H ILLINOI S UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN PRODUCTION NOTE University of Illinois at Urbana-Champaign Library Brittle Books Project, 2010. GENERAL I NST RU C TIO N$ PROGRESSIVE COST ANDACCUTZNG SYSTEM A M'ERICAN ASSOCIATION OF THE BAKING INDUSTRY 1405 Ashlandi Block, Chicago linov COPYRIGHT NOTIFICATION In Public Domain. Published prior to 1923. This digital copy was made from the printed version held by the University of Illinois at Urbana-Champaign. It was made in compliance with copyright law. Prepared for the Brittle Books Project, Main Library, University of Illinois at Urbana-Champaign by Northern Micrographics Brookhaven Bindery La Crosse, Wisconsin 2010 651 GENERAL. INSTRUCTIONS ZsANDARD COT AND) ACCOUNTING SYST" AMERICAN ASSOCIATION OF THE BAKING INDUSTRY CENERAL I)VIS 1S9F'COST AND WHAT THEY INCLUDE The five general divisions of cost in the Baking Industry are; 1. RAW MATERIALS 2. PRODUCTIVE LABOR 3. MANUFACTURING EXENSE 4. GENERAL EXPENSE 5. COMME RCrhL EXPS (1) RAW MAtERIALS are of two kinds: First, INGREDIENTS, such as flour, sugar, lard, yeast, etc. These are the items that the for las cal for in definite quantities. They can there-. fore he charged direct to the manufacture of a given product, from the formulas, at purchase price f.obb. bakery. Second, WRAPPING MAERIA&, includingpper and cord, cartons, etc* These items likewise can be charged direct to one particular kind of product,at purchase price f~o.b. bakery. iote Raw Materials do not include such supplies as brooms, soap, towels, lubricatingoil,, fuel, etc., that do not enter into the product as an ingredient or wrapping matera. (2) PRODUCTIVE LABOR includes all items of labor entering into the manip '04 ufacture and wrapping of products, which can be charged directly to product. A method of distributing the -cost of 'productive labor according to a system of control by sZtanarwilbe outl' 1 1ined ter. :h (3) UF'ACTURING EXPENSE includes all expenditure, other than the cost 4 of raw materials and productive labor, which is incurred in the process. of man- ufacture up to the time of delivery of the goods to the shipping clerk or wag- on checker - including superintendent's and foruents salaries, fuel, repairs,etc. The sum of "RAW MATERIALS, "PRODUCTIVE LABOR", and 'MAFACTURING t. EXENSES' , Gives TOUTAL MFACTURING COST. L.(4)GEE EXES is of two kinds: First, A1MINISTRATION AND OFFICE EXPESE, including all expenditure. in the operation o f the of fice and in the general administration of the business, Asuch expenses being largely under the personal control of the management, Second, FIXED AND DISTRIBUTABLE EXPENSE, including charges that are ~1incurred for the benefit of the business as a whole, such as interest, deprecia- Stion, insurance, taxes, rent, light, heat, etc., but which are not entirely under Sthe personal control of the management. 2ma. (5) �2 IRCAL EXPENSE consists of: a. SHIPPING DEPAR ThENT EXPENSE is the expense of inspecting, assembling and packing the product ready for loading on the wagon for city delivery or shipment'by express. b. BARN AND GARAGE EXPENSE is all expense incurred in selling in or near city. C. COUNTRY SALES EXPENSE is all expense incurred in selling goods for shipment by express or interurban. 4. GENERAL SALES EXPENSE is all expense chargeable to selling but not chargeable directly to either city or country sales- such as general advertising. The sum of "0YTAL MANUFACTURING COST", "GENERAL EXPNSE, and" 1iERICAL EXPENSE" gives TOTA COM A C The complete list of specific items entering into these general div. isions of cost will be discussed later. PURCHASING. RECEIING AnPSTRING MATERIALS METHODS OF DETECTING STOPPING*WASTE. Next to cash, bakery raw materials and' supplies require the most care.. ful watching. They enter heavily into the assets of-the business; they make up the largest part of the cost of bakery products; they are Just a short step removed from being actual cash itself. And yet our experience inia consider. able amsber of bakeries shows a general neglect and laxity in this important matter that is causing the bakers a loss of' thousands of dollars annually. Hence, vs urge the installation of thoroughly accurate methods of. accounting for raw materials and supplies, not only because such methods are fundamental to cost keeping, but also because they will stop losses that are a-serious diain upon the business. In~ the larger bakeries requisitions should be made out in duplicate on a suitable form (preferably a book of numeredt forms) so that the person whoy does the actual purchasing will have a written record of his authority in each case, and the person- who is responsible for having the materials on hand when needed, will h a ve evidence t ha t requisition w as made to the purchasing officer or agent. PURCHASE ORDER ensure