1 i 1 ! Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/costingproblemOOelborich 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 lOaSf-icqcMt-rHCO CO .-I CO 00 lO CO VI (M (M O 1-H ^ iO (M^ 00 C'«^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 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- ment : Vertical and Diagonal, Spacing. Miscel- laneous Constructions — Special Bars and Mesh — Fire-Resisting Floors. Roof Coverings : Slates, Tiles, Stone Slates, Thatch. External Plumbing : Lead, Flats, Gutters, Flashings, Ridges, Hips, Valleys, Zinc and Copper. Glazing : Window and 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 Rox. 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 way as need arose by builders who (while often good tradesmen) knew Uttle or nothing of farming and its special requirements. In this book the design of farm-buildings is, for the first time, dealt with upon sound scientific and economic principles. The buildings on a Farm are shown to be closely related to one another, and a system of development is explained by means of which the buildings, whether old or new, can be arranged so as to allow of working with mini- mum labour and maximum profit. Price 10/6 Net Descriptive Booklet Poet Free 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 WILL be specially welcome because of the practical information on costing it contains ; a branch of the subject 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 analysis and composition of the charges are, in most cases, given as well as the costs. Price 30/- Net IliuBtrMted Prospectus giving FULL CONTENTS Post Frss A DICTIONARY OF MILITARY TERMS BY EDWARD S. FARROW THIS volume contains nearly 700 pages (thin Bible paper), and includes 12,000 definitions of words and phrases, cover- ing not only the most recent coinage of warfare, but also many ancient terms. The definitions likewise include guns, arms, ammunition, and equipment of all kinds, tactics, army regulations, aeroplanes, slang terms, French phrases, and the lingo of the trench. The very latest weapons, such as the Browning Machine Gun and Brown- ing Automatic Rifle are accurately described. The author, Edward S. Farrow, was In- structor of Tactics at the United States MiUtary Academy, West Point, and while there compiled Farrow's Military Encyclopaedia. Price 12/6 Net DescHptlve ProMpectUM Post Free HANDBOOK OF SHIP CALCULATIONS CONSTRUCTION AND OPERATION By CHARLES H. HUGHES THE first handbook compiled with the purpose of assembUng in a single volume, in convenient form, piactical data for every day reference. It represents many years of collection and classification of material, gathered primarily for the everyday use of Mr. Hughes. Theoretical calculations have been purposely omitted, so that the book is thoroughly practical. Weights, Measures and Formulae — Strength of Materials — Shipbuilding Materials — Ship Cal- culations — Hull Construction — Machinery — Boilers — Draft — Marine Steam Engines — Pro- pellers — Paddle Wheels — Steam Turbines — Steam Plant Auxiliaries — Internal Combustion Engines — Piping, Tubing, Valves and Fittings — Electricity — Heating, Ventilating, Refrigera- tion, Drainage, Plumbing and Fire Extinguish- ing Systems — Ship Equipment — Ship Operating. The handbook contains upwards of 800 pages, with over 1 20 illustrations. It is of a convenient size, bound m full flexible leather, gilt edges. Printed in clear type on good paper. Price 228. 6d. Net Descriptive Folder Poet Free A HISTORY OF LACE By Mrs. PALLISER Edited and Revised by M. JOURDAIN and ALICE DRYDEN Contains nearly 300 Illustrations of beautiful old lace besides description of processes, etc. Buckram Bound, Price £2 12S. 6d. Net THE BRITISH BATTLE FLEET By FRED. T. JANE With twenty-five Reproductions in Colours from Originals By W. L. WYLLIE, R.A. In two volumes Roxburgh Binding, Price 25/ Net Ulutt rated PampbUt Poat Free MASONIC EMBLEMS AND JEWELS Treasures at Freemason's Hall By dr. WILLIAM HAMMOND, F.S.A. Edition de Luxe, Price 30/ Net Full Particulan Post Prte The Directors give personal consideration to all submitted Manuscripts on Scientific, Technical and Commercial Subjects ZU £lbrarp Press. £lttiitea 26 PORTUGAL STREET LONDON, W.C.2 23 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewals only: Tel. No. 642-3405 Renewals may be made 4 days prior to date due. Renewed books are subject to immediate recall. IbJTERLIEtL^RY LOAN TmtK WKKS AFTER RECEIPT NON-RENEVMBLE J ¥of "CVT^T 4S;4- TrtoiA :;nr« 9 '71 General Library