how near 
 you can hope to get to the truth. 
 
 While I contend that cost-keeping is not an 
 adequate description of factory accounting, 
 it will, I feel, facilitate our discussion if I speak 
 in the first instance of production costs. 
 
 You are all, no doubt, familiar with the 
 expression " prime cost," and will be willing 
 to accept the definition that the prime cost 
 
64 
 
 THE COSTING PROBLEM 
 
 of an article represents the cost of material 
 and wages directly expended on its production. 
 
 Let me use an illustration, which, for con- 
 venience, is from an engineering source. 
 
 Brass bar of special section, is used for 
 making lever bodies for motor-cycle controls. 
 The following figure shows on the left hand a 
 piece cut off the special section bar without 
 
 Piece of Metal as cut 
 orr FROM Bar. 
 
 Similar Piece after being 
 
 MACHINED TO FlNAL ShAPE. 
 
 having been machined to final shape, so as to 
 show the bulk of metal involved in making 
 one article, and on the right hand an identical 
 piece after it has been fully machined. 
 
 It will be quite obvious that a large pro- 
 portion of metal cut in making one lever 
 body does not enter into the finished article. 
 
APPROXIMATION 65 
 
 It has become what engineers know as 
 *' swarf," and this swarf is of scrap value only. 
 
 It may help the illustration if I give some 
 values. This bar was purchased at the rate of 
 7jd. per lb., and the swarf realised 2|d. per lb. 
 Further, the finished article only accounts 
 for 21 1 per cent, of the metal cut up — ^the 
 balance of 78| per cent, being represented 
 by the swarf. 
 
 Let me add that during the year in question 
 the price of bar metal of this particular kind 
 had risen from the normal price of Tjd. per lb. 
 to 9id. per lb. 
 
 The complete levers are held in stock without 
 any indication of the date when the metal was 
 bought, and now I ask you, how shall we 
 arrive at the prime or direct material cost of 
 the component parts we are considering ? 
 
 Suppose we take the weight of metal used 
 as the weight of bar cut off. After that, shall 
 we credit against the cost of that metal the 
 scrap value of the swarf ? It is certainly only 
 logical to do so, but we are faced, in the ordinary 
 
66 THE COSTING PROBLEM 
 
 way, with difficulty in learning the precise 
 proportion of swarf that is made, without 
 adopting laboratory methods, that are out 
 of place in the regular routine of production. 
 
 Without discussing these difficulties let me 
 say at once that the best that can be done, 
 and only then under carefully organised work- 
 shop arrangements, is to credit the swarf, 
 as collected, as accurately as possible to 
 its proper order or contract. There will be 
 always some swarf that has too miscellaneous 
 an origin to be so credited, and the value of 
 such swarf should go to the benefit of the 
 Works Profit and Loss Account. 
 
 You will appreciate that, in this matter of 
 swarf, expediency will inevitably necessitate 
 some compromise or approximation in the 
 material cost accounts. 
 
 As to the rate per lb. to be adopted for the 
 material cost, if the occasion for applying the 
 cost is the annual stocktaking — ^and I particu- 
 larly desire to lead you to associate the cost 
 figures with that occasion, so that you will 
 
APPKOXIMATION 67 
 
 remember the influence of the factory account- 
 ing on financial accounting — at stocktaking, 
 then, three material values are available as 
 alternatives : — 
 
 1. The current market price. 
 
 2. The average price of purchase of 
 
 metal during the preceding year, 
 taken either as — 
 
 average rate per lb., or 
 
 average cost per lb., 
 the average cost being the total ex- 
 penditure divided by the total weight 
 purchased. 
 
 3. The actual purchase price of the metal 
 
 known to have been used. This en- 
 tails routine organisation to achieve 
 the record for such a purpose, and is 
 not generally justified. 
 
 The first course is sound to a certain degree, 
 viz. that stock materials should not be valued 
 above current market rates, but it by no means 
 follows that where the original cost was less, 
 
68 THE COSTING PROBLEM 
 
 that the stock values should be raised to market 
 rates, for to do so would be very dubious finance. 
 
 The second course is usually the soundest 
 course, if average cost is taken, subject always 
 to current market rates not being exceeded. I 
 may remind you that there are usually only 
 relatively few items of stock that are of the 
 nature of staple commodities having a market 
 quotation, so it is not possible in practice to 
 follow market rates very extensively. In 
 some businesses the stock held in staple com- 
 modities will be of considerable importance — 
 e.g. pig iron held by a foundry. 
 
 In discussing the influence of swarf on the 
 metal cost of our lever body I have not men- 
 tioned that there is a certain length of bar 
 necessary for holding same in the machine used 
 for turning and cutting up the bar, and that this 
 short length cannot be machined and becomes 
 scrap. The amount of waste depends on the 
 method of holding the bar. Incidentally it 
 may be pointed out that a higher price is 
 obtained for solid scrap than for swarf. I 
 
APPEOXIMATION 69 
 
 just refer to the point to further remind you 
 that academic accuracy as to the amount of 
 metal used is not quite easy to obtain apart 
 from the need for compromise as to the price 
 adopted. 
 
 Leaving the direct material cost of this lever 
 body, let us deal with the direct wages cost 
 of making or forming it into its final shape. 
 In this particular instance there are eight 
 machining operations and one hand opera- 
 tion, followed by the processes of poUshing 
 and plating. 
 
 DeaUng with any one machine operation, 
 the obviously direct wages cost is the amount 
 of wages paid to the machine operator for the 
 time occupied in machining one article. Yet at 
 once arises the question of the allocation of the 
 wages cost of the time occupied in getting the 
 machine ready, that is, as to setting of tools. 
 This should be spread over the batch of articles 
 done. If the batches are small, or the quanti- 
 ties done before the setting of the machine is 
 disturbed are small, the influence of this 
 
70 THE COSTING PROBLEM 
 
 preparatory work will be proportionately higher 
 than where large quantities are done at one 
 setting. Average costs of a number of batches 
 will obviously be truer than costs of occa- 
 sional batches. 
 
 By way of throwing a sideHght on the hind- 
 rances to perfect costing, let me refer you to the 
 case when overtime is worked. For overtime 
 the men are paid at the rate of time and a 
 quarter (i.e. 1 J hours' pay for one hour's work), 
 or time and a half, or even double time. The 
 overtime may frequently arise from a general 
 pressure of work. This would mean that the 
 overtime allowance (the extra quarter time, 
 etc.) should be spread over the production as 
 a whole — or, in other words, treated as a 
 general works expense. If, on the other hand, 
 overtime is occasioned by a special job, that 
 job ought to bear the entire burden, which 
 may easily extend to special power and 
 supervision charges, etc. 
 
 For some machining operations, the setting 
 up the machine is quite a lengthy process. If 
 
APPEOXIMATION 71 
 
 the machine operator is competent to set up 
 his own machine the wages cost of setting up 
 will be his wages, but, for much manufacturing, 
 the machine operator is not suflSciently skilled 
 to do this work, which is carried out by a 
 machine setter who looks after a number of 
 machines. The machine operator may have 
 to stand by while his machine is being set for 
 him, so that there will be his wages as well as 
 the machine setter's to put against the job. 
 Under these conditions, moreover, the machine 
 setter is in frequent attendance on the machine 
 to see that the tools are performing their work 
 properly — ^the machine operator being then 
 virtually only a minder. It will not be difl&cult 
 to reahse that precise allocation of the machine 
 setter's time to each of the jobs he is deaUng 
 with is almost impossible, and it is nearly 
 always the more sensible course to average the 
 machine setter's wages as a percentage on the 
 machine operator's wages — or, better still, as 
 an average charge per hour of machine time. 
 Machine-setting wages cannot always be 
 
72 THE COSTING PROBLEM 
 
 dealt with as ''direct" wages, and in the 
 alternative it is convenient to distinguisli them 
 as secondary wages. 
 
 There are other secondary wages to be con- 
 sidered, notably that of viewing or examining 
 the work when effected between operations 
 or groups of operations. Final inspection of 
 the completed product can less often be asso- 
 ciated with operation costs. 
 
 Both direct wages and secondary wages are 
 properly considered as manufacturing wages, 
 or, if you will, as prime or productive wages, 
 though the latter term is a misnomer. 
 
 Apart from the problems just indicated 
 there are frequently cases of groups of machines 
 being tended by one operator. In such 
 cases the direct wages charge for an hour's 
 work on any one machine will be the opera- 
 tor's full wages, divided by the number of 
 machines he tends. This number will, how- 
 ever, fluctuate from day to day according to the 
 number the machine setter manages to keep 
 set up for the machine operator. 
 
APPROXIMATION 73 
 
 In other cases there will be a group of 
 automatics with only the machine setter in 
 attendance. There is then really no direct 
 wages charge available as a basis for apportion- 
 ing the setter's wages, and this constitutes an 
 occasional difficulty in applying secondary 
 wages as a percentage on the direct or operator's 
 wages and may necessitate arbitrary division. 
 
 Against the compHcations of direct and 
 secondary wage allocations just indicated, 
 there is a vast amount of machine work where 
 the operator's wages have not to bear any 
 secondary wages charge, and the manufactur- 
 ing or prime wages cost of any such operations 
 would seem to be free of any occasion for 
 approximation. Even here a note of warning 
 may be sounded as to the unreUabiUty of much 
 of the time allocation that is based on the men's 
 own ideas of time spent on each j ob . More often 
 than not these allocations are only approxi- 
 mations, and not close ones at that. Mechani- 
 cal time recorders are installed in many 
 workshops, apart from time recorders for 
 
74 THE COSTING PROBLEM 
 
 ordinary timekeeping, to eliminate these in- 
 accuracies of time booking or allocation, but 
 carefully organised administration is necessary 
 to acliieve any marked success in that direction, 
 particularly as to the issue of new job tickets, 
 otherwise a time recorder stamping may not be 
 above guile — guile, that is, on the part of the 
 man stamping the card as to when he wishes to 
 appear as going " off'' one job and " on " the 
 next. The exhaustive allocation of the whole 
 of a man's working time on his time sheet or on 
 separate job tickets is not conclusive evidence 
 of the accuracy of that allocation, although 
 from a bookkeeping point of view it will appear 
 accurate simply because all the time, and hence 
 all the wages, is accounted for. 
 
 Consideration has been given so far to 
 machine work, but the same remarks apply to 
 some extent to hand work. Pohshing and 
 plating involve very different conditions, and 
 cannot be dealt with now. 
 
 Assuming I have sufficiently indicated that 
 both direct material costs and manufacturing 
 
APPEOXIMATION 75 
 
 wages costs are not to be ascertained without 
 some degree of approximation, it will be well 
 to refer to the effect of defective work, 
 either in point of material or workmanship. 
 The cost of such waste is obviously a charge 
 against the good articles made. In some 
 businesses it may be admissible to treat the 
 cost of all defective work as a general expense 
 to be distributed jyro rata over the whole pro- 
 duction by some average formula. In other 
 cases this would be grossly misleading as to 
 the real cost of certain articles or classes of 
 articles. 
 
 Yet another consideration in regard to the 
 prime cost of an article is the proportion each 
 article should carry of the initial costs of 
 drawings, patterns, special tools, jigs and gauges. 
 Where there is only one lot of articles to be 
 made, and repetition orders are an improbable 
 event, the task of apportionment is only simple 
 arithmetic. In other cases these costs are of 
 such general incidence that there is hardly 
 any alternative to treating them as a general 
 
76 THE COSTING PROBLEM 
 
 works expense. To capitalise such expendi- 
 ture is only justified in rare cases. 
 
 We now come to the most debatable element 
 of production costs, viz. that of the overhead 
 or establishment expenses — sometimes called 
 the oncost. 
 