an actual count, measure or weight by the Stock Clerk for checking against the dealer's invoice. It can be done by grouping these ites on the sheet and cutting the 'carbon paper so they shal not be copied through., Only the' description of the articles ordered should appear on the Receiving et. RECEIVING The duty of receiving, storing and issuing all raw mterials and sup. plies should be vested in one person. In bakeries of fair size these functions will take all the time of one person. He should be desigoated as Stock Clerk. Is3 r The Stock Clerk gets a copy of every Purchase Order, known as bipRs- ceivtng Sheet. When raw materials or supplies are received he should count weigh, or measure them accurately, and enter the-qutity on the Receiving Sheet, wich should then go to the bookkeeper for checking against the quan- tity charged in the dealer's invoice. STORING SA1.S No one but the Stock Clerk should have access to the stock. The ideal arrangement is to have stock of every kind stored in one room and that room kept locked at all times. Practicall all baker materials are a licable to domestic use and have a habit of disaearin rather m steriousi *Remove all temptation by putting them under lock and key so far as possible ard by making one person responsible. MAMIRY ANI SUPPLY RE I STIONS Absolutely nothing should'leave the stock room except as it is given out by the.Stock Clerk'on written requisition signed by an authorized person: The requisition should show the date, the articles wanted, the quantity of each, the department for which wanted and the signature of the person making the requisitions STOCK RECORDS Just as you insist upon knowing each day theamount of cash on hard or the balance at the bank, so you should insist on knowing at all times the exact quantity of stock on hand. In other words, every baker should maintain a oer #..ua1. stock inventor . It will enable him to know when purchases should be made and in what quantities, to make correct insurance claims in caseof fire; and will help him to locate wastes of materials, to understand his costs, and to figure his monthly profit or loss. For this purpose, a Stok ord Inventor should be provided, showing separately each kind of material, showing receipts (date and quantity) , issues (date and quantity) :q C~anities on hand. Entries are made inn this Stock Record from Receiving Sheets, and Material and Supply Requisitions; and the quantities on hand are obtained by adding the quantities received and subtract- ing the quantities issued from previous quantities on hand. In starting the record the original quantities on hand. must be obtained by an actual Inventory. In the smaller bakeries, heone or perhap s two persons attend to' from stock for use in manufacturing. Even greater care must be excercised to make sure that 'these terials pass- through'the various ufacturitg processes without le, and that -they' prcd"^uce the quantity of finished goods of a satisfactory quality, that tey Oug.it to produce if properly handled. r-4 -, FOUR CHECKS NECESSARY To secure efficient bake shop control, the product should be checked, at four separate and distinct stages of mnufacture, to determine: First, That the correct quantity of each ingredient goes into the dog& mixture. Second, That each dough produces the standard number o f counts" in the pan. Third, hat losses occur in baking, or in delivery to the wrappers or Shipping Clerk. Fourth, hat number has to he rejected as unsalable during inspection, grapping, aosezlthing and packing of goods. tITII OP' A I"COUNT* By the term "eount", as used in this and subsequent paragraphs, will be meant that unit of production whose wholesale price is 4 cents. Thus a loaf of bread that wholesaesor 4 cents will represent one countp a loaf that wholesales for 8 cents, two counts; a cake or a dozen doughnuts that wholesales for 12 cents, three cunts. MIXINODOUGH ACCORI G TOA)OUCH DER A D Seet for each dough mixed, is fundamental to any accurate system of accounting for ingredients. The Dough Sheet should show in pounds and ounces the eact quantity of each ingredient that is to be put into that particular dough. The ingredients must be care ful y weighed out and put into the miixture exactly in the quantities called for by the Dough Sheet. Wherever conditions permit, the best way to issue materials is in the *xactquantities required ror each individual dough. This plan necessitates providing suf ficieht buckets, pans, etc., to hold the various ingredients for each dough to be made. The exact quantity or each ingredient required for each dough should be weighed' out in the se buckets and pans. If there are six doughe, six bucets of milk, six buckets of oil, etc., should be made up. It is a .good plan to weigh out sugar first and put it in the bottom of a buck.. et, then weight out the salt arnd put it on top of the suga. This will be found a preventive to theft. ATANDARDS OFPRODUClTON pi C9+nT A. Vhe Mulded and Put in the Pan. A re brt should be obtained o f the rnmer of counts moulded and panned. This quantity should check with the standard for that particular sice and kind of dough. B.