nioeratt) of * 
 4 ^(California 
 
 33fTund 
 
HOW TO FIND 
 
 Manufacturing Costs 
 
 AND 
 
 Selling Costs 
 
 BY 
 
 LESLIE UNCKLESS 
 
 t 
 
 COST ACCOUNTANT AND DEVISER 
 OF OFFICE SYSTEMS 
 
 FIRST EDITION 
 
 PUBLISHED BY MODERN METHODS PUBLISHING COMPANY 
 DETROIT, MICH. 
 
COPYRIGHT, 1909, BY LESLIE UNCKLESS 
 Aw, RIGHTS RESERVED 
 
CONTENTS 
 
 PAGE; 
 
 How to Get New Ideas 4 
 
 Getting All the Information 9 
 
 Average Cost 10 
 
 Follow-up ii 
 
 Labor 13 
 
 Methods for Payment 15 
 
 Piece Work 15 
 
 Premium Plan 16 
 
 Contract Work 17 
 
 Time 17 
 
 Classification of Material 18 
 
 Estimates 22 
 
 Time Cards 25 
 
 Cost of Material 28 
 
 Classification of Office Expense 29 
 
 System 30 
 
 Cost by Lots 31 
 
 Some Items of Indirect Labor Expense 33 
 
 Experimental Work, Designing, Etc 34 
 
 Patterns 36 
 
 Handling Various Accounts Relating to Costs 39 
 
 Salesmen's Accounts . 46 
 
 Shop Orders 46 
 
 Indexing Orders 49 
 
 Stock Room 50 
 
 Reports 51 
 
 Returned Goods 54 
 
 Changing of Prices 57 
 
 Continuous Process Factories 58 
 
 Receiving Department . 58 
 
 239126 
 
iv CONTENTS 
 
 PAGE; 
 
 Basis of Apportionment 62 
 
 Rush Orders 64 
 
 Water Power 66 
 
 Sinking Fund 66 
 
 Administration Expense 67 
 
 Rent 67 
 
 Depreciation 68 
 
 Freight and Demurrage 69 
 
 Discount 71 
 
 Royalties and Patents 71 
 
 Burden 73 
 
 Heat, Light and Power 75 
 
 Cartage Account 78 
 
 Mechanical Appliances 79 
 
 Loose-Leaf Books and Card Systems 82 
 
 Purchasing 83 
 
 Claims and How to Handle Them 84 
 
 How to File Claims 89 
 
HOW TO FIND 
 
 MANUFACTURING COSTS AND 
 SELLING COSTS 
 
 BY LL5LIL UNCKLL55 
 
 COST- ACCOUNTANT AND DEVISER OF OFFICE 
 AND FACTORY SYSTEMS 
 
 INTRODUCTION 
 
 The question of cost is a vital one to every manufac- 
 turer, and while it is true that most manufacturers realize 
 this, there are many who have to learn the underlying 
 principle, the basic law of cost, which is that Labor plus 
 Material plus Expense equals cost. 
 
 In the earlier days cost accounting was not given 
 the consideration it is now. It was not given the atten- 
 tion it deserved, but as competition grew keener it became 
 necessary to know how much the manufacture of goods 
 was costing and to know as soon as possible after the 
 material was made, and in many cases to figure in advance 
 the probable cost, which required making an estimate. 
 
 Now there are few manufacturers who do not figure 
 out their costs, and while the information contained in 
 this work is not to be considered final, it is the outcome 
 of experience gained in the cost accounting departments 
 of many different concerns. 
 
 The subject naturally divides itself into two parts. 
 Manufacturing cost and Selling cost, the first having to 
 do only with the manufacture of goods, the second with 
 their sale. 
 
 Both consist largely of expense items, but in this 
 
2 MANUFACTURING COSTS 
 
 connection it is well to consider that expenses are neces- 
 sary to the conduct of any business and should not be 
 considered as unessential or as loss. In truth, all Labor 
 and Material may be considered under the head of 
 expense, yet, from the fact that they are more easily 
 taken care of in other ways, they are not usually consid- 
 ered under the head of expense. Some labor and material 
 can be charged direct to an article, which simplifies the 
 work of the cost department, while some items which 
 are required in the factory, and without which it could 
 not exist, do not admit of such treatment. They must be 
 placed in a general account and from that point be dis- 
 tributed, usually by percentages, according to a definite 
 plan of apportionment which has been arranged. 
 