 It is necessary to say at once that commercial 
 expenses have little, if any, relation to produc- 
 tion costs, and only an entirely arbitrary pro- 
 cess of distribution is possible. It is doubtful 
 if there is any nearer method than to apply 
 conmiercial charges as a flat percentage on the 
 production cost. This method is substantially 
 what a merchant would do in distributing his 
 expenses over the goods handled. Some dis- 
 crimination may be proper and possible be- 
 tween difierent classes of goods, but it is con- 
 venient for our purpose to dismiss this question 
 as pertaining purely to the merchanting of the 
 factory's production and outside the range of 
 factory accounting proper. 
 
 In dealing with works or manufacturing 
 expenses it is of first importance that they be 
 
APPROXIMATION 77 
 
 inclusive of every expense that is not strictly 
 commercial or financial. This inclusiveness is 
 frequently neglected, and only the more 
 obvious works expenses treated as such. 
 
 In the tabular extracts that are given at the 
 end of this chapter, a list of Works Expense 
 Accounts appears that, while not necessarily 
 suitable for any particular works, will yet be 
 found sufficiently representative, and will serve 
 to bring out the less obvious items of works 
 expenses. 
 
 Attention is called to the grouping of these 
 expenses under the term " services." This 
 arrangement is made to facilitate comparison 
 of period totals for administrative purposes, 
 and to facilitate also the apportionment of 
 the total expenses among the various works 
 departments, and then, again, for apportion- 
 ing the departmental expenses among the 
 sections comprising each department ; and, 
 even further, among the units constituting a 
 section or department — as exemplified in the 
 further tables (page 92). 
 
78 THE COSTING PROBLEM 
 
 It is not always easy to determine under what 
 heads expenses shall be recorded in any given 
 case, because there may be local limitations 
 as to what can be attempted in that direction 
 with any satisfaction owing to difficulties in 
 obtaining correct allocation of expenditure to 
 the several accounts. 
 
 In the case of materials accurate cost alloca- 
 tion can only be achieved through efficient stores 
 control. It is seldom accurate enough for 
 material allocation to be done from the invoices 
 solely according to the intention for which 
 the materials in question were purchased. 
 The method is, however, easy and comphes 
 with the main necessities of the case, but it 
 must be admitted as an approximate method 
 partially, at least, and under some conditions 
 quite misleading. A more accurate method 
 would be to put all such material into stock, 
 and then allocate according to the purpose for 
 which the material is actually drawn. 
 
 Assuming that the works expenses are re- 
 corded under the several appropriate headings 
 
APPROXIMATION 79 
 
 with sufficient accuracy, the next question 
 that arises is, How are these expenses related 
 to the prime material and wages costs of a 
 ^iven article ? 
 
 One method is to apply the total expenses as 
 a flat percentage charge or burden on the 
 manufacturing wages expenditure. If the 
 whole of such wages are expended under 
 similar conditions, such as being all for machine 
 work of similar class at similar rates of wages, 
 then a flat percentage may be quite near the 
 mark, but if the wages rates or any other con- 
 ditions are very irregular, taking the works 
 through, then such a percentage scheme is 
 distinctly faulty. 
 
 In engineering factories and the like the 
 most notable difierence in conditions is that of 
 machine work and hand work. Obviously no 
 single flat percentage ought to apply equally 
 to these two sets of conditions. 
 
 Without attempting a very close examination 
 of these matters, it will be easily appreciated 
 that to arrive at any approach to accuracy 
 
80 THE COSTING PROBLEM 
 
 in the incidence of works expenses it is neces- 
 sary to treat each class of expense on its merits 
 and apportion accordingly to the respective 
 works departments concerned. Some sugges- 
 tions in that direction are contained in the 
 tables given on pages 86 et seq. 
 
 As already indicated, discrimination may be 
 necessary as between machine and hand sections 
 in the same department. An average expense 
 burden or oncost rate at this stage will only be 
 acceptable if the conditions of the department 
 are fairly even in character throughout. It 
 will be practically imperative in many cases to 
 discriminate between the various producing 
 units or centres of production in the same 
 department. Any machine operating on manu- 
 facturing work constitutes a producing unit, 
 and if there is a machine operator working solely 
 on any one machine, then the man and machine 
 together comprise the producing unit. Some- 
 times several machines are operated by one man, 
 and in the case of automatic machines there 
 is no operator in the ordinary sense. It will 
 
APPROXIMATION 81 
 
 not be difficult to see that the operator's wages 
 constitute an uncertain basis for applying 
 works expenses, even as they do for applying 
 secondary wages. There is the further stronger 
 point against such a practice in the variation 
 in wages rates, because the high wage rate of a 
 skilled worker by an average percentage-on- 
 wages plan would then carry a heavier charge 
 than the lower wage rate of the semi-skilled 
 operator, whose services usually entail more 
 supervision and other assistance, and who may 
 be using the more costly machine. 
 
 A careful survey of production conditions 
 in any factory will make it quite evident that 
 there must be heavier expenses in working one 
 machine compared with another, and pro- 
 portionately less expense for the hand workers 
 using only a bench, a vice, and loose tools. To 
 appreciate that there is a difierence in the 
 expenses does not itself overcome the diffi- 
 culty of discriminating as to the precise 
 proportions of the expenses to be borne in 
 each case. 
 
82 THE COSTING PROBLEM 
 
 The first essential to any adequate treat- 
 ment of this subject is to eliminate the opera- 
 tors' wages, and therefore their variations, and 
 to take as a basis the time during which each 
 producing unit is in use. Time is the common 
 measure for the great majority of expenses, 
 and it is only elementary logic to apply those 
 expenses on a time basis. 
 
 It will easily be seen then how the case of the 
 automatic machine can be met equally with 
 that of the hand worker. 
 
 Applying these remarks to the present con- 
 sideration, if we bear in mind that works 
 expenses quite commonly exceed the manu- 
 facturing wages in total, it will be clear that 
 arbitrary methods of applying or distributing 
 these expenses are likely to give most serious 
 errors. On the other hand, while it is not 
 possible to arrive at any absolute accuracy in 
 the matter, a very close approximation to the 
 truth may be obtained by a carefully ordered 
 sequence of apportionments on the lines fore- 
 shadowed. 
 
APPROXIMATION 83 
 
 This aspect of factory accounting has a vital 
 influence on the efficient direction of any- 
 manufacturing business, and has a direct bear- 
 ing on the proper stock value of completed 
 products and work in progress. 
 
 One of the most important results that should 
 ensue from the exercise of the analytical 
 spirit in factory accounting is not only the 
 investigation of the true cost of each article 
 made, but the true usefulness of all the stock 
 held. 
 
 It is not enough at the annual stocktaking 
 to be able to demonstrate that certain materials 
 were bought at a certain price, or that certain 
 products were produced at a certain cost — 
 or uncertain cost, perhaps, if the truth were 
 known — ^but we must know more, we must 
 know if the materials and the products are 
 reasonably certain to be used within the coming 
 year. The risk of obsolescence in material and 
 product is often too little regarded — particu- 
 larly as to materials. 
 
 Some provision should be made to meet this 
 
84 THE COSTING PROBLEM 
 
 risk by a reservation on the total stock values, 
 just as on book debts a reservation is made for 
 bad and doubtful debts. 
 
 Touching the stock valuation of products, 
 it is very necessary to see that no items are 
 valued above the price that they are likely to 
 realise when sold, less a deduction to cover the 
 estimated or average costs of selUng. An 
 investigation of this aspect of stock values will 
 entail consideration of stocks that are unsale- 
 able or sell so slowly that a portion may 
 ultimately prove to be imsaleable. Although 
 the fixing of selUng prices is not within the 
 scope of factory accounting, the ultimate 
 valuation of all stock does belong there, 
 because the writing down of stock values is a 
 contingency to be provided for in arriving at 
 the total works expenses. 
 
 Another considerable aspect of factory ac- 
 counting relates to plant matters, such as the 
 correct appraisement of capital additions, the 
 provision for proper depreciation in consider- 
 ing works expenses, and the annual valuation 
 
APPROXIMATION 85 
 
 of plant, more particularly tools and loose plant. 
 The care with which these matters are dealt 
 will not merely affect annual stock values, but 
 also affect the sum total of works expenses to be 
 taken into consideration, and so the real cost 
 of the factory products. 
 
86 
 
 THE COSTING PROBLEM 
 
 Tabulation of Works Expense Groups. 
 
 Group. 
 
 stand- 
 ing 
 
 Order 
 No. 
 
 Works Expense Class. 
 
 Provisional Basis 
 
 or Formula for 
 
 apportionment to 
 
 Departments. 
 
 Building 
 Service 
 
 R2-1 
 
 Repairs — Land and 
 Buildings 
 (less Power Dept. 
 Bldg. if separate). 
 
 By percentages 
 based on Works 
 Manager's esti- 
 mate. 
 
 
 R2-5 
 R2-6 
 
 Repairs — Pipe Trans- 
 mission. 
 
 Repairs — Transporta- 
 tion Plant. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental ori- 
 ginal values of 
 plant concerned. 
 
 
 R2-7 
 
 Repairs — Shop Fixtures. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental ori- 
 ginal values 
 of plant con- 
 cerned. 
 
 
 — 
 
 Depreciation on capital 
 value of plant named 
 above. 
 
 On same basis as 
 repairs. 
 
 
 
 Provision for expiration 
 of lease. 
 
 By apportion- 
 ment according 
 to the indivi- 
 dual value and 
 age of the build- 
 ings. 
 
 
 Sl-3 
 Sl-4 
 
 Heating Expenses. 
 Lighting Expenses. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental ori- 
 ginal values 
 
 
 S2-1 
 
 Building Attendance. 
 
 of plant con- 
 cerned. 
 
 
 S3-1 
 
 Rent, Rates, Taxes, Fire 
 Insurance and Pre- 
 vention. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental ori- 
 ginal values of 
 all buildings 
 and all plant 
 taken together. 
 
APPROXIMATION 
 
 87 
 
 Tabulation of Works Expense Groups — Gontd. 
 
 Group. 
 
 stand- 
 ing 
 Order 
 
 No. 
 
 Works Expense Class. 
 
 Provisional Basis 
 
 or Formula for 
 
 apportionment to 
 
 Departments. 
 
 Power 
 Service 
 
 R2-1 
 R2-2 
 R2-3 
 R2-4 
 
 SM 
 81-2 
 
 S2-2 
 S2-3 
 S2-4 
 
 Repairs — ^Power Dept. 
 Building. 
 
 Repairs — Motive Power 
 Plant. 
 
 Repairs — Mechanical 
 Transmission. 
 
 Repairs— Electrical 
 Transmission. 
 
 Depreciation on capital 
 value of plant named 
 above. 
 
 Power Generation Ex- 
 penses. 
 
 Power from outside 
 sources. 
 
 MechanicalPlantAttend- 
 ance. 
 
 Electrical Plant Attend- 
 ance. 
 
 Belting Attendance. / 
 
 Grouped together 
 in one sum and 
 apportioned by 
 percentages 
 based on Power 
 Department's 
 report confirm- 
 ed by Works 
 Manager. 
 
 Produc- 
 ing 
 Unit 
 Service 
 
 R2-8 
 R2-9 
 
 Repairs — Special Process 
 
 Plant. 
 Repairs — ^Machines. 
 
 Depreciation on capital 
 value of plant named 
 above. 
 
 According to Cost 
 Allocation Ac- 
 counts. 
 
 By percentages 
 based on rela- 
 tive departmen- 
 tal original 
 values of plant 
 concerned, or 
 possibly accord- 
 ing to Cost Allo- 
 cation Accounts. 
 
 On same basis as 
 repairs. 
 
88 
 
 THE COSTING PROBLEM 
 
 Tabidation of Works Expense Groups — Contd. 
 
 Group. 
 
 Stand- 
 ing 
 Order 
 
 No. 
 