&WenDlivered from the Ovens' In the larger bakeries it is ad-. visable to make a report of the number of "counts" baked and delivered to the wrappers or Shipping Cl.ak. S ller bakeries do not require this check. By checking the quantity thus reported against the standard, the loss in baking can be determined. C. Then Assembled Read for Salesmen or for Shipment. A daily report should be made by the Shipping C.erk of the total number of perfect "counts" and of imperfect "counts" ('cripples" of all kinds received by him. To do this he must inventory the supply he carries over from one baking day to the next. This inventory should be taken at the period of the day when his sup- ply is lowest. This gives a comparatively simple but effective check, and shows up the losses between output of the moulders and perfect 'count" ready for sale. FIGURING COSTS OF 1ATRIALS FIGURING STANDARD UNIT COST OF NGREDIENTS The basis for figuring costs of ingredients is the &S men. tioned-in a previous paragraph. This sheet shows, in pounds and ounces, the exact quantity of each ingredient put into each kind of dough. The method by which the superintendent can check his men to make sure that no more and no less than the specified quantities were used, was outlined in a previous paragraph. When this check is applied, the Douconstitutes an accur- ate record of the c anift of ingredients used. Multiply the quantity of each kind of ingredient by the latest price paid for it, and the total is the standard cost of ingredients for each kind of dough. This cost divided by the number of "counts" that each kind of dough should prduce, gives the standard unit csto ingredients per "count". WHY ADDITION IS NECESSARY TO COVER LOSSES If, then, there were no loss in counts due to fermentation causes or to inaccurate scaling; or to burned, poorly baked, undersize, dirty or broken loaves ("cripples, as they are called), this standard unit coot of ingredients would be the complete cost. But there is very likely to be a diem crepancy between what doughs actually produce and what they ought to produce, and there are sure to be some "cripples". How much losas there will be from these sources will depend to a large extent on the energetic and intelligent use of the checks mentioned in a previous paragrph, but even under best con- ditions and best control there will be some losses. and unless they are acf- counted for in the cost, the cost will be incomplete.& The result 6f this would be one of those leaks that cause so many bakers to think their costs are lower than they really are, and who there fore , unit cos+1MWt of ingre 4dietsto ov r e oses( ndalo etrfltat+i iV %V. %ma saine tuit 2. "Counts" that should have been produced, based on the standard of production for that kind of dough. 3. Perfect "counts" actually produced. 4. Losses (difference between items 2 and 3) divided between: a.' Fermentation, saling, etc. b . Cripples of various kinds. g 6.m By sizunariing the Daily Production Records for a month, an average percentage of "counts" lost, to perfect "counts" produced can be obtained. This percentage must then be added to the standard unit cost of ingredients, figured froe the Dough Sheet) to get the actual unit cost of ingredients. FIG'JINE: COST OF WRAPPIG'MATER IAS S The principles involved in figuring the cost of wrapping materials are the same as for ingredients, that is, a standard unit cost of wrapping matterials must first be obtained and a waste percentage added to cover the losses that occur through carelessness in handling materials, etc. The st- dard cost of wrapping materials should be obtained separately for each kind of brand of bakery goods wrapped. The waste percentage should be obtained as follows: .1 Determine the standard qgutity of each kind of wrapping material that should be needed for the wrapped production of a three months period, as saning no waste and basing the figures on an overage actual wrapped production. 2. Compare this standard quantity of each kind of wrapping material with the q2 tit actual used during the same period as shown by the perpet- ual stock records the difference represents the 'gaste. 3. Determine the percentage of waste to be added to the standard wrapping cost, by dividing the standard quantity into the quantity wasted. 