 The following chart shows the various divisions and 
 subdivisions which, in total, form a manufacturing estab- 
 lishment. In the small plant the owner may be the whole 
 executive force, but as his business grows he must dele- 
 gate a portion of this work to others, and in the larger 
 concerns the divisions shown are recognized and the 
 relations they bear to each other are known and observed. 
 In this chart we find that costs come under the head of 
 accounting, which is but natural, and that it is connected 
 to a certain extent with various other parts of the 
 concern. 
 
 To this department primarily belongs the work of 
 taking the data furnished b) r the timekeeping, accounting 
 and stock departments, arranging and tabulating this 
 information to show the net results. There is nothing 
 creative or imaginative in the proposition as it is generally 
 considered, yet it affords an unusual opportunity for the 
 cost clerk who requires reasons for his acts and is not 
 content to do a thing in a certain way merely because 
 somebody "always did it that way." The enterprising 
 man will weigh the acts of his predecessor and his own 
 
AND SELLING COSTS 3 
 
 as well, satisfy himself as to their soundness or lack of it, 
 and if he finds that they are not based on correct reason- 
 ing, he will reject them and substitute a system which is 
 correct. To be on the lookout for improved methods in 
 cost accounting- is to make of yourself a more valuable 
 
 Stoo K hoi cl 
 
 Directors ] 
 
 V.Presdt. Secy, Treas. 
 
 Tlanuf actunng A| Sales lAcc o^ 
 
 Superintendent II Sales Hgr. |~6oo K Kee pers 
 
 [ Salesman j [ Tj^e Kgeyer.5 
 
 WorKmery | | Cost Clerk 
 
 (Stenographer 
 
 CHART OF DIVISIONS AND SUB-DIVISIONS. 
 
 employe, or in the case of an employer, to build for 
 himself a bigger business. No system is so good that it 
 cannot be improved, and suggestions to improve the 
 methods of an institution are usually welcomed, even 
 though they may not be adopted at once. 
 
 Perhaps this treatise on costs will contain nothing 
 new to you, but the ideas will be expressed in a way which 
 
4 .MANUFACTURING COSTS 
 
 should make them worthy of the study of anybody who 
 is open to suggestion. 
 
 HOW TO GET NEW IDEAS 
 
 The basic law of costs is Material plus Labor plus 
 Expense equals Cost, and the principles of cost account- 
 ing do not change. They are absolutely similar in 
 every case, no matter what the product or how simple 
 or complex its manufacture. The only difference then 
 between the various cost systems offered must be in the 
 application of the underlying principles of the science, or, 
 in some cases, we might say the absence of application, 
 since some men ignore them to a certain extent and 
 always to the detriment of their business. Manipulation 
 of accounts may stave off bankruptcy for a time, but 
 results eventually in a pyrotechnic finish. 
 
 While on the subject of Organization it is well to 
 consider not only the benefit of new ideas, but how to get 
 them, as a business should be built from within. Period- 
 ical meetings of the executive force seem to be best in 
 this respect, as thus there is given an opportunity for 
 interchanging of ideas. A meeting of that kind should be 
 a meeting where suggestion is the rule. A "knockfest" 
 defeats the object for which the meeting was called. 
 There isn't a man in an office who is so devoid of origi- 
 nality that he cannot make a good suggestion. Possibly 
 some will be valueless, but to secure anything of value 
 it is necessary to separate the good from the bad. As a 
 further reason for the general meeting, men do not like 
 to give ideas or suggestions in private to an individual, 
 as the credit for them is generally not given to the 
 originator. The open meeting on the contrary gives each 
 
AND SELLING COSTS 5 
 
 man an opportunity to get credit for his ideas, whkh is 
 just what he wants and just what he should have. 
 
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 To know at the end of the year what has been the 
 profit or loss for the year is not enough. Monthly state- 
 
MANUFACTURING COSTS 
 
 ments should be required showing net profit or loss, and 
 the manufacturer who has the matter of costs down to a 
 certainty can know as often as that and at a small 
 expense. If the article manufactured is, for instance, an 
 automobile, it is not enough to know the total cost per 
 
 COST OF 
 CA5TIMO 
 
 
 190 .. 
 TO 
 190 
 
 (W.is 
 
 Prod-c 
 
 Coitptr 
 ?our>ti 
 
 To-fat 
 
 ^.ExperMe. 
 