 Tool 
 Service 
 
 Works Expense Class. 
 
 R 1-1 Repairs — Patterns. 
 
 Rl-2 Repairs — Jigs and 
 Special Tools. 
 
 R3-1 
 
 S2-5 
 
 Repairs — Loose Plant. 
 
 Tool Dressing and 
 Sharpening. 
 
 Annual loss in value of 
 plant concerned as 
 disclosed at stock- 
 taking. 
 
 Provisional Basis 
 
 or Formula for 
 
 apportionment to 
 
 Departments. 
 
 The costs under 
 these headings 
 are likely to be 
 of a minor 
 character, if 
 the main 
 
 charges are 
 booked against 
 the specific 
 order occasion- 
 ing the repairs. 
 The apportion- 
 ment in any 
 case can follow, 
 with little 
 
 error, the lines 
 adopted for 
 Loose Plant 
 Repair Costs. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental replace- 
 ment values of 
 plant con- 
 
 cerned, or pos- 
 sibly according 
 to Cost Alloca- 
 tion Accounts. 
 
 These costs 
 should prob- 
 ably be appor- 
 tioned almost 
 wholly to the 
 machining de- 
 partments, but 
 if no clear dis- 
 tinction exists, 
 the apportion- 
 ment basis can 
 be the same as 
 per Loose Plant 
 Repairs. 
 
 On same basis as 
 Loose Plant 
 Repairs. 
 
APPROXIMATION 
 
 89 
 
 Tahulatio7i of WorJcs Expense Groups — Gontd, 
 
 Group. 
 
 stand- 
 ing 
 
 Order 
 No. 
 
 Works Expense Class. 
 
 Provisional Basis 
 
 or Formula for 
 
 apportionment to 
 
 Departments. 
 
 Material 
 
 S4-1 
 
 General Stores and ^ 
 
 
 Service 
 
 
 Warehouse Ex- 
 
 
 
 S4-2 
 S4-3 
 
 penses. 
 
 Sundry Carriage and 
 Package Expenses. 
 
 Material Testing and 
 Treatment. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental totals 
 of direct pro- 
 duction hours. 
 
 
 S4-4 
 
 Timber Preparation and 
 Storage. 
 
 Total to Wood- 
 working De- 
 partments. 
 
 
 S4-5 
 S2-6 
 
 Interdepartmental 
 Transportation. 
 
 By percentage 
 based on Works 
 Manager's esti- 
 mate. 
 
 Depart- 
 mental 
 
 Plant Removals and 
 Alterations. 
 
 According to Ck)st 
 Allocation Ac- 
 counts. 
 
 Service 
 
 S5-1 
 
 Accident Compensation. 
 
 By percentage 
 based on rela- 
 tive depart- 
 mental wages 
 totals. 
 
 
 S5-2 
 
 National Insurance Ex- 
 
 According to de- 
 partmental 
 
 
 
 penses. 
 
 wages sheets. 
 
 
 S6-1 
 
 Shop Stores Expenses. 
 
 By percentage 
 based on Works 
 Manager's esti- 
 mate. 
 
 
 S6-2 
 
 Shop Supplies (General). 
 
 
 
 S6-3 
 S6-4 
 
 Overtime Charges. 
 General Labouring. 
 
 According to 
 Cost Allocation 
 Accounts 
 
 
 S6-5 
 
 Shop Supervision and 
 Inspection. 
 
 
00 
 
 THE COSTING PROBLEM 
 
 Tabulation of Works Expense Grozips — Contd. 
 
 Group. 
 
 stand- 
 ing 
 
 Order 
 No. 
 
 Works Expense Class. 
 
 Provisional Basis 
 
 or Formula for 
 
 apportionment to 
 
 Departments. 
 
 Ad- 
 minis- 
 tration 
 Service 
 
 R3-2 
 
 S3-2 
 
 S3-3 
 
 S3-4 
 S3-5 
 
 Repairs — Office Equip- 
 ment (Works). 
 
 Annual loss in value of 
 above as disclosed at 
 stocktaking. 
 
 Works Management and 
 Administration. 
 
 Drawing Office General 
 Charges. 
 
 Works Stationery. 
 
 Sundry Minor Expenses.^ 
 
 By percentage 
 based on rela- 
 tive depart- 
 mental totals 
 of direct pro- 
 duction hours. 
 
 Contin- 
 gency 
 Service 
 
 — 
 
 Estimated Guarantee' 
 liabilities on year's 
 products. 
 
 Development and Ex- 
 perimental expendi- 
 ture not carried for- 
 ward at end of year. 
 
 Reservation for bad and 
 doubtful stock dis- 
 closed at stocktaking.. 
 
 By percentages 
 based on rela- 
 tive depart- 
 mental totals 
 of direct pro- 
 duction hours. 
 
APPROXIMATION 
 
 91 
 
 Apportionment of Departmental Expenses between 
 Hand and Moxihine Sections, 
 
 Building Service. 
 Power Service. 
 
 Producing Unit Service. 
 
 Tool Service. 
 
 Material Service. 
 Departmental Service. 
 Administration Service. 
 Contingency Service. 
 
 Divided on ratio of areas actually 
 occupied. 
 
 All to Machine section subject to 
 deduction for handworkers' use of 
 hand pneumatic, electric and hy- 
 draulic tools ; also for transportation 
 power consumption in the case of 
 heavy hand work 
 
 All to Machine section. The equi- 
 valent service for the Hand section 
 is included in the Building Service 
 apportionment. 
 
 Special process plant expenses may 
 affect either Hand or Machine sec- 
 tions and can only be dealt with on 
 the merits of each case. 
 
 Apportioned to the Hand section 
 according to the Works Manager's 
 estimate, but usually not exceeding 
 the ratio of the number of hand units 
 to machine units. The balance to go 
 to the Machine section. 
 
 Divided according to ratio of total 
 hand production hours to total 
 machine production hours. 
 
92 
 
 THE COSTING PROBLEM 
 
 Apportionment of Departmental Expenses to 
 Individual Producing Units, 
 
 Building Service. 
 
 Power Service. 
 
 Producing Unit Service. 
 
 Tool Service. 
 Material Service. 
 
 Departmental Service. 
 Administration Service. 
 Contingency Service. 
 
 By percentage based on ratio of net 
 individual area occupied to total net 
 areas occupied by producing units. 
 
 Net areas should include the space 
 required for working each machine. 
 
 Tills plan automatically deals with 
 non-producing areas by proportion- 
 ately increasing the incidence on the 
 producing areas. 
 
 By percentage based on the ratio 
 of average power used by the indi- 
 vidual unit to the average total power 
 consumed in the department. Tills 
 automatically spreads transmission 
 losses in proportion to the net power 
 used. 
 
 To arrive at the average power used 
 by individual machines specific tests 
 may be necessary on representative 
 machines. The belting capacity is 
 rarely a safe guide to the power con- 
 sumed 
 
 By percentage based on capital 
 value of Individual items, subject to 
 scrutiny of Works Manager — par- 
 ticularly in the case of Special Process 
 Plant. 
 
 By percentage based on Works 
 Manager's estimate. 
 
 By same percentage as Producing 
 Unit Service or, when the producing 
 units are of imiform character, by 
 sub-division, according to the number 
 of such units. 
 
 Same basis as Material Service. 
 
 By sub-division according to the 
 number of producing units. 
 
 Same basis as Administration Ser- 
 vice. 
 
 These tabulation forms are reprinted from the Author's work on " Factory 
 Administration and Accounts " by permission of the publishers. 
 
APPENDIX A. 
 
 Extracts f from The Federation Printers' 
 Cost-Finding System. 
 
 [Words in brackets added by the Author.] 
 
 Introductory Remarks, 
 
 What is Cost ? 
 
 Cost may be defined as the sum of all the 
 expenses, direct and indirect, incurred in the 
 production of a given article. If more than 
 the cost be charged for a job, the difference is 
 the profit ; if less than the full cost be charged, 
 the difference is the loss on the job. 
 
 What is Meant by a Cost System ? 
 
 A cost system implies a systematic method 
 of discovering cost, as opposed to guessing. 
 
 By permission of the Federation of Master Printers, 
 24 Holbom, E.C.I , from their publication, " The Federation 
 Printers Cost-Finding and Accounting Systems." 
 
 93 
 
94 THE COSTING PROBLEM 
 
 It means a certain amount of routine, for no 
 proper system can be evolved which does not 
 necessitate some clerical work and the keeping 
 of various forms. 
 
 Why a Cost System at all ? 
 
 Because in these modern scientific days no 
 manufacture can be carried on successfully for 
 any length of time without an accurate know- 
 ledge of the cost of the article manufactured. 
 Printing, which is a manufacture as well as an 
 art, is no exception to this rule, and the un- 
 fortunate condition of the trade as a whole 
 may be considered as almost entirely due to 
 ignorance on the subject of cost. 
 
 What are the Main Essentials of a Proper Cost 
 System ? 
 
 They are that it should be (1) simple, (2) 
 accurate, and (3) elastic. It should be simple, 
 because simplicity implies ease in operation as 
 well as economy in clerical labour. It should 
 be as accurate as possible, for if its principles 
 are not scientific [analytical], it will not com- 
 
APPENDIX A 95 
 
 mand the assent of the trade, and therefore 
 it will fail to secure that universal adoption 
 which is so desirable. It should be elastic, in 
 order that it can be adapted to large and 
 small shops alike. 
 
 Explanation of the System, 
 
 The broad principles of the system can be 
 summarised as follows : 
 
 cost + nett profit 
 = selling price. 
 
 Chargeable wages + a^ 
 proportion of general 
 expenses. 
 
 Chargeable material 
 + handling and sell- 
 ing expenses. 
 
 The essential points of the system are — 
 
 1. The cost per hour (if the work be done on 
 time) or per piece unit (if the work be done on 
 piece) must be found for each process in the 
 business. 
 
 2. The hour or piece-unit cost should cover 
 all the expenses of wages and general expenses 
 
96 THE COSTING PROBLEM 
 
 (e.g. idle time, rent, rates, taxes, selling ex- 
 penses, and interest on capital, etc.). 
 
 3. A percentage sufficient to cover the cost 
 of warehousing, handling, and selling should 
 be added to the nett cost of material. 
 
 4. The individual cost of each job on the 
 above basis should be ascertained, to which 
 should be added a reasonable amount for nett 
 profit. 
 
 5. The hour costs should be automatically 
 checked at recurring intervals, so that the 
 printer may know that the hourly rates on 
 which he is working are covering the costs of 
 production. 
 
 The information is obtained in the follow- 
 ing manner : 
 
 1. Once a year, preferably at the beginning 
 of the financial year, but the methods 
 can be started at any time, the expenses 
 of the business are allocated to the de- 
 partments, to find the departmental 
 standing expenses. 
 
APPENDIX A 97 
 
 2. The percentage to be added to wages and 
 
 departmental expenses to cover over- 
 head expenses, and a different per- 
 centage to add to the cost of materials 
 to cover handling and selhng expense- 
 is found at the same time. 
 
 3. Every worker whose time can be charged 
 
 to jobs makes out a daily docket show- 
 ing how his time has been spent. 
 
 4. The hours charged to jobs on the daily 
 
 dockets are transferred daily at the 
 correct hourly rates to — 
 
 {a) the job cost sheets, to find the 
 cost of each job ; 
 
 (6) the value of production form to 
 find the value of work produced 
 each week. 
 
 5. The materials used are entered on the 
 
 Materials Issued Forms, or on the work 
 ticket, and transferred to the job cost 
 sheets. 
 
98 THE COSTING PROBLEM 
 
 6. The cost of production is found each 
 week ; and when compared with the 
 value of production, the hourly rates 
 in each department can be checked and 
 corrected if necessary. 
 
 The whole system is summarised in these 
 six sentences. 
 