4. Add this percentage to the standard expressed in dollars and cents, and divide by the number of packages to get the actual unit cost of wrapping the several kinds of goods. Th SUM OF ACTUAL UNIT COST OF INGREDI:ENTS AND ACTUAL UNIT COST OF WRAPING GIVES Th TOTAL. ACTUAL UNTIT COST OF RAW MARIALS. . I . .sT~ GLAOR COST CHECKNTG LABOR AGAINST PRODUCTION ELIMINAION OF WASTES IN LABOR The cost o f shop labor represents on the average about l0of the+ks purpo sec in any plant, a labor cost per "count" for bread dough producto, and for pastry of all kinds, including cake, is division enough. The actual unit cost of labor is obtained by simply dividing the labor payroll for each pay period ('as a week) by thoe production in cocunts"f for the same period, as figured from the Daily Baking' Records, performing this opera- tion separately for bread 'f advisinismitand 1WE S . f a d . . s lcr is maintained, CHiECKING LABOR BY COMPARISON OF LABOR COT A comparative record of the unit costs of labor should be kept, not only for costs reccrd purposes, but also for the purpose of checking and con- trolling labor. This record may be in the following form: Actual Unit Cost of Labor per 1000 "counts" Bread Making Department F'or Week Endinn Perfect "Counts" for Week -.r "- -.-- 30,000 Shop Labor Payroll for Week at l0%W-......- 4130, 00 Unit Cost per 1000 "Counts" ----- . ... $4.00 Note: Thee figures are assumed, and are based upon a sae of 30,000 "counts" for the week, sore at 4 cents per "count", and a shop labor cost of 10% of the selling price. Table of Comparative Unit Costs of Labor Per 1000 "Counts" Average Average Average Best Fc This for Same For April in Record Year to Period Pre- Previous- Date ous Year Ari8 il15 etc $3.90 $4.10 $4.25 $4.20 $4. 00 $3.95 Note: It is easier to compute all unit costs in terms of 1000 "counts" carrying the cost in dollars and cents, than in terms of a single "count", which would require fractional figures. By following the cost of labor each week and comparing it with other weeks of the srmae month, with the average of that month a year ago and with the'best record"; also by comparing the average cost for this year to date, with the average cost for the same period of the previous year, and with the-"Best record", the proprietor can keep himself informed about his labor cost. Then, if he is willing to exchange cost data with other association members ( any many will be glad to do this), he can find out how his cost, week by week, an+- how his "best record", compares with that of other bakers, among whom he can undoubtedly find, some whose solume of production and working conditions are similar enough to his own to make the comparison of valuee. I* Manaer' s Supervision - by a careful study of labor cost figures ANALYSIS AN!) DISTRIBUTION REGULAR AND ADEQUATE SALARY FOR PROPRIETOR IDstances are frequent 4n which administration and office salaries and expenses are not included at all in what the manager is willing to consider his cost of production. This is usually the case when he is anxious to figure a low enough cost to permit reduction of selling price in order to influence a few so 8 . customers that be think he needs in his business. Then we find instances where the cost price is made to include something for these important and prcper charges, but by no means an adequate amount. We are therefore taking this opportunity of impressing on the bakery manager the necessity of, Firs t handling his bakery on the well established business principle that his personal and family money matters must be kept entirely separate from his business finances, even when the proprietor is the sole and only owner of the bakery. Second taking out and charging the business with angular salary for his own services and the services of members of his family who work in the bak- ery and doing this on the regular pay days. third, making this regular salary at least equal to the commerc value of his service, that is, what his particular services would be worth in the open market if he were to hire out to someone else; or, to put it-in another way, what he woUig have to pay to get some one else to do the-work he is doing, and to do it equally as well. In this connection, it should beismembered that the human machine is subject to wear and tear just the same as the mixer or the oven, and that therefore, after reaching a certain point, it gradually deteriorates. A per. son's salary must, tb #efore, be fixed sufficiently high during the period of greatest energy and activity, to permit of laying aside a sufficient portion of it to provide for the time when his earning capacity will have depreciated. Moreover, every business man is entitled to at least one vacation a yearand it is generally a benefit to his business if he takes it. He should have no hesitancy* whatever in charging his regualr salary for the vacation period; he is entitled to it, and his cost of production should include it always assuming that his selling price shall include his entire cost of pro- duction plus a profit. If the cash