 Direct 
 Lfrbor 
 ?ti. Ib 
 
 Total 
 
 Tot*) Cost" 
 
 % 
 
 /Wount 
 
 Pfex- Ib. 
 
 Fof Merit h 
 
 JAN 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FEB. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 MARCH 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 APRIL 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 NAY 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 JUNE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 JULY 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 AU6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 SEPT 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 OCT. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 NOV. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 DEC 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 TOTAL 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 COMPARATIVE REPORT ON COST OF CASTINGS. 
 
 machine. The cost of different groups such as frame, 
 engine, body, etc., must be known as well, and back of 
 that must be available the cost of separate parts of each 
 group if the cost system is to be a success. It is not 
 meant by this that a cost must be figured on each part in 
 every case, although that may be done, but if it is at any 
 time necessarv or desirable to know that cost, the system 
 
AND SELLING COSTS 7 
 
 should admit of its being shown without the necessity of 
 making an exhaustive research. 
 
 Cost keeping can be carried to extremes as well as 
 anything else, and it is quite as important to steer clear 
 of red tape as it is to have a cost system at all. The fol- 
 lowing formula explains how the cost of an automobile 
 might be shown : 
 
 Cost of parts of a group = cost of group. 
 
 Cost of groups + assembling cost of machine. 
 
 In other words, the part costs something, the sum of 
 the parts equals the cost of the group, and the cost of the 
 different groups plus the assembling equals the cost of 
 the machine. 
 
 Suppose, for example, we are figuring the cost of 
 engines for an automobile and find that they cost $150.00 
 each while the estimate is $100.00 each, an increase of 
 50% and of course very unsatisfactory. The question, 
 "where is the increase?" naturally arises and it becomes 
 necessary to analyze this particular cost, which may be 
 gone about in the following way : 
 
 A list of the parts constituting the engine is made 
 out and the estimated cost looked up. Considering first 
 the cylinder, we will suppose that the cost is made up as 
 follows : 
 
 COST ESTIMATE 
 
 Material $4.00 $3.50 
 
 Labor 7.00 7.00 
 
 Expense 7.25 7.00 
 
 Total $18.25 $ I 7-5o 
 
 Though the estimate is $17.50, there is an increase 
 of 75 cents on each engine and so on throughout the 
 whole list of parts. The difference will be shown on each, 
 and at the end, if the calculations have been correct, we 
 find that the net amount of increase is $50.00. 
 
 Now, having found where the increase is, the next 
 
8 MANUFACTURING COSTS 
 
 question is, "why the increase?," which will have to be 
 explained by the foreman having the work in charge, pro- 
 vided any increase in cost of labor is found. If changes 
 in expense or material are discovered, the estimate should 
 be revised to conform to the correct figures. If the work 
 is all done "piece work," no increase should be found 
 except as may occur by reason of defective parts on which 
 some labor has been done, for the timekeeping department 
 will pay only for the number of good pieces delivered 
 and the inspection department will keep the timekeeper 
 posted in that respect. 
 
 Where part of the work is done "day work," how- 
 ever, it is very likely that increases will occur and to the 
 foreman in charge belongs to a great extent the work of 
 keeping up the production per employe which will keep 
 down the cost. The forms and systems described through- 
 out this work will, if followed, make possible comparisons 
 of cost with estimate of previous costs, and these are of 
 course of great value. 
 
 All direct labor charges labor 1 
 which is for some particular article Y Labor 
 and no other. J 
 
 All material directly entering ] 
 into the construction of an article, } Material 
 parts purchased for it or used on it. J j Manufacturing 
 
 Cost 
 
 All items of labor and material 
 without which it could not be made, 
 but of such a nature that they do 
 not enter into the article in a direct i ^ } 
 
 way. In other words, all material [ ^< x P ense 
 and labor used in a factory not be- I 
 longing to either of the first two | 
 classes. J 
 
 CHART SHOWING THE THREE GENERAL CLASSES INTO 
 
 WHICH EVERYTHING ENTERING INTO 
 
 A COST MAY BE DIVIDED. 
 