 In introducing this cost-finding system into 
 any business, it is necessary to divide the 
 business into departments. 
 
 ♦ ♦ ♦ ♦ ♦ 
 
 From the Trading and Profit and Loss 
 Accounts for the previous year find the total 
 amount expended in : 
 
 1. Wages and National Insurance Act pay- 
 ments (including foremen and casual labour, 
 but excluding office salaries, etc.). 
 
 2. Materials that can be charged to cus- 
 tomers, called chargeable materials, e.g. ink, 
 paper, strawboards, and binding materials ; 
 
APPENDIX A 99 
 
 but excluding sundry or non-chargeable 
 materials, such as proof paper, lye, roller 
 composition, string, etc., which cannot be 
 charged on each job. 
 
 3. Outside work, which consists of goods 
 bought in for re-sale, and work done by other 
 firms which cannot be carried out in the 
 printing oflBce. 
 
 4. All the other general expenses of the 
 business, such as salaries, rents, taxes, insur- 
 ance, interest, depreciation, etc., and sundry 
 materials, as proof paper, roller composition, 
 etc. 
 
 :i( 4c 4t 9|e 4t 
 
 The expenses of the previous year or average 
 of years should be divided over the different 
 departments in the following manner : 
 
 Rent, Rates, Taxes, Heat, Light, and Water, — 
 These can all be grouped together, and divided 
 in most cases over the departments according 
 to the square feet of floor space in each. 
 ♦ ♦ ♦ * ♦ 
 
100 THE COSTING PROBLEM 
 
 Fire Insurance must be allocated to each 
 department as follows : Insurance on build- 
 ings in proportion to the floor-space, and 
 insurance on plant and contents according to 
 the value in the department. 
 
 Insurance for Loss of Profits, — ^This amount 
 should be entered in the overhead expenses 
 column. 
 
 Workmen's Compensation, — ^The sums spent 
 in compensation or insurance against em- 
 ployer's Hability claims should be allocated to 
 the departments on the basis of the wages 
 paid. 
 
 Power. — ^The cost of driving the machinery 
 must be allocated to the departments in pro- 
 portion to the amount used. 
 
 ***** 
 
 Repairs and Renewals to Plant and 
 Machinery. — ^The sums thus expended should 
 be allocated to the departments where the 
 expenses are incurred. 
 
 ♦ * 4t 4k * 
 
APPENDIX A 101 
 
 Direct Departmental Sundries.— These in- 
 clude the various non-chargeable materials in 
 each department, which cannot be charged to 
 each job, such as proof paper, lye, roller com- 
 position, oil, rags, paste, etc. 
 
 Interest on Capital. — Interest of at least 6 per 
 cent, per annum on the capital employed in 
 each department should be considered as an 
 expense of the business, and allocated to such 
 departments. The rates of interest have 
 greatly increased owing to the war, and 
 reasonable adjustments should be made for 
 this additional expense. 
 
 % « He :N Hi 
 
 Depreciation. — The Committee recommends 
 that depreciation should be written at the rate 
 of 10 per cent, per annum off the diminishing 
 value of the plant. The depreciation should 
 be allocated to the departments according to 
 the value of plant in each, if the figure in the 
 balance sheet represents the present working 
 
102 THE COSTING PROBLEM 
 
 value of the plant, otherwise adjustments 
 should be made. 
 
 Odd Men, etc. — ^If there should be an 
 engineer, labourer, or a liftman, their wages 
 should be allocated to those departments 
 where their services are rendered, and the 
 wages of a paper warehouseman to the paper 
 department. 
 
 ^ ^ 9p 'P ^ 
 
 All other General Expenses should be treated 
 as overhead expenses to be dealt with as a 
 percentage on materials and departmental 
 costs. 
 
 ♦ ♦ ♦ ♦ ♦ 
 
 General Expenses on Materials. — ^The next 
 point is to deal with the expenses allocated to 
 the materials account, viz. the expenses of 
 storing and handUng materials. To this 
 amount should be transferred a fair proportion 
 of the overhead expenses. The total of the 
 materials account will be a percentage on the 
 
APPENDIX A 103 
 
 total amount of the materials used for the year, 
 and this percentage should be added to the 
 nett value of all material suppUed to cus- 
 tomers to cover the costs of handling and 
 selUng. 
 
 All the expenses will have thus been allo- 
 cated, either to the departments, to materials, 
 or to overhead expenses. 
 
 Method of Recovering Overhead Expenses. 
 
 This amount should be recovered by adding 
 a percentage (which will vary with each 
 business) to the total departmental cost, i.e. 
 the wages paid plus the standing departmental 
 expenses. 
 
 ♦ ♦ ♦ ♦ « 
 
 Daily Dockets, 
 
 In order to find the number of hours worked 
 on each job in each process, a daily docket 
 must be kept by each worker whose time or 
 machine is chargeable, and the docket should 
 
104 THE COSTING PROBLEM 
 
 show the number of chargeable hours worked 
 on each job, and its number, and the number 
 of non-chargeable hours, and thus account for 
 the total number of hours paid for. 
 
 Ai * * * j¥ 
 
 Printing Machine Units [and Rates]. 
 
 A unit [Machine Basis Rate] representing 
 machine hour cost [per unit of Plant Value] 
 must be found for each machine. This unit 
 will cover all the expenses of the department 
 — ^with the exception of the wages of the 
 minder and the feeder on each machine — and 
 to the unit hour cost of the machine [Machine 
 Basis Rate] a sum must be added to cover the 
 wages of minder and feeder. 
 
 The original cost of the machine is a fair 
 basis for allocating all the expenses of the 
 department, as depreciation, insurance, and 
 interest are according to the cost of the 
 machine ; and floor-space, power, and over- 
 head expenses, such as travellers' commission, 
 carriage, etc., approximately follow the cost 
 of the machine. 
 
APPENDIX A 105 
 
 Each machine must be reckoned as repre- 
 senting a certain number of [Plant Value] 
 units. It is suggested that £50 is a convenient 
 unit, that is, one unit for every £50 or part 
 of £50, of the original cost of the machine. 
 
 Having ascertained the number of [Plant 
 Value] units the machine is assessed at, and 
 the average number of chargeable hours for 
 such machine, multiply them together, and 
 obtain the total hour units for each machine 
 per week [and so arrive at a departmental 
 total of hour units for the machine room]. 
 
 To find the value of the hourly unit 
 [Machine Basis Rate] take the total depart- 
 mental cost of the machine room for as many 
 weeks as possible, and find the average weekly 
 cost. From this sum deduct the average 
 weekly chargeable wages (i.e. the wages paid 
 to minders and feeders), and the balance is 
 that part of the cost of the machine room 
 which must be [divided by the departmental 
 total of hour units to arrive at the Machine 
 Basis Rate per unit of plant value]. 
 
106 THE COSTING PROBLEM 
 
 [To arrive at the Individual Machine Rate 
 per hour, or Hourly Rate, as stated earlier in 
 the extracts, for any machine multiply the 
 Machine Basis Rate by the number of Plant 
 Value Units represented by the machine in 
 question.] 
 
 ***** 
 
 The weekly wages on each machine, divided 
 by the average number of hours per week that 
 the machine is chargeable, gives the wages per 
 chargeable hour. 
 
 ***** 
 
 The hours spent on each job will be found 
 from the daily dockets, and these hours should 
 be multiplied by the correct machine hourly 
 rate [the Individual Machine Rate] to find 
 the cost. To the machine cost must be added 
 the cost of ink used, plus the proper percent- 
 age for handling and selling materials. 
 
APPENDIX B. 
 
 Extracts* from Report of Committee on 
 Commercial Efficiency appointed by 
 Federation of British Industries. 
 
 September 1918. 
 
 Individual Effort. 
 
 Your Committee desire to emphasise the fact 
 that although co-operative action, as supple- 
 menting and co-ordinating individual effort, 
 can do much to improve general efficiency of 
 Industry, no amount of co-operation between 
 individual firms can be really effective unless 
 the internal organisation of the individual 
 firms attains maximum efficiency. 
 
 ^F V *|C JjC *|C 3|C 3|C 
 
 Your Committee are of opinion that con- 
 siderable room remains for improvement 
 
 * By permission of the Federation of British Industries. 
 107 
 
108 THE COSTING PEOBLEM 
 
 in most trades in the country in this 
 respect. 
 
 Standardisation of Methods and Details of 
 Costing. 
 
 Costing has generally been worked out both 
 in the U.S.A. and in Germany on a much more 
 scientific and universal basis than in this 
 country. Your Committee are satisfied that 
 this is a most important matter, and one to 
 which Voluntary Associations should devote 
 immediate attention. It is highly desirable 
 that a standardised basis of costing should be 
 adopted by members of Trade Associations, 
 and it is suggested that the auditors of each 
 association should, as far as possible, co- 
 ordinate the various methods of the members. 
 {See page 111.) 
 
 In Financial Combinations this policy has 
 been one of the greatest sources of increased 
 efficiency, and your Committee are convinced 
 that great benefits to industry would result 
 from its adoption by Voluntary Associations. 
 
APPENDIX B 109 
 
 The detailed Interchange of Costings 
 
 Is practised in U.S.A. and also in Germany, 
 but has only been carried out to a very 
 limited extent by Voluntary Associations in 
 this country. 
 
 Your Committee are of opinion that the 
 development of associations should as quickly 
 as possible be brought to a higher level, in 
 order to enable such detailed interchange to be 
 adopted more widely in this country. 
 
 Interchange of costings has also been adopted 
 by German manufacturers in certain trades 
 without any special form of association. 
 Different firms have joined together to compete 
 in foreign markets and for particular tenders. 
 The firms have disclosed to each other their 
 costs for each particular item, and a common 
 poUcy is adopted on this basis by allocating 
 each item or component part to the works best 
 suited for the purpose. 
 
 Interchange of Methods of Working, 
 
 Your Committee regard this when properly 
 carried out as one of the chief sources of 
 
110 THE COSTING PEOBLEM 
 
 strength of Financial Combinations, and though 
 it is recognised that at the present time it is 
 very difficult for Voluntary Associations to 
 carry out such interchange, yet the growth of 
 these Associations should gradually develop 
 a policy of the kind, as a result of the increase 
 of mutual confidence between the members. 
 
 A Summary of the Fundamentals of a 
 Cost System for Manufacturers. 
 Published by the Federal Trade 
 Commission of U.S.A. 
 
 Necessity of Ascertaining True Costs. 
 
 To-day, margins of profit in most lines of 
 trade are very much narrower than formerly, 
 and the necessity for the most efficient manage- 
 ment and closest analysis is felt as never before. 
 
 It is necessary to know on what articles a 
 profit is being made, and on what a loss ; and 
 that the manufacturer should see that every 
 article manufactured bears its proper share of 
 factory and general overhead charges. 
 
APPENDIX B 111 
 
 Most manufacturing plants have grown to a 
 size which renders personal supervision im- 
 possible. The only reliable way, therefore, by 
 which an executive can judge of the efficiency 
 of an organisation is through a system of 
 periodical statistical reports. 
 
 It is impossible to know whether the in- 
 troduction of new methods and improved 
 machinery will reduce costs, unless the manu- 
 facturer knows not only what his total cost is, 
 but exactly what items make up the total. 
 
 Exchange of Statistical Information Beneficial. 
 
 The Federal Trade Commission is encourag- 
 ing this free interchange between manufac- 
 turers, and is also encouraging associations 
 to compile statistics for the benefit of their 
 members. 
 
 The Commission beUeve that the nearer ''cost 
 systems'^ approach uniformity the more valuable 
 will he the results. 
 
 It is the belief of the Commission that the 
 small margin of profit existing in so many of 
 
112 THE COSTING PEOBLEM 
 
 our industries is due to ignorance on the part 
 of manufacturers of what their goods actually 
 cost to produce. 
 