balance should be low, there is no reason why the owner. cannot-leavre a portion of his salary in the business, or. his. entire salary if he can afford it;. but it should be considered strictly as a loan, credited to his personal account, charges into-administration and office expense, and so included in his cost of. production. If he doeasn'#t do-that he merely gives away his time, . energy and thought to his customers, and int1e long run he will not even be thanked for it. Administration and Office Eonse Properly Includes the followin: Inasmuch as the wholesale and retail selling expenses., and the mari ufa.cturing costs, in the department at bread, cake and pastry should be kept separate, it is desirable to make an apportionment of Administration and Of fice Expense into Manufacturing and Operating Department Sales and Delivery Department Sh~x~g3a~ aDepartment -, 9-,. This apportionment should be of the-total only, of the Administration and Office Expense for each month; and should generally be made on estimated percentages, determirned by the proprietor after carefully considering the rel- atiE7C assistance rendered by the office ( including himself ) to each of the divisions mentioned. For example, he might determine the following apportionment to be about correct: 50% Chargeable to Manufacturing and Operating. 40% Chargeable to Sales and Delive " 1%,Chargeable to Shipping Sales. COWPARATIVE RECORDS This approtionment should be studied once a month, since the relative assistance rendered by the office to each department of the business will vary from time to time. Comparative records should be kept and comparisons made each month with the expense of the last previous month, the next preceding month, the corresponding month of the previous year, and with the best record - that is, the lowest expense for any month of record. This will enable the proprietor to check his progress intelligently; and regular consideration of the subject will gradually perfect his methods of figuring. DEPRECITON. INSURANCE TAXS AND INTEREST AMPORTA EE OF THEIR CORRECT CONSIDERATION IN COSTS ANALYSIS AND DISTRIBUTION There are no items of expenditure so frequently omitted in figuring costs, as the fixed overhead expenses, that is, depreciation, insurance, taxes and interest, Many a business failure can be traced definitely and unquestion ably to the management failure to consider these items adequately in establish- ing his selling price. Not only the smaller industries, but many of the larg . er ones as well, are guilty of unsafe practice in this particular. The danger from this source is particularly treacherous because the evil effects do not show quickly nor in a pronounced manner. Slowly and grad-u ually, though none the less surely, however, such neglect will sap the life blood of the business. The process may be compared to the ef~fedt of certain poisons which is indefinitely delayed, and isqneithe cute npinful until it has run its man ent value; is going to last a good many years. 2ff it is a building, it may last thirty years, if a horse, it may last only six years; if a breadpnit may on y last one year; but at any rats it is, for the time being at least. an .nvastment, an asset; and the baker therefore correctly charges the purchase cost: to an asset or investment account in his ledger. 40 10 Of As the years pass, the building gradually deteriorates, despite the fact that it is kept in ropatr# a4 in the course of time it will iritably have to be sacrificed'and repla ed: The delivery equipipt 4pt4'iorates more rapidly, and the pans and similar equipment still more rapidly. Besides the wear and tear, there is another factor that effects the useful life or many items in the investment list; and that is the possibility or probability of being discarded as obsolete, long before they are worn out, The building, the oven, or the machine, gets out of date; new and better build.. ing layouts are discovered; improved sanitary conditions are demanded; new machines are invented and put on the market, which are so superior and oper- ate at such a saving over the old that a baker may feel he cannot afford to con- tinue the use of the old. And so it becomes necessary to charge manufacturing costs each month and to include in the selling price, such proportionate part of the purchase cost of all the asset items as will equal the amount originally paid for them by the time they are worn out or for any reason discarded. If this is done, money will be available out of the income of the business, to replace outworn or obsolete equipment; and no new capital will be required for that purpose. If it is not done, nothing will be available for replacement, and unless new capital is furnished, the bakery of necessity passes out of existence, having gradually given away its plant to its customers. DIVISION