AND SELLING COSTS 9 
 
 GETTING ALL THE INFORMATION 
 
 In figuring the cost of castings, for instance, it is not 
 enough to know that there were a certain number of 
 pounds produced and that the total charges equaled a 
 certain amount. 
 
 This may do in some instances, it may be the only 
 information required, but in most foundries there is the 
 inventory to be considered and the line of investigation 
 in figuring a cost would be about as follows : 
 
 Are there any cores for this job in stock which will 
 be used later? 
 
 At the close of the month were there any molds in 
 the foundry not poured, on which the labor charges went 
 in with the month's production, etc.? 
 
 The cost clerk in any establishment should not only 
 use the information given him, but should have the 
 requisite knowledge of the business to enable him to 
 know when he has received all the information necessary. 
 
 When all the data required has been furnished, he 
 will be able to figure a correct cost and not until that 
 time. 
 
 It makes no difference what the product, the loose 
 ends must be gathered up. The printed forms used in 
 the cost department may sometimes be printed so that any 
 omissions will be noticed and where possible this should 
 be done, so that there will be no excuse for anything to 
 be overlooked. To fix the importance of these facts in 
 your mind, the following formula is given : 
 
 Total charges less value of inventory = cost. 
 
 Less inventory here is where the trouble often is. 
 The total charges are easy to get, but the inventory is 
 
10 MANUFACTURING COSTS 
 
 often overlooked, or if taken, is sometimes not figured 
 properly. 
 
 The correct amount of an inventory is not always 
 what the parts represented have cost, but rather it is 
 what they should have cost and nothing should be inven- 
 toried at a higher figure than a duplicate lot could be 
 produced for. 
 
 AVERAGE COST 
 
 Average cost of output or production is sometimes 
 a good thing to know, but is rarely an accurate way to 
 figure cost's. 
 
 A foundry might wish to know the average cost per 
 pound of each month's production, yet to figure that each 
 pound of castings produced has cost just this average 
 amount would be to make a great mistake. Some cast- 
 ings will cost three cents per pound at the shipping room 
 scales, others may cost fifteen cents per pound, and the 
 separate cost of each kind is necessary. 
 
 As a rule, the heavier the casting the lower the cost 
 per pound, but these matters should be taken up when 
 the estimate is made. Another thing to be considered in 
 the foundry business is that small pieces require more 
 melted iron to produce a ton of castings than do large 
 pieces, for a larger part goes back to be remelted and 
 this is an item worth looking into. 
 
 If a contract is made to furnish a customer with 
 whatever castings he requires, the cost may be considered 
 in one lot, that is, charge the job with everything used 
 on it. It must be remembered, however, that unless the 
 castings are ordered in the same proportion, they are 
 figured in the estimate, that is, for the same number of 
 pieces of each kind the cost is apt to be unsatisfactory 
 
AND SELLING COSTS 11 
 
 and this naturally leads to the subdivision of a job, the 
 grouping of certain pieces and figuring costs on them 
 together. 
 
 FOLLOW-UP 
 
 To keep an account showing the location of all parts 
 in process from the time they are started until assembled 
 requires extra labor, but the results will in many instances 
 warrant that being done. In a bicycle factory, which will 
 serve as an illustration as well as anything else, the num- 
 ber of parts is so large that a system is required to keep 
 them moving through the factory and the following plan 
 was used : 
 
 The order department issued shop orders for the 
 different parts required and in the superintendent's office 
 a book was kept, one page of which was used for each 
 part ordered and the pages were large enough to take 
 care of a season's orders in most cases. The number of 
 columns in a page provided one for each operation of the 
 part and the names of the operations were written in the 
 proper columns when the order was placed. 
 
 Take as an illustration a rear sprocket of which say 
 1000 7-tooth 3/1 6" were ordered. On arrival of the 
 Shop Order in the superintendent's office auxiliary orders 
 would be made out, one for each foreman having any 
 work to do on the lot and one of these would be sent to 
 the punch room to start work on the job, the original 
 being kept in the superintendent's office to be filed after 
 entering it in the stock book. Each foreman then knows 
 how much work he has in view, although some time will 
 elapse between the receipt of the order and the receipt of 
 the partly finished material. If the order is marked 
 "Rush," part of the sprockets may be taken from the 
 press and hurried through the other operations, but in 
 
12 MANUFACTURING COSTS 
 
 every case deliveries from one department to another 
 must be signed for. A ticket similar to the accompany- 
 ing form is made out in triplicate and the department 
 receiving them is required to sign for them. 
 