 System and its Development. 
 
 The best accounting brains in the country- 
 are producing a " cost system " which shall 
 provide not only for the determination of the 
 amount of each element of cost properly charge- 
 able to each job or operation, but also for an 
 improved method of book-keeping which causes 
 the books to reflect at all times the true 
 financial and industrial condition of the busi- 
 ness, and renders possible the preparation of 
 monthly statements of conditions, as well as 
 complete monthly statements of financial and 
 factory operations. 
 
 Material, 
 
 The first element of cost is material. Material 
 can be divided into two kinds : direct and 
 indirect. 
 
 Labour. 
 
 The second element of cost is labour, and 
 
APPENDIX B 113 
 
 this, like material, is divided into two 
 classes : 
 
 {a) Direct, or productive labour. 
 
 (b) Indirect or non-productive labour. 
 
 Overhead Expense 
 
 Is the expense of every kind connected with 
 the business, none of which can be directly 
 located as belonging to a particular job. Over- 
 head can be divided into two classes : 
 
 (a) Factory overhead, which consists of 
 items directly belonging to factory 
 operations. 
 (h) General overhead, which is expense not 
 directly connected with the factory. 
 
 Departmentalisation 
 
 Is necessary for the proper distribution of 
 factory overhead expenses. Every business 
 can be departmentaUsed to some extent. 
 
 Generally speaking, it is best to sub-divide 
 into departments according to operations 
 of manufacture. In a number of lines of 
 manufacture, all work can be placed in one 
 
114 THE COSTING PROBLEM 
 
 department where the unit of production is the 
 same ; i.e., mth hand workers the unit is 
 the productive man hour, and with machine 
 workers the machine hour. 
 
 Fiooed Factory Charges. 
 
 Building expense, power, insurance, taxes 
 and depreciation constitute what are generally 
 known as fixed factory charges, because they 
 are practically fixed, and the factory has 
 nothing to do with either increasing or decreas- 
 ing them. 
 
 Variable Factory Clmrges. 
 
 These are the final items of "factory over- 
 head," such as non-productive labour, repairs, 
 lubricating oils, supplies, etc., and should be 
 charged to general factory expenses, and dis- 
 tributed in a fair manner, which will vary with 
 special conditions existing in each particular 
 business. 
 
 Interest. 
 
 Charge for interest takes two forms : 
 
 (a) Where materials have to be stored for 
 
APPENDIX B 115 
 
 long periods while a seasoning pro- 
 cess is being completed, or for other 
 reasons. 
 (b) Where it is desired to show the effect 
 of variations in the amount of capital 
 employed and the term of employ- 
 ment. 
 
 Ascertainment of Normal Cost, 
 
 In every manufacturing business it is un- 
 questionably true that in some months items 
 of expense will occur which are not properly 
 chargeable against the cost for that month. It 
 is therefore necessary that costs be averaged 
 over a period of time sufl&ciently long to take 
 in both dull and busy seasons. 
 
 Distribution of Overhead Expenses to Job Costs, 
 The standard recognised by the majority of 
 manufacturers and accountants in a plant 
 where practically all the labour is hand labour, 
 is the " man hour " basis ; i.e., the total hours 
 divided into the total overhead expense gives 
 a rate per hour, which rate, multiplied by the 
 
116 THE COSTING PROBLEM 
 
 hours spent on a job, gives the overhead 
 expense chargeable to that job. In a plant 
 where the machines are the producing unit, 
 the distribution must be on the basis of the 
 " machine hour." 
 
 An estimate of overhead expenses should 
 be made at the beginning of the year, based 
 on previous years' experience, with such 
 changes as the executive's knowledge of 
 business conditions leads him to make. This 
 figure, divided by the expected output in 
 hours of the machines, gives a normal over- 
 head expense rate to be applied to all work 
 in that department. This rate remains con- 
 stant until the end of the fiscal year. The 
 following schedule shows the method to be 
 used in estabhshing this rate : 
 
APPENDIX B 
 
 117 
 
 88-* 
 
 CO 
 
 ^ Q Q o 00 
 (M o O as as 
 
 (MOO I— iiO(M(Mt— (i—i 
 
 00 
 
 00 iO 
 
 o 
 
 CO lO lO iO 
 O G<l tr- I— 1 
 cq o 
 
 <N 
 
 SO (M O Q Q Q O 
 CD OS -^ti O O O <£> 
 lOaSf-icqcMt-rHCO 
 
 CO .-I CO 
 
 00 lO 
 
 CO VI (M (M 
 O 1-H ^ iO 
 (M^ 00 
 
 C<f O' 
 
 CO 
 
 
 8Q Q '«*< O 
 O O '"^ 00 
 
 iOC<l^ 00^ rH 1— I 
 
 c<r f^ cS 
 
 So o o 
 lO '«ti cq 
 
 lO ?0 (M t- 
 
 O O lO iO 
 
 «0 <M (M <M O lO 
 
 iO'*iO<X>'«^a5lr-00 
 
 ^g2 
 
 t- CO 00 
 
 (M lO 
 
 0) 
 QQ 
 
 a 
 
 M 
 
 P o 
 
 pqpk 
 
 S OD O) 
 
 S,.s g 
 
 S o o 
 
 O C C3 j5 ^ 
 
 b 0^ m'S§ S g g 
 
 00 »o 
 
 o 
 
 00 00 '*ti t- 
 O <M ?D 
 (M CO 
 
 
 03 
 
 □Q rM 
 
 .^ S eg p 
 0) S (D O 
 
118 THE COSTING PROBLEM 
 
 Total Factory Cost. 
 
 The job cost sheet has now been charged 
 with the three elements of cost, viz., material, 
 labour and factory overhead expense, and 
 the total of this constitutes Factory Cost, to 
 which must be added the General Overhead 
 Expenses. 
 
 Shipping, Selling and General Expenses. 
 
 Under General Expenses are included officers' 
 salaries, office expenses (not including factory 
 clerks), discounts on sales, bad debts, bad 
 work, franchise taxes, and other items of a 
 general nature. 
 
 An estimate of shipping, selling and general 
 expenses should be made at the beginning 
 of the year. This amount divided by the esti- 
 mated cost of the total completed work for 
 the year gives a percentage for these items. 
 Applying this rate to the factory cost of a job, 
 the amount which must be added to the 
 factory cost to ascertain the total cost is 
 readily determined. 
 
APPENDIX B 
 
 119 
 
 O Ool loDOOt-OOiOiO 
 
 ?0 ^00^ r-H (N I— I CO^C<l^t- 1-H 
 
 
 g go Q 
 
 €«- 
 
 
 (M O Q O 
 f-t l-H O iO 
 
 
 8<M»OQOQQOiO 
 C5nHO<MOOiO(M 
 
 CM 
 
 
 00 
 
 <v 
 
 ^ o 
 
 c3 
 
 "5 ^ 'eS? 
 
 en .1-1 
 
 a. 
 
 e8 
 
 
 «3 t^-S 
 
 S « OJ QJ .2 
 
 -%% 
 
 ^^ 
 
 H (D 
 CO - 
 
 
 f-t 
 
120 THE COSTING PEOBLEM 
 
 The schedule on the previous page shows 
 the method of arriving at this rate. 
 
 GENERAL REMARKS. 
 
 The Uses and Advantages of the Cost System. 
 
 An exact knowledge of costs which can be 
 used for the purposes of analysis or com- 
 parison, or for obtaining a clear statement of 
 the position of the business. 
 
 The showing up of unprofitable lines, and 
 the fallacy of making reductions in price, or 
 some other concessions to customers. 
 
 To eUminate waste by means of depart- 
 mental statistics, and to reveal excessive 
 costs in the different departments. 
 
 The cost system, with forms properly de- 
 signed for giving statistical information, is of 
 the greatest aid to factory efficiency. It will 
 also give very valuable information to the 
 manufacturer. 
 
 The Federal Trade Commission is urging 
 manufacturers to give the subject of accurate 
 costs the attention it deserves. It has found 
 
APPENDIX B 121 
 
 that unreliable costs cause a great deal of 
 unfair competition and a heavy business 
 death-rate. 
 
 While the claim is not made that a cost system 
 will save a man from failure, the claim is made 
 that a man who knows where he stands day by 
 day is very much less likely to make a failure of 
 his business than the one who is directing his 
 business by guess work. 
 
APPENDIX C. 
 
 The Functions op the Engineer : 
 His Education and Training * 
 
 By Lieut.-Col. W. A. J. O^Meara, C.M.G. 
 
 Introduction, 
 
 In spite of the illustration given by the great 
 war of the exceedingly important role being 
 played by the engineer in our own time, his 
 status, at least in this country, is still a dubious 
 one, and there are in some quarters consider- 
 able misunderstandings as to his true functions 
 and responsibilities. The new era upon which 
 the world is now about to enter has brought 
 into existence new problems for settlement, 
 
 * Abstract of a paper read in London on February 13, 
 1919, before the Institution of Electrical Engineers, and 
 reprinted from The Channel. 
 
 122 
 
APPENDIX C 123 
 
 among which, the author considers, one of 
 those caUing for early attention is the better 
 and more efficient utiUsation in many indus- 
 tries of the skill, knowledge, and experience of 
 the engineer. In industrial and commercial 
 enterprises of a technical kind there are two 
 broad classes of responsibiHties, those con- 
 nected with the so-called " economics of 
 poUcy," and those connected with the so- 
 called '' economics of practice/' In this 
 country the opinion has prevailed that in 
 such industries the problems which present 
 themselves fall under two separable, distinct, 
 and independent heads, viz. : the " tech- 
 nical '' and the '' administrative,'' and that 
 the " technical " problems alone constitute 
 the domain of the '' economics of practice," 
 whilst every other financial, commercial, or 
 administrative problem belongs exclusively to 
 the " economics of policy." Engineers are 
 supposed to deal especially with the former. 
 Both engineers and the teaching profession 
 have largely acquiesced in this view of the 
 
124 THE COSTING PROBLEM 
 
 division of responsibilities, and schemes for 
 the education and training of the engineer 
 have hitherto been framed for meeting this 
 condition of affairs. 
 
 Engineers' Education in the Past. 
 
 Past methods of engineering education may 
 be described as those of '' haphazard experi- 
 ences " and the " school of apprenticeship," 
 both of which have proved inadequate . Within 
 our own time an entirely new class of schools 
 and colleges has sprung up in the British Isles 
 for the express purpose of providing instruc- 
 tion in technical subjects for engineering 
 students. These can only be a means of 
 providing a young man with experience and 
 knowledge preparatory to his entry on the 
 activities of commercial and industrial life ; 
 they cannot turn him out a " complete 
 engineer." The nature and scope of the in- 
 struction which should be given at such 
 colleges have been much debated. From 
 these debates emerges the absence of unani- 
 
APPENDIX C 125 
 
 mity on the part of the employers as to the 
 real value in the production market of the 
 engineering graduate immediately on the com- 
 pletion of the normal college course. In this 
 country the discussion has been usually con- 
 fined to the scientific aspects of instruction 
 in Technology. 
 
 The Engineer in Foreign Countries. 
 
 In some countries a wider view has been 
 taken of what an engineer's education should 
 comprise, such subjects as accountancy, book- 
 keeping, mercantile law, political economy, 
 repairs and depreciation, sociology, etc., have 
 been suggested, and in some of the American 
 Institutes of Technology a department of 
 " business engineering " has been provided for 
 many years covering some of these subjects. 
 The reason is a different view of the nature 
 and scope of the engineer's responsibilities. 
 The American engineer occupies, as a rule, a 
 far stronger and more important position in 
 the economics of industrial and commercial 
 
126 THE COSTING PROBLEM 
 
 life than that accorded in this country. The 
 same thing is true of many Continental 
 countries. The Societ6 des Ingenieurs Civils 
 de France has recently passed a resolution 
 that instruction in administrative subjects 
 should be made obligatory for all students in 
 the higher schools of civil engineering. 
 