OF ASSETS AND RATES OF DEPRECIATION Inasmuch as the average life- of the different kinds of plant equip. merit varies, it is necessary to carry the purchase cost of such equipment under several groups on the ledger, as for example- Buildings Machinery and Ovens Other Shop and Store Equipment Of fice Furniture 'nd Fixtures Well constructed brick bakery buildings will last from 2S to 40 years and a depreciation rate of 3% a year should be ample* For frame buildings at least 5% a year should be charged off. Ovens will average approximately a ten year life, and 10% a year shu~ld be charged off for them. Machinery 8 years, 12j% to 1510, l ETA A S ANDINTERST These are fixed charges that are paid but once a year, or at most but a few times a year, and have to be spread over the expense of each month.The best way of doing this, is to charge aoch month with oneiwtwelfth of the totml cost of each of these items for the previous year ; unless for. some kn~own rea.. son, such as reduction of no tes cutef a . ng, or decrease in insurance rate, or increase in taxable vaLue s, tle-Thia--e for the current year is going to be greater or less; in whichx ;ase o'-s ytvle. fthi of the estimated cost for the current year should be taken. "r UI MAFACTURING, EW&]aENS CCIaPOSITION OF TOTAL MANUFACTURING EPENSE Manufacturing Expense is composed of the follwig three item':- (1) DIRECT MANUFACTUJRING EXPENSE. (2)-THE PORTION OF ADMINISTRATION AND -OFFICE EJZNS PROPELY CHARGEABLE TO WJUFCTURITG (3) E PORTION OF FIXED AND DISTRIBUABLE E , PROPERLY CHARGEABLE TO lANUFAVTUNG DCT MUFCTURNG EXPENEincludes thoseiteaw ae i able exclusively to manufacturing. The main groups that fal nd theshead Fuel for Ovens - all wood, coal, coke0gato6 etc.,s sed exclusively for heating ovens. Sho Suples stationery used exclusively by and for the Manufacturing Department, bread labelsf brooms, soap and other cleaning' supplies, towels, motor o, g*'ae, peels, and any other similar articles used by arid for the Manu- facturing Department. R-aepairs to is oOenufacturinrse "e st n machines and other equipment used exclusively by th. Manufacturing Department. POWer Li t and Water Purchased or. rove . undry anufacturi Exe miscellaeous items ot included in above groups. FIXED AND DISTRIBUTABLE EXPENT~i includes: Depreciation, Insurance, Taxes. and Interest wIt~ will be ixiadvis. able for most baker s to attempt an intricate division of these items. U would recommuend that a. division of the total o f these items be maetween Manufacturing Expense and Selling Expense in the ratio that the asset -value of etore, and delivery and shipping equipment, including stables. garagoe and wagon room, bewis to the asset value of the balance of the plant. which UIIT COoF MANUF'ACTURING EXPENSE . Having obtained the Total Manufacturigg Expense by combining the tems. mentioned above, the unit cost of Man ufacturin Expense should be rlg~rsd (as for Labor) by divi"ding the production in "counts" for the month into the Total Manuf acturng xn se for that mon th. Comparative record of the unit costs of manufacturing Expense should be kept, not only for cost record purposes, but al so for the purpose of checking and controlling such expense. This record should be kept in the same manner anid in the asm form am 12 s as that for unit costs of labor, except that the period wul4 a month in- stead of a week. In fact, everything under the head "Checking Labor by Cow. parison of 'Labor Costs"' will also apply to checking Manufacturing Expense, BARN AND GARAGE EXPENSE WH RE ThEY BELONG IN COSTS HOW THEY ARE CONTROLLED Unlike most industrial managers, the proprietor of the bake shop has by no means ended his worries nor his expense when he has delivered his man- ufactured goods to the shipping floor ready for delivery. There is no trans portation company ready and. anxious to relieve him of further responsibility by giving him a bill of lading guaranteeing safe delivery to the customer. Nor can he sell his goods F. 0. B. bakery. He is obliged to go into the delivery business himself; to purchase, own and maintain delivery equipment, to hire help and incur all the risk and liability until his manufactured products have been delivered at the door of the customer, and generally into the very show case (or kitchen) itself. More-. over, hemust pay all the. expenses of this delivery service, and his only means of getting it back is to include every penny of it in his cost, and therefore in his selling price. DIVISIONS TO BE CARRIED IN LEDGER The detail of carrying Barn and Garage Expense in the accountsvaries with the' size of the bakery. In a bakery turning out an average of 30,000 counts per day,. the expense of each automobile may be kept separately on the ledger in order that the proprietor may have a check on the care ercised by several drivers. In