 Once a day these tickets are written up. That is, they 
 
 NO. DATE. 
 
 DELIVERED TO DELPT. 
 
 THE FOLLOWIN6 
 
 DEPT. FOREMAN 
 
 RECEIVED BX 
 
 FORM FOR TICKET FOR DELIVERIES FROM ONE DEPART- 
 MENT TO ANOTHER. 
 
 are entered on the proper auxiliary order by the depart- 
 ment delivering them and are also placed in the "received" 
 column of the order in the department receiving them. 
 One copy of the receipt is left in the box of parts and 
 the stub is retained in the foreman's book. Two of these 
 books are provided for each department and one is in use 
 
AND SELLING COSTS 13 
 
 there while the other is in the office being written up, 
 that is, while the entries are being made on the stock book 
 to keep this record up to date. This plan keeps an accu- 
 rate record of each part being made and gives the location 
 of these parts at all times. If 7 T 3/16 sprockets are 
 required, the superintendent can, by looking at the stock 
 book, see at a glance the number coming through, when 
 the order was placed and the present location of the parts. 
 Thus there is no evading the main issue by a fore- 
 man. If he states that the goods have left his department, 
 he must prove his statement by his receipts. A "chaser" 
 could be used to good advantage in this system and it 
 would be his duty to go through the factory daily and 
 hurry along the parts most needed. The tickets in the 
 boxes will show him when material was delivered and 
 how long it has lain in a department without being 
 worked on. It is not necessary to deliver all the auxiliary 
 orders as soon as they are made out in the superintend- 
 ent's office. On the contrary, it will be a good plan to 
 hold them in some cases and let the parts go as far as 
 necessary and then put them in the stock room. This 
 eases up on some departments which can run during the 
 dull months of the year on material which it is not neces- 
 sary to finish until 1-ater. Some trouble may be experi- 
 enced in starting a system of this kind in a factory where 
 foremen have been allowed to do pretty much as they 
 liked, but once it is understood that the new plan has 
 come to stay, there will be but few who will not get in 
 line. There is no good reason why it cannot be made to 
 work in any kind of business. Foremen will be more alert 
 if they know that an absolute check is kept on their 
 departments. 
 
 LABOR 
 
 Since labor is one of the most important parts of 
 cost, it requires a great deal of care on the part of the 
 
14 MANUFACTURING COSTS 
 
 manufacturer to record it properly. A record should be 
 kept of every employe and the accompanying form shows 
 in substance the information usually required on records 
 of this kind. The employe should sign this record, so 
 that if necessary to identify his signature at any time the 
 
 RECORD OF EMPLOYES 
 
 No. 
 
 NAME 
 
 ADDRESS 
 
 AGE 
 
 OR SINGLE. 
 
 PREVIOUSLY EMPLOYED WTH 
 
 DISCHARGED REASON 
 
 DATE EMPLOYED |QuiT 
 
 REMARKS 
 
 SIGNATURE 
 
 card may be referred to. Any information peculiar to 
 the requirements of a business may be incorporated in 
 these records as desired. The employe's value is deter- 
 mined to a great extent by the amount of supervision he 
 requires. There are some men who, when a job has been 
 given them, take entire care of the matter from that time 
 on, getting the work out in the proper way and at the 
 proper time. These men, on account of requiring little 
 
AND SELLING COSTS 15 
 
 supervision, are more valuable than men who have to be 
 constantly watched and directed as each new step with 
 the work is taken. They receive more pay because they 
 are worth more. 
 
 METHODS FOR PAYMENT 
 
 The various methods used in paying employes are 
 considered under the following heads : 
 
 1. Day work. 
 
 2. Piece work. 
 
 3. Premium plan. 
 
 4. Contract. 
 
 5. Profit sharing. 
 
 A great many of the manufacturing establishments 
 of the present time -are using the day work plan. This is 
 simply paying the employe a certain amount for a speci- 
 fied number of hours spent in the factory, with no stipu- 
 lations as to just how much work is to be done during 
 that time. Of course, if a man shirks to any great extent 
 and is discovered, he loses his job. Wages are fixed 
 according to the class of work done and in the different 
 classes according to the value of the man. The amount 
 of work he turns out determines what pay he shall receive, 
 as it is only fair to give the alert and thorough workmen 
 more than the slow one. 
 