 Need for Reform in British Engineering Colleges. 
 
 In view of the sharp competition in inter- 
 national trade to be expected it would be folly 
 to ignore what is taking place in educational 
 matters abroad. The scope of the engineer's 
 training is wider in foreign countries, and the 
 existing boundaries between the " economics 
 of policy " and the '' economics of practice " 
 require readjustment in the direction of widen- 
 ing the province of the engineer's responsi- 
 bilities. It is therefore necessary that the 
 scheme of engineering education in this country 
 should aim at covering as wide a field as that 
 covered in any other country, so that the 
 engineer may be quaUfied for the wider re- 
 
APPENDIX C 127 
 
 sponsibilities whicli will fall upon him when 
 called upon to occupy a position similar to 
 that assigned to engineers in other countries. 
 
 Scojpe of the Engineer's Responsibilities, 
 
 The practice of the engineering profession is 
 concerned with a number of well-known opera- 
 tions based on solid facts requiring the adop- 
 tion of a certain procedure to attain desired 
 results. The true object in framing courses of 
 instruction should be to provide a man with 
 practical and immediately useful knowledge 
 concerning the adaptation of means to ends ; 
 the procedure necessary to secure materials, 
 tools, etc. ; the procedure necessary to secure 
 the construction of various kinds of works ; 
 and further to render him familiar with the 
 legal aspects of his responsibilities and his con- 
 tractual relations. Whilst the technical sub- 
 jects faUing within this scope are already well 
 provided for in many British institutions, those 
 not directly connected with Technology are 
 scantily provided for. 
 
128 THE COSTING PROBLEM 
 
 The history of engineering shows that it is 
 quite wrong to suppose that at any time has 
 the engineer confined his professional attention 
 to the technical problems connected with his 
 calling. Where misconceptions exist on this 
 subject, they arise from the fact that before 
 the " industrial revolution " the engineer's 
 skill was largely devoted to the design and 
 installation of stationary structures, on the 
 completion of which the engineer practically 
 disappeared from the scene. Even then the 
 engineer in the initiation of such projects had 
 to carry out many details of an administrative 
 and financial character, such as the preparation 
 of specifications, estimates of costs, calling for 
 tenders, entering into contracts, supervising 
 the performance of contracts, measuring-up, 
 agreement with contractor as to claims for 
 " extras," and the issue of certificates for 
 payments. 
 
 In those days it was principally the laws of 
 statics with which the engineer was concerned, 
 and once the bridge, aqueduct, reservoir, or 
 
APPENDIX C 129 
 
 other structure was completed it was safely 
 handed over to the employer, in charge of 
 people without technical qualifications. Now 
 the great majority of engineering enterprises 
 require the provision of machinery and plant 
 the essence of a great part whereof is motion, 
 and expansion, progress, and growth the 
 destined concomitants. These enterprises 
 present important commercial and adminis- 
 trative problems relating to running costs, 
 repairs, and depreciation, future capital out- 
 lay, organisation, and the control and man- 
 agement of staff, in addition to purely tech- 
 nical questions. The responsibilities during 
 the construction stage, therefore, have added 
 to them those relating to operation and ex- 
 pansion, involving many factors of importance 
 outside those of a technical kind. In a double 
 sense the modern engineer's work has ceased 
 to be stationary. He cannot safely transfer 
 the custody of his handiwork to those without 
 technical quaUfications. To make a technical 
 enterprise a financial success the engineer must 
 
130 THE COSTING PROBLEM 
 
 continue to concern himself with the operation 
 of the machinery and plant, and control and 
 direct the energies of the skilled persons 
 necessary to assist him in the conduct of the 
 establishment. 
 
 How many engineers, in recalling their ex- 
 periences in some scheme or job, give thought 
 to the questions — ^How much of the work 
 involved is really technical, in the narrow 
 sense : how much is based exclusively on the 
 knowledge acquired in the normal college 
 course ; what other knowledge was it necessary 
 to call in aid ? The answers to these questions 
 are of great importance in determining the 
 scope of the education and training to be 
 provided for engineers in this country. 
 
 The Six Functions in a Modern Undertaking, 
 
 Monsieur Henri Fayol, a distinguished 
 French engineer, gave an address in Paris in 
 the winter of 1917, in which, from his long 
 experience as an engineer and administrator, 
 
APPENDIX C 131 
 
 he laid down that the several operations con- 
 nected with every enterprise fall into six 
 distinct groups, namely : — 
 
 (i) The Financial. 
 
 (ii) The Commercial, 
 (iii) The Technical, 
 (iv) That of Custodianship. 
 
 (v) That of Book-keeping, 
 (vi) The Administrative. 
 
 These six groups or essential functions are 
 always present in every enterprise, and the 
 responsible engineer must be concerned in his 
 professional work with every one of them. 
 In the higher positions of the staff of a complex 
 enterprise no such separation of functions is 
 possible as will provide that any one of the 
 six groups can be assigned to a separate in- 
 dividual or class of individuals in such a way 
 that he or it will have no concern with any of 
 the transactions falUng under any of the other 
 five groups. The organisation of even the 
 
 i2 
 
132 THE COSTING PROBLEM 
 
 largest undertakings is unavoidably so arranged 
 that every member of the controlling staff must 
 concern himself with at least three and often 
 four of these groups of functions. " Adminis- 
 tration " comes into play throughout the entire 
 organisation, hence some knowledge of the 
 principles of administration is essential to 
 everyone forming a link in the chain of 
 organisation. 
 
 Qualifications needed by Engineers associated 
 with the conduct of Industrial Enterjprises, 
 
 Following out the line of thought indicated 
 in the preceding sections, the author points 
 out that the engineer must take responsi- 
 bilities involving other than technical con- 
 siderations, that in many cases he is respon- 
 sibly concerned in all six of the functions of 
 M. Fayol's list, and that very generally, whilst 
 the technical faculty is essential, it may not 
 be the quahfication of the highest importance 
 in the higher ranks of the profession. In some 
 
APPENDIX C 133 
 
 cases the administrative facility in an engineer 
 has a higher relative value than the technical. 
 Conversely, those responsible for the manage- 
 ment must possess some technical knowledge 
 to enable them to carry out their duties 
 efficiently. 
 
 Modificatio7is Recommended in the Present 
 Scheme ofEdiccationfor Engineering Students. — 
 Seeing that the commercial and administrative 
 functions of the engineer are of so much im- 
 portance logically, instruction in the appro- 
 priate subjects should find a place in the 
 engineering curricula. Some of the objections 
 likely to be raised are anticipated and dis- 
 cussed. The first is that no time can be 
 allotted for such studies, the curricula being 
 already too full : the second that the subjects 
 cannot be taught by lectures, and can only be 
 acquired in the school of experience ; the third, 
 that the subjects are proper matters for 
 graduate lectures ; and the fourth, that the 
 engineer's employer is the best quahfied person 
 
134 THE COSTING PEOBLEM 
 
 to instruct him in these subjects and the 
 colleges should therefore consider them as 
 outside their curricula. The author points out 
 that these objections tacitly admit the im- 
 portance of the subject but suggest postpone- 
 ment of their study until the engineer has 
 entered on his career — i.e. suggest that he 
 should enter it uninstructed in essential sub- 
 jects, which may result in his making early 
 mistakes costly to his employer, and perhaps 
 disastrous to himself. The practical sugges- 
 tion is made that time can be found by omitt- 
 ing some of the more specialised subjects, such 
 as the design of electrical machinery, which 
 are, in fact, only practised by a small propor- 
 tion of engineers, and which could be more 
 effectively taught to those whose tastes and 
 aptitudes so incHne them, in graduate lectures. 
 
 Scope of the Instruction. — ^It is suggested, 
 that the instruction should cover the elements 
 of the following subjects, with the number of 
 hours stated : — 
 
APPENDIX C 
 
 135 
 
 Number of Hours 
 
 Subject. 
 
 (a) Accountancy and book-keeping, 
 
 - 8 
 
 (6) Administration and Organisation, 
 
 - 8 
 
 (c) Commercial Law, . - . 
 
 - 6 
 
 (d) Depreciation, - - - - 
 
 - 2 
 
 (e) Estimating and writing of Specifications, 12 
 
 Total number of hours' instruction 
 during course, - - - - 36 
 
 It is thought that this will be sufficient to 
 bring home to the students the important 
 nature of the commercial and administrative 
 transactions for which they will be responsible. 
 A wide range of instruction in such subjects is 
 now provided, outside engineering courses, in 
 London and other centres. 
 
 Practical Training — '' Oo-operatioe Courses." 
 
 The author considers that a considerable 
 improvement in engineering education would 
 follow the adoption of the " co-operative 
 system," which is already practised in the 
 United States. Under this system the student 
 
136 THE COSTING PROBLEM 
 
 works for alternate weeks in a works and in 
 the college. It is suggested that under this 
 system the student acquires knowledge of both 
 the practical and theoretical sides of the sub- 
 jects under study, and thus obtains a more 
 useful and thorough equipment for his future 
 work. The policy of receiving pupils in 
 engineering works without the payment of 
 premiums receives his approval, and lends 
 itself to the system advocated. The nature 
 of the workshop instruction to be given is not 
 prescribed ; it must naturally depend on the 
 activities of the particular firm and its work- 
 shop equipment. (The author does not 
 attempt to show how this system will further 
 his particular object of imparting instruction 
 in commercial and administrative subjects. 
 It would seem to fit in best with work in the 
 firm's administrative offices, a department to 
 which engineering pupils are not, as a general 
 rule, given access.) 
 
 The author concludes with some remarks on 
 the general education of engineers. The neces- 
 
APPENDIX C 137 
 
 sity for this being of a higli standard is gener- 
 ally admitted, and no great changes are needed. 
 An ideal arrangement would be that a student 
 should obtain an arts degree before proceeding 
 to his engineering, but it is recognised that this 
 is outside the range of practical politics in this 
 country, although it is the rule in one of the 
 universities in the U.S.A. Short of this, 
 students should be encouraged to improve their 
 general education. It cannot be too often or 
 strongly impressed that one of the most im- 
 portant qualifications of a modern engineer 
 consists in a command of the English language, 
 and a facihty to give expression to his thoughts 
 through its medium, with clearness, conciseness, 
 and completeness, in speech as well as on paper. 
 
 Conclusion. 
 
 The education and training of the engineer 
 is closely associated with his status. Under 
 present circumstances anybody may hold him- 
 self out to be an engineer without offending the 
 law. Unqualified practitioners in engineering 
 
138 THE COSTING PROBLEM 
 
 have brought discredit on the profession in 
 the past, and will do so in future. In view 
 of the importance of the engineer's calling, of 
 his functions in relation to the expenditure of 
 vast sums of money (public and private), etc., 
 etc., the time has arrived for statutory pro- 
 vision to be made to put some check on the 
 freedom with which the title " engineer '' is 
 appropriated by the unquaUfied, and for the 
 constitution of an authority to regulate and 
 control the profession as regards education, 
 training, and discipline. The constitution of 
 a general engineering council with statutory 
 powers would be of advantage to the pro- 
 fession and to the public. These questions 
 are not merely matters of domestic concern to 
 the profession, but of the highest national 
 importance. It behoves the leaders of the 
 British nation then to concern themselves 
 actively and to take steps to place the pro- 
 fession on a basis that will best serve the 
 interests of the State. 
 
 GLASGOW : PRINTED AT THE UNIVBR8ITY PR£S8 BT ROBERT MACLKH08K AKD CO. I TD. 
 