other bakeries separate accounts may be kept according to the nature of the expenses, A bakery may subdivide the expenses as -follows; Repairs and Maintenance of Barn Repairs and Maintenance of Garage Repairs and Maintenance of Harness Repairs and Maintenance of Wagons Repairs and Maintenance of Automobiles Barn Wages Garage Wages For small bakeries it is not necessary to keep such an extensive list of accounts. Perhaps four Accounts "repairs, wages, supplies and udrChig es, l will give the proprietor all the detail. he will need, as his close contact with all phases of the business makes greater detail unnecessary. Barnard Garage expenses should be kept in separate accounts in order that a comparison may be had c f the cost per mile traveled, and of this cost per 1000 "counts" delivered%, by wago~n and by automobile respectively. Of SCourse, in any such cornparI c-Rthe density of customers along the route must by given due consideration, as tis factor has a most important bearing on both the cost per mile and the cost per 0,i0 "counts" delivered. - 13 .. t2_ TT%' ' SPEC;IAILY IMPORANT The portion of depreciation chargeable to Barn and Garage Expense as one of the *actors of Fixed and Distributable Expense is particularly important. The average life of horses and automobiles is comparatively short, and new ex- penditures have to be made in this connection at rather frequent intervals. CHARGING OF BARN AND GARAGE SUPPLES but We would recommend for all/the largest bakeries, that Barn and Garage Supplies be charged immediately and directly to Expense, rather then to the Raw Material Stock Account when purchased, and later to Expense when the 'Supi. plies are given out for use. Nevertheless, these supplies should be kept un- der the supervision of the Stock Clerk and should be given out by him as need. ed, the requisition to be signed b) some authorized person. This requisition would serve only as authority for the Stock Clerk, and would not be needed for accounting purposes. RECORDS TO BE KEPT A record of the amount of gasoline delivered to each automobile should be sent to the office and the Stock Record Sheet for gasoline credited there': with. An individual record of gasoline consumption by automobiles should be kept, together with a record of the miles traveled by each automobile, so that the miles traveled per gallon can be figured at the end of each month. In this way all of the geoline will be accounted for, or the records will show a shrink. age in the stock of gasoline or a decrease in the mileage per gallon. In either case the person responsible will be known, and the leak can be corrected. A record of mileage obtained from tires should also be kept. It will be difficult to check the consumption of horse feed, if the barn man is permitted to use his own judnient. We know of one baker who re"s quires that his barn man weigh out the feed for each anid. strictly in ac-. cordance with orders. Incidentally his horses are always in good condition. He credits the Stock Record Sheet for feed with the quantity prescribed. If the record shows more, he knows, there is either loss by theft or that the barn man is disobeying orders. A thorough control is quite possible by such methods. SHIPPING DEPAR2I4ET AND SALES EWENS INCLUDING LOSS ON STALES SHIPPING PD4'A(NEXPENSE consists of* and the expense consists of (a) bor of the shippin clerk and his helpers, properly chargeable to each of these divisions; and (b) s or pro- portion of other expenses of the Shipping Iepartmnt, chargeable to each of these two divisions. SES EXPENSE consists of: 1. CITSy jSINES EXNSE This includes all expense incurred in selling and delivering in or near the city and may be carried under the following headings: "14 - Salaries and Commission of Salesmen and Route Su erintendent -in- eluding bonuses of any kind. Barn and Garage Expense - Previously explained. Advsitn - c rds, circulars, newspapers, postage, samples, signs, calendars, posters, premiums and all other more or less regular advertising. sales Develo rient Eyp ense c olic itors and demonstrators' salaries the expense of corveyances for them, and all other expense incurred in any special effort to get new business. LOss on Stale Goods difference between the cost of manufacture q the returned goods, and the amount obtained from the sale of such goods. The Portion of Administration and Office Epense Properl Chargeable The Portion of Other Distributable E ense Pro erl.Char sable to Cit Whclesae Sell.in - rent and heat, repairs to buildings, etc. Sundry Charges and Exenses a expenses not specifically mentioned above that are chargeable to City Wholesale Selling. 