 This plan requires a large amount of help to super- 
 vise and direct the workmen and much of this time is taken 
 up in seeing that each employe is kept busy. If a day 
 worker runs out of work, the temptation to stand around 
 until he is given something else to do is sometimes too 
 strong to be resisted. 
 
 PIECE WORK 
 
 The piece work plan places a price on each operation 
 or piece manufactured and the employe is paid according 
 
16 MANUFACTURING COSTS 
 
 to the number of pieces he turns in. In some cases he is 
 charged for the pieces he spoils. The temptation to slight 
 the work is so great that a rigid inspection system must 
 be installed where this plan is used, in order to see that 
 the count is correct and that the work is properly done. 
 This plan should result in more money for the workman 
 since there is an incentive for him to speed up, and it also 
 benefits the employer by increasing the production without 
 adding to the manufacturing expense, thus decreasing 
 cost and increasing profit. The employer who sees his 
 workmen making more than their day work rate is some- 
 times tempted to cut prices and the employe puts on more 
 steam and will make possibly as much as before, which 
 results in another cut. When the price gets so low that 
 in spite of his extra exertion the workman can make but 
 little if any more than regular pay while on day work, he 
 naturally gets discouraged and quits and the next man on 
 the job may have to be given day work in order to get 
 the work done at all. 
 
 Cutting piece prices spoils all the good there is in 
 this system, for if the workman thinks that to turn in a 
 big day's work is to invite a cut in prices, he will naturally 
 stay on the safe side and do only enough to avoid a cut. 
 In establishing piece work prices it is advisable to run 
 through a lot of "day work" and from the results of this 
 determine on a price for the operations, and once such a 
 price is established, do not change it. Of course, this 
 cannot be done in every instance, but the man who, by 
 reason of his ability, is able to earn more than another, is 
 werth it and the firm employing him can well afford to 
 pay it. 
 
 PREMIUM PLAN 
 
 The premium plan is that arrangement whereby an 
 employe receives, in addition to the wages paid him, an 
 extra amount for doing more than what has been named 
 
AND SELLING COSTS 17 
 
 as a day's work, or for completing a task in less than the 
 specified time. The proportion of factories using this 
 plan is not large, yet it possesses some very attractive 
 features. 
 
 CONTRACT WORK 
 
 It is doubtful if contract work in factories is ever of 
 much benefit to the manufacturer. To be sure, it releases 
 him to a certain extent from supervising the work, but 
 he more than pays for this item in the contract price, as 
 the contractor is rarely satisfied unless he is making more 
 than a foreman. 
 
 To maintain that the contract system is of advantage 
 to the manufacturer is to admit that the contractor has 
 better executive ability and can manage men to better 
 advantage than the regular foreman or superintendent 
 can, an admission which few proprietors would care to 
 make. The most noticeable disadvantage in this system 
 is, that it prohibits a knowledge of the cost of different 
 operations being known. A certain price is paid for 
 doing a number of different things and to figure out just 
 what is paid for each is practically impossible, and with- 
 out an absolute knowledge of the cost of each operation 
 no concern is getting value received from its cost depart- 
 ment. 
 
 TIME 
 
 One of the best Time systems for taking care of the 
 time of employes in the factory is to have a timekeeper 
 in each department, whose duty it is to furnish a man 
 with a ticket each time a job is started, which shows the 
 name or number of the job, the time commenced and 
 when the ticket is turned in the time completed is noted 
 thereon. These tickets may 'be assorted daily as to job 
 numbers and after the cost of the jobs is figured they may 
 be rearranged by the timekeeping department and entered 
 
18 MANUFACTURING COSTS 
 
 on the time book. Machines may be purchased to do much 
 of the detail work in time keeping- and cost accounting, 
 and where the size of the plant or the volume of work 
 turned out makes it possible to use them, they are very 
 economical besides being absolutely accurate. 
 
 WORKMAN'5 NO. 
 
 NAME 
 
 JOB NO. 
 