EFFICIENCY 
 BOOKS 
 
 %,hz f ibrarp fxtss f imitcb 
 
 26 PORTUGAL STREET 
 
 LONDON 
 
 W.C. 2 
 
INDEX 
 
 Accounting 
 
 Aeronautical Theory and 
 Practice 
 
 see page 3, 5 and 6 
 15 
 
 Airships - . . . 
 
 15 
 
 Battleships 
 
 Building Construction - 
 Costing . . . . 
 Costing in Steel Works - 
 Deformation of Steel 
 
 .. 23 
 
 13 and 19 
 3. 5> 6, 20 
 20 
 9 
 
 Design and Manufacture 
 
 OF Electric Machinery 
 Farm Buildings 
 Hydraulic Steel Forging 
 
 II 
 19 
 9 
 
 Heat Treatment of Steel 
 Labour .... 
 
 Lace Making and Design- 
 ing - - . - 
 
 Management 
 
 9 and 20 
 3, 6 and 7 
 
 23 
 
 3, 6 and 7 
 
 Manufacturing - 
 Marine Engineering 
 Masonic Problems - 
 Military Science 
 Naval Science - 
 
 .. 3.6,9,17.20 
 
 22 
 „ 23 
 
 21 
 » 23 
 
 Physiology 
 
 7 
 
 Re-organisation 
 
 Re-Employment of the Dis- 
 abled - - - - 
 Scientific Management - 
 Steel Manufacture - 
 
 6 
 
 7 
 
 3 and 7 
 
 9 and 20 
 
 Shipbuilding 
 Wages Systems - 
 Works Administration 
 Woollens Manufacture - 
 
 22 
 .. 3 and 5 
 3 and 6 
 17 
 
FACTORY 
 
 ADMINISTRATION 
 AND ACCOUNTS 
 
 By EDWARD T. ELBOURNE 
 
 (Of Messrs. Brindley & Elbourne, Consulting Engineers) 
 
 THE aim of Factory Adminis- 
 tration AND Accounts is to 
 present an analytical study of 
 the problems pertaining to Factory 
 Administration and Accounts as a 
 whole. The author has condensed 
 much valuable information into tables ; 
 the principles laid down are adapted 
 for all descriptions of factories. 
 
 THE CONTENTS 
 
 General Administration — Staff Organisation 
 — Routine Organisation — Correspondence — 
 Publicity and Sales Promotion — Estimates — 
 Output Considerations : Official Orders — Works 
 Administration — ^Works Regulations — Labour 
 — Drawings — Specifications and Patterns — 
 Materials — Production Efficiency — Despatch . 
 Works Accounts — Functions of Works Ac- 
 counts — Works Expenditure Account — Stand- 
 ing Orders — Stock Accounts — Cost Allocation 
 
Account — Shop Charges — Process Product — 
 Manufactured Stock Product — Stocktaking — 
 Loose Plant Valuation — Building and Fixed 
 Plant Valuation — Works Accounts Abstracts 
 — Administrative Statistics, Routine Forms — 
 General Office — Wages Office — Drawing Office 
 — Foundry — Smithy — General Stores — Tool 
 Stores — View Room — Work Depot — Ware- 
 house — Works Accounts Office, Financial 
 Accounts — General System of Financial Ac- 
 counts — Wages and Petty Cash Accounts — 
 Purchase Accounts — Sales Accounts — Share 
 Accounts — Private Accounts — Annual Ac- 
 counts Audit. 
 
 Its highest value will, we believe, lie in assist- 
 ing those who are contemplating the re-organi- 
 sation of their works. — The Engineer 
 
 To all manufacturers who wish to run their 
 business on scientific lines, and to keep 
 thoroughly in touch with their work at all its 
 stages, the book will be invaluable. — The 
 Glasgow Herald 
 
 The work is certainly one we recommend to 
 all interested in the subject, and practising 
 members will find it a good investment to have 
 a copy in their library. — The Accountants' 
 Journal 
 
 The Secretary will find some very useful 
 information in that part dealing with financial 
 accounts as well as in the section devoted to 
 correspondence. Further, the Secretary as 
 administrator will find some sound advice in 
 the pages devoted to staff organisation. — 
 The Secretary 
 
 NEW EDITION, Price 37/6 Net 
 Prospectus Post Free 
 
THE UNIVERSAL 
 
 WAGES 
 
 CALCULATOR 
 
 Designed and compiled by 
 
 CHARLES E. LEWTON 
 
 THIS Calculator is so simple a child can 
 use it. So accurate that the wages of 
 any employee can be calculated in a few 
 moments, correct to a farthing. This, in spite 
 of the innumerable recent advances ! It will 
 never be out-of-date and is practically in- 
 destructible. 
 
 Invaluable in Costing 
 and Estimating 
 
 For all Trades where Wages are paid 
 
 by the Hour, for any Working Week, 
 
 and any rate of Pay 
 
 Single Copim 80/ Nit, Two or More Less 26% 
 Explanatory Fold0r PoBt Free 
 
Cbe manufacturind Problem Series 
 
 General Editok: EDWARD T. ELBOURNE 
 
 THE COSTING 
 PROBLEM 
 
 BY 
 
 EDWARD T. ELBOURNE 
 
 Author of " Factory Administration and Account! " 
 
 The upheaval of War and consequent recon- 
 struction of industry on a peace basis involves 
 the recasting of commercial judgment. Pre-War 
 experience is no longer a sufficient guide to trading 
 operations, and no manufacturer ought to face the 
 future without means of accurately measuring the 
 cost of production. 
 
 Therefore it is felt that all who realise this fact 
 and desire to institute a systematic method of 
 discovering the cost of work done, will warmly 
 welcome a book in which an effort is made to 
 present a picture of what Costing involves, and to 
 give some idea of the character of the problem 
 to be faced 
 
 Price 4/6 Net Now Ready 
 
 By the same Author and unifomi with above 
 
 THE MANAGEMENT 
 PROBLEM 
 
 In the Press 
 
 Volumes in Preparation 
 "The Re-organisation Problem" 
 
 Bv J. E. POWELL 
 "The Workers' Problem" 
 
 By W. WILKINSON 
 
 other volumes to follow 
 
THE PHYSIOLOGY OF 
 
 INDUSTRIAL 
 ORGANISATION 
 
 AND THE RE-EMPLOYMENT 
 
 OF THE DISABLED 
 
 By Professor JULES AMAR 
 
 Edited with Notes and Introduction by 
 Professor A. F. STANLEY KENT, M.A., D.Sc, Oxon 
 
 THE organisation of industry based not 
 only upon economy of time and move- 
 ment, but also upon the experimental 
 science of industrial fatigue. 
 
 This book is written by an eminent French 
 scientist, who explains the methods he has 
 employed, at the instance of the French Govern- 
 ment, whereby 80 per cent, of the War-Disabled 
 have been enabled to return to their former 
 occupation. 
 
 The work must powerfully interest statesmen, 
 employers, surgeons and physicians, instrument 
 makers and the general public, for the future 
 welfare of our war-cripples should be a personal 
 matter to all. 
 
 The subjects dealt with include : A historical 
 sketch of the physiological science of labour — 
 the organic functions of man — the aptitudes of 
 
different types — mechanism of the nervous 
 system — the nature of the personal equation — 
 work and fatigue ; method and instruments 
 for measuring and educating muscular effort — 
 instruments and methods used in re-education 
 of war-cripples — value of foods — evils of alco- 
 holism — environment — adaptation of Tools and 
 Methods of Working — apprenticeship (national 
 system shown to be necessary) — scientific pro- 
 thesis, i.e. addition of artificial parts to replace 
 those lost. 
 
 The author's contribution to the solution of the 
 general problem would command respect at any 
 time, but from his position he may be assumed to 
 represent very closely the views of official France. 
 . . . . M. Amar has produced a work whose study 
 cannot but reward all those who are in earnest in 
 promoting the welfare of the disabled and improving 
 the lot of those who have heard the call of their 
 country to defend the right.— Engineering. 
 
 The results actually achieved in increasing 
 output by an economy of effort will be equally 
 startling and important to the employer and to 
 the workman. — Manctiester Guardian, 
 
 A title so formidable to the lay mind conveys 
 little idea of the wealth of fascinating and socially 
 
 useful information contained There is 
 
 hope and help provided here for war-cripples. 
 
 . . . . Does such a book need any further 
 
 recommendation. — Tlie Sunday Times, 
 
 Price 30/- Net 
 
 Illustrated Prospectus Post Preo 
 
PRACTICAL SHELL 
 
 FORGING 
 
 AND THE PLASTIC DEFORMATION OF 
 
 STEEL 
 
 AND ITS HEAT TREATMENT 
 
 By CLIFFORD O. BOWER, 
 
 A.M.Inst. C.E., A.M.I.Mcch.E. 
 Assistant Manager, The Ammunition Depart- 
 ment, Messrs. Sir W. G. Armstrong, WTtiitworth 
 & Co., Limited ; late of the Ammunition Depart- 
 ment, Messrs. Vickers, Sons & Maxim Ltd. 
 
 THIS book is recommended to those desirous 
 of mastering the scientific principles and 
 the practical art of deforming, by the aid 
 of punches, dies or mandrels actuated by hydrau- 
 lic pressure, steel made plastic by high tempera- 
 ture, and subsequently subjected to exacting 
 tests. 
 
 The processes here described were employed in 
 manufacturing the deep shell-cases required 
 during the war. Consequently they can be even 
 more successfully used for the shallower designs 
 now required. 
 
 Such articles as Air-Bottles, Motor-Car Live 
 Axle Casings, Caps, Pedestals, Tubes, Wheel 
 Hubs, Hollow Rollers, Pistons, Flange Coup- 
 lings, Cylinder and Manhole Covers, can be made 
 better and in larger numbers by this process. 
 
CONTENTS. 
 
 Material : Selecting — Mechanical Properties of 
 Shell Steels — Methods of Parting Discard — Ripping 
 and Fracturing Billets — Mechanical Treatment : 
 Forging — Temperature — Rate of Cooling Pressure 
 Required — Power Required to Pierce — Effect of 
 Punch Form — Stream Line Flow — Friction on 
 Punches and Dies. Tools and AppUances : Hand- 
 ling and Transportation of Billets — Marking Forg- 
 ings — Loading of Furnaces — Punches — Piercing 
 Dies — Press Stops and Indicators — Extraction of 
 Forgings from Dies — Forge Gauges— Drawing Dies 
 — Forging Slings — Nose Swaying Dies — Bottling 
 Dies. Heat Treatment : Internal Structure of 
 Shell Steels — Constitution and Formation of Pearlite 
 — Allotropic Modifications of Iron and Transforma- 
 tion Products — The Iron-Carbon Alloy Equilibrium 
 Diagram — Effect of Rapid Cooling and Quenching — 
 Difference in Physical Properties obtained by 
 Tempering — Air Hardening — Mechanical Work as 
 it Affects Crystal Size — Crystal Growth — Rapid 
 Heating — Difference in Physical Properties — Hy- 
 draulic Equipment : Features of Hydrauhc Piercing 
 — Botthng and Drawing Presses — Pressure System 
 — Intensified Pressure — Small Powered Presses — 
 Bottling Presses — Two-column Presses — Medium 
 Powered Presses — High Powered Presses — Drawing 
 Presses — Pipe Arrangements — Low and High Pres- 
 sure Pumps — Control Valves. Re-Heating and 
 Annealing : Desired Conditions — Classes of Fuel — 
 Combustion in Simple Furnace — Forced Draught — 
 The Continuous Furnace — Pre-Heated Air Furnaces 
 — Coal Consumption — Producer Gas — Producer Gas- 
 fired Furnaces — Normalising and Annealing Fur- 
 naces — Heading and Bottling Furnaces — Pyro- 
 meters and Heat Measurement — Index. 
 