2. SHIPPING SALES EXPENSE This includes all expense incurred in selling and delivering goods outside the city, and may be carried under the following headings: Containers includes cost of all paper shipping carriers; and the depreciation, niaintenance and return express charges on all returnable ship- ping carriers. P paid Express and Parcels Post o includes outgoing charge-s obut does not include charges for return of empty carriers. Sud eivrLbr Supplies and Expense includes charges for service rend~ered- to the Shipping Sales Department by Barn or. Garage Labor and Equipment. This service should be credited to Sundry Ehargea and Expenses of Wholesale Selling Department, -to which all barn and garage expenses .were originally charged. Advertising as explained under City Wholesale Selling Expense. Sn Ch esnEen tall expenses not specifically mentioned abovoe a'e h:eablI to Shipping Sales. 15 .. METHOD OF FIGURING LOSS ON STALES It has been our experience that comparatively few bakeries are in- cluding this most important, and, in many instancea, exceptionally heavy item, in their costs. Stales returned should be listed by kinds of goods and then priced and ae ede at the total ostb If actual cost is not available, use es- t;mated os , The diffore b,- hetween the total manufacturing cost so ob- tained and the total amznV '. received from the sale of the returned goods represents the loss or. stales In order to keep down this loss, a record should be kept on each sal sr an showinig the nu~her of "tount s" delivered to him, the number of "Countse" returned by hi; and the effort should be made to keep each sales. mn bew a naxima e stab lished percentage. DTS'1'1' "Ir"O BET ' I ASer"'T LABILTYAD OT COU ETERPJMTNATION OF MONTHLY ?ROFIT OR LOSS DEFINTTON OF ASSETS Assets are thos items that have a more or less permanent value, and may b' converted into cash at any time. They are of two kinds. Current or yick Assets are such as may be readily converted into csh, at cr near full value. They include cash in bank or elsewhere, accounts r3eivabio, (money due from customers), and merchandise stock - such as raw maeriair, wrapping supplies and shop supplies. Fixed or Permanent Assets are those items that cannot be so readily converted ii r o ca y II they are to be sold, they must be sold at second- hand value, wit.. the single exception of the building eite. They include site or othler land owned by the business; buildings of all kinds; machinery of all kinds; miscellaneous shop equipment, such as troughs, racks, pans, tafle , eta; ; horses, wagons and harness; automobiles, store fixtures, and of fioa f~rnituue. A 3SET AGCCUITT3 The acccounts carried on the ledger for assets are known as "asset 1c ou9&- No matter how small] a baker"'s business may be,- he should have a seixtrate a4c.cun t on his ledger for each of the assets listed above. D-' COST ACCOUNTS T1 azccunts to which expenditures essential to the processes of ma-, ctvrir g, selling, delivering and collecting, are charged, are known as cct acc'ounts". These accounts are divided as follows: Manufaturi~xpense ( to be kept separate for bread and other products): A record of :: rawr material used, wrapping supplies used, shop labor employed, taxes 1insup rano e rent or depreci ion of buildings, depreciaw tion cf machines and miscetlaneuus shop equipment, repairs to buildings, re- pairs to machine and to miscellaneous shop equipment, power and light, water fuel, shop supplies. r156. Seling arid Delivery �xpen-e * A record of shipping department labor palaries and commissions of salesmen, barn labor, horse and wagon expense, auomobile expense,- advertising, sundry development expnse,, loss on stale goods, depreciation on horses wagons, depreciation on automobiles. Adminstrative and Office E ense : - A record of the proprietor's salary avd other office salaries, printing and stationery, tolephon and tel.- egaph, postage and office supplies, association dues, donations and charity., depreciation on office furniture, attorney and other professional fees. FR()FUT' AND LOSS The sum of all the charges for a month included in the Cost Accounts gives the total cost of doing business. The sales for the month (bLlls rendered and cash collected) represent the total income from the business. The difference is the profit or loss for the month, and should b e the exact amount required to balance assets and liabilities at the end of each month. The essential feature, without which it is impossible to figure thes profit or loss, is to know the value of the stock on hand (raw materials) at the end ot the month and used during the month. This book is a preservation facsimile produced for the University of Illinois, Urbana-Champaign. It is made in compliance with copyright law and produced on acid-free archival 60# book weight paper which meets the requirements of ANSI/NISO Z39.48-1992 (permanence of paper). Preservation facsimile printing and binding by Northern Micrographics Brookhaven Bindery La Crosse, Wisconsin 2010