 Price 30/- Net 
 
 Illustrmted ProMp0ctu8 Post Free 
 
SPECIFICATION & DESIGN 
 
 OF 
 
 DYNAMO-ELECTRIC 
 
 MACHINERY 
 By MILES WALKER, B.Sc, M.I.E.E. 
 
 Professor of Electrical Engineering, University of Manchester 
 
 THIS book is designed to occupy the place 
 in the ofi&ce of the engineer taken by 
 Prideaux's Precedents in that of the 
 lawyer. It is the book to be consulted in all 
 difficulties that arise in connection with the 
 subject of dynamo -electric machinery, and no 
 pains have been lacking on the part of the author 
 to make it as reliable in the electrical field as 
 is Pride aux in that of law. 
 
 The plan adopted is to give sample perform- 
 ance specifications for machines intended for 
 various classes of work. For instance, under 
 the heading " Alternating Current Generators," 
 the book considers four machines, each being a 
 typical machine for a certain class of work. 
 For each machine there is given a model per- 
 formance specification (such as a buyer or his 
 consulting engineer might draw up in order to 
 state clearly what is wanted by the user) . Then, 
 looking at the matter from the manufacturer's 
 
point of view, a design is drawn up to meet the 
 specification. The complete calculation of the 
 machine is given and a specimen design sheet 
 fully filled in is reproduced in facsimile. 
 
 CONTENTS. 
 
 Short Rules for Use in the Design of Dynamo - 
 Electric Machinery — The Magnetic Circuit — 
 The Materials of the Magnetic Circuit — ^The 
 Electric Circuits — The Design of Armature Coils 
 and the Formers on which they are Wound — 
 Insulation — The Predetermination of Tempera- 
 ture Rise — ^The Specification and the Design to 
 meet the Specification — Alternating-Current 
 Generators: High-Speed Engine Type — Alter- 
 nating-Current Generators : Slow-Speed En- 
 gine Type — Alternating-Current Turbo-Genera- 
 tors — Induction Motors — Continuous -Current 
 Generators — Rotary Converters — Phase Advan- 
 cers — Index. 
 
 533 Practical Illustrations. 
 
 Few engineers are better qualified to write a 
 book on dynamo design than Mr. Miles Walker. 
 His long experience with the British Westinghouse 
 Company enables him to write authoritatively and 
 to place at the disposal of his readers much 
 valuable information. Perhaps no other book 
 written in the English language contains so much 
 up-to-date information, certainly no other book 
 that has come before our notice .... deals 
 with modern dynamo design so thoroughly. — The 
 Bagineer, 
 
 Price 36/- Net 
 liluatrated PmmpbM Post Free 
 
BUILDING 
 CONSTRUCTION 
 
 General Editor 
 F. M. SIMPSON, F.R.I.B.A. 
 
 Professor of Architecture in the University of London 
 AUTHORS OF SECTIONS 
 
 Professor BERESFORD PITE, F.R.I.B.A. 
 FRANK T. BAGGALLAY, F.R.I.B.A. 
 H. D. SEARLES-WOOD, F.R.I.B.A. 
 
 E. SPRAGUE, Assoc.M.Inst.C.E. 
 JOHN H. MARKHAM, A.R.I.B.A. 
 
 H. A. SATCHELL, F.R.I.B.A., P.A.S.I. 
 EDWIN GUNN, A.R.I.B.A. 
 
 F. M. SIMPSON, F.R.I.B.A. 
 ALAN J. JAMES 
 
 J. D. GRACE 
 
 In the eight hundred odd pages of this profusely 
 illustrated work the latest developments in all 
 branches of the builder's craft are dealt with by 
 men who are probably the foremost authorities on 
 the art and science of building-construction. 
 
 In the hands of such eminent writers, it is not 
 surprising that the right construction of buildings — 
 usually a prosaic theme — is lifted high above the 
 
 13 
 
level of the usual " utility " book, and made a topic 
 of entrancing interest. This desirable end is not 
 achieved by the sacrifice of the practical side of 
 building to the theoretical or artistic side. The 
 authors, while emphasising the science of the subject, 
 keep the Ideal Building steadily in mind. Both 
 science and art is allotted its true place, and a 
 correct balance is carefully maintained. The entire 
 subject is covered authoritatively and completely 
 from the selection of the site down to interior 
 decoration. 
 
 CONTENTS. 
 
 Brickwork : Site and Foundations — Walls — 
 Materials — Ancient and Modern Brickwork — Terms 
 and Bond — Moulded, Plain and Glazed Brickwork, 
 Fireplaces and Flues. Stonework : Materials — 
 Conversion of Stone, Construction, Jointing Arches, 
 etc. Carpentry : Strains, Timber Joints, Casing 
 and Centering, Roofs. Metal Construction : Graphi- 
 cal Treatment of the Action of an External-Load 
 System on a Structure — Elasticity and Strength of 
 Materials — Beams and Girders — Struts and Columns 
 — Design. Reinforced Concrete : General Design, 
 Materials and Construction Surface Treatment, 
 Water-proofing, Calculations : Singly Reinforced 
 Beams, Doubly Reinforced Beams, Shear Reinforce- 
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 Door Glazing, Roof Glazing, Pavement Lights. 
 Timber : Softwoods. European- American Varieties ; 
 Hardwoods, Seasoning, Selection, Specification, 
 Preservation, Wet and Dry Rot. Joinery : Match 
 Boarding, Flooring, Panelling Doors, Skirtings and 
 Rails. Windows, Shutters, Skylights, Staircases. 
 Plastering : Plaster Grounds, Plastering Mixtures. 
 Painting and Decoration. 
 
 Two Volumes. Price 26/- Net Complete 
 
 Pull Prospectus Post Pre* 
 
 X4 
 
HANDBOOK OF MODERN 
 
 AERONAUTICS 
 
 By 
 
 ARTHUR W JUDGE 
 
 Whitworth Scholar, Associate R.C.S. (Lon- 
 don), Diplomate of Imperial College of Science 
 and Technique, London, Associate Member 
 Institute of Automobile Engineers, Associate 
 Fellow Royal Aeronautical Society, Fellow 
 Royal Society of Arts. 
 
 INCLUDES in one volume of convenient 
 size all available facts, data, tables, and 
 matters of interest and utility that those 
 interested in the practical side of aeronautics 
 need in their daily work. 
 
 It is the first and only book of the kind, with all 
 those features that go to make up a manual of 
 permanent value for constant reference. The 
 information has been carefully selected and pre- 
 sented in such form that it may remain as valuable 
 and reliable in ten or twenty years as it is to-day, 
 only needing to be supplemented with later 
 information. References and Bibliographies at 
 
 15 
 
the end of each Section further enhance the utility 
 of the book, enabling the user to quickly obtain 
 any fuller information he may urgently need. 
 
 ABRIDGED CONTENTS. 
 
 General Useful Information — Screw Threads, 
 Wire Gauges, Limits and Tolerances, etc. — 
 Weights and Weight Estimates for Aeroplane 
 Design, etc. — The Properties of Materials — 
 Aeronautical Material Processes — Strength of 
 Materials — Aeroplane Fittings — Mathematical 
 Rules, Data, and Formulae — Mechanics, etc. — 
 Aerodynamics — Aeroplane Design — Aeroplane 
 Performances — Stability and Control — Aero- 
 nautical Instruments — Meteorology — Naviga- 
 tion — Aircraft Engines — Airscrew-s — Flying 
 Boats and Seaplanes — General Standard 
 Material Specifications — Carburettors — Radia- 
 tor Thermometers. 
 
 Contains 1040 pages, printed on thin paper, 
 and measuring only 7^" x 5" ; bound in 
 flexible leather-cloth binding. 
 
 Price 30/- Nbt 
 DeacHpHr9 Folder Pont Preo 
 
 16 
 
WOOLLEN 
 
 AND 
 
 WORSTED 
 
 BY 
 
 ROBERTS BEAUMONT 
 
 M.Sc, M.I.Mech.E. 
 
 INTENDED for the use of those actively 
 engaged in the commercial production of 
 woollen, worsted, and union cloths, this 
 boot is practical from beginning to end. No 
 space is wasted on history or anecdote. Con- 
 sequently there is not a line that is not useful 
 and of practical value, not a word or illustration 
 that can be spaied. The author knows that 
 what is wanted is facts and reasons. 
 
 Woollen and Worsted solves the technical pro- 
 blems met in the course of the ordinary manu- 
 facturing processes. It describes the processes, 
 and also explains the scientific principles behind 
 them. In short, it ranks as the one standard 
 authority on each woollen process, machine, and 
 product of the wool, worsted, or union mill. 
 
 CONTENTS. 
 
 Fibres, Yams, Fabrics — Designing Theories 
 and Practice — Technicalities of Textile Colour- 
 
 17 
 
ing — Textile Mathematics — Textile Analysis — 
 Textile Microscopy — PreUminary Routine and 
 Work — WooUen Yam Construction — Worsted 
 Yam Construction — Weaving — Cloth Finishing 
 — Scouring and Drjring Machinery — Mixing 
 Machines — Rag-Grinding and Gametting Ma- 
 chinery — Scribblers, Intermediates, Carders and 
 Condensers — Automatic Feeds — Self -Actors — 
 Combing Machines — Gilling and Drawing Boxes 
 — Spinning Machinery for Worsted Yams — All 
 the diflferent types of Woollen and Worsted 
 Looms. 
 
 The 500 illustrations include photo -micro- 
 graphs of Fibres, Yams, and Fabrics, and Four- 
 teen Folding Coloured Scale Drawings. 
 
 The Woollen Carding section is excellent. 
 Worsted- Yarn construction similarly receives 
 excellent treatment. The principles of Fabric 
 Structures are well illustrated. The various types 
 of backed Fabrics and " imitation backed " 
 Structures are lucidly explained. — Tbe Textile 
 Mercury. 
 
 The present work is of exceptional merit. The 
 treatment of the material by the several machines 
 is always dealt with from the point of view of 
 effective manufacture.— TAe Textile Recorder. 
 
 New and Enlarged Edition. One Volume 
 
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 Price 42/- Net 
 
 lllugtrmied ProapeciuB Post Free 
 
 18 
 
ECONOMIC 
 FARM-BUILDINGS 
 
 BY 
 
 CHARLES P. LAWRENCE, F.S.L 
 
 WITH AN INTRODUCTION BV 
 
 SIR THOMAS MIDDLETON. 
 
 UP to the present time the large majority 
 of farm-buildings have " just happened." 
 They have been built in a haphazard 
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 The buildings on a Farm are shown to be 
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 the buildings, whether old or new, can be 
 arranged so as to allow of working with mini- 
 mum labour and maximum profit. 
 
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 19 
 
LIQUID STEEL 
 
 ITS MANUFACTURE AND COST 
 
 BY 
 
 DAVID CARNEGIE 
 
 F.R.S.E^ M.Inst.C.E^ M.I.Mech.E., M.I.S.Inst. 
 
 A6SI8TED BY 
 
 SIDNEY C. GLADWYN 
 
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 systematically treated by the authors. All 
 known processes are described, and details 
 of costs of plant, manufacturing, and assembling 
 given. 
 
 The work also sets forth and compares the 
 various processes employed in modem steel- 
 works — Crucible — Bessemer — Open -Hearth — 
 Electric, and combinations of these methods. 
 
 The processes are explained and the costs 
 given are quoted from information obtained by 
 the authors in the course of their wide practical 
 experience in the manufacture of steel. 
 
 The chemical and physical values having an 
 important bearing on the cost of material, the 
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 most cases, given as well as the costs. 
 
 Price 30/- Net 
 
 IliuBtrMted Prospectus giving 
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A DICTIONARY 
 
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 MILITARY TERMS 
 
 BY 
 
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HANDBOOK OF 
 
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 CONSTRUCTION AND 
 OPERATION 
 
 By CHARLES H. HUGHES 
 
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A HISTORY OF LACE 
 
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