 NAME 
 
 OPERATION 
 
 TIME STARTED 
 
 NO. PIECES 
 
 Tine FINISHED 
 
 PRICE PER PIECE 
 
 TIME WORKED 
 
 TOTAL 
 
 DATE 
 
 OK 
 
 FOR INDIVIDUAL JOB RECORD 
 
 CLASSIFICATION OF MATERIAL 
 
 Material for an article should only be drawn from 
 the stock room on a requisition properly signed by the 
 foreman, which gives the required information regarding 
 the transaction. These tickets should be taken to the 
 office daily and entered in the stock book, form 7. The 
 tickets may then be assorted according to the job num- 
 
AND SELLING COSTS 19 
 
 hers or articles to be charged, so that if it is necessary 
 to know the charges against a job the tickets may be 
 found all together. The stock book is merely a perpetual 
 inventory and once a month it is figured up and the 
 
 DELIVER TO 
 
 STOCKROOM T'lCttET 
 DATE. . _ _. 
 
 BEARER THE FOLLOWING MATERIAL 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 CHARGE TO 
 
 FOREMAN 
 
 RECEIVED 
 
 BY 
 
 
 
 
 FORM 6, FOR STOCK ROOM REQUISITION. 
 
 balance brought down, although balances may be brought 
 down more often if desired. 
 
 The clerk keeping this book should be required to 
 hand in monthly a classification of charges which shows 
 the various accounts to be charged for material drawn 
 and the amount of such charges. Form 8. A classifica- 
 tion of the time is made monthly by the timekeeper on 
 the same form and these forms may be placed in binders 
 
20 
 
 MANUFACTURING COSTS 
 
 UNIT 
 ARTICLE MINI HUN STOCK ACCOUNT 
 
 USED 
 
 CHARGE TO 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 VALUE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 UliNVno 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 DATE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 BALANCE 
 
 VALUE. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 > 
 t 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Et 
 
 *D ~Z- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 K 
 S 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 * 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 RECEIVED FROM 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 UJ 
 
 | 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Q V 
 
AND SELLING COSTS 
 
 21 
 
 CLASSIFICATION 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Cartage 
 
 
 
 
 
 
 
 
 
 
 
 
 
 .Mnnuf'g Expense, Factory 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Wood Shon 
 
 
 
 
 
 
 
 
 
 
 
 
 
 OHice Expense 
 
 
 
 
 
 
 
 
 
 
 
 
 
 rower Account. Fuel nnd Oil 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Operation 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Repairs 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 AmoiiDt Forwerd 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FORM 8, FOR MONTHLY CLASSIFICATION OF TIME. 
 
22 
 
 MANUFACTURING COSTS 
 
 and used as journals, which makes it unnecessary to 
 copy them into the regular journal. 
 
 ESTIMATE a COST SHEET UNH 
 ARTICLE DATE 
 
 r 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 TOTALS 
 
 ESTIMATES 
 
 In order to know positively whether or not a cost 
 on an article is as low as it should be, it is necessary to 
 refer to the estimated cost sheet. Each cost figured might 
 be lower than any of the preceding costs and still be too 
 high. Some goods afford a larger profit than others, but 
 this is no reason why the cost should not be accurately 
 known. 
 
 Guesswork has no place in the figuring of costs and 
 the estimate should never be used as a substitute for 
 them. It is auxiliary to the cost and while not of equal 
 
AND SELLING COSTS 23 
 
 importance perhaps, it yet serves as a check on costs 
 which are too high. In making up an estimate a blank 
 form should be used which has four or five columns. 
 These may be headed Material, Labor, Expense and Total 
 and if the item of expense needs to be considered in 
 classes, extra columns may be provided for that purpose. 
 
 As the first column is for material, the footing^ of this 
 column represents the cost of the material in the article 
 and the footings of the other columns show in turn just 
 'how much labor, manufacturing expense, etc., should go 
 into the cost. 
 
 To illustrate, take a low pressure cast iron boiler that 
 is used for heating houses. The steam dome, we will say, 
 weighs 300 pounds which, at a cost of one cent per pound, 
 gives three dollars ($3.00) to place in the first column. 
 This piece requires a certain number of chaplets, a certain 
 amount of core sand and core oil or compound. The 
 value of all these is entered under material. Possibly this 
 is all the material in this piece, so that the total shows 
 what should be figured for material. 
 
 Some founders charge the cost of core sand to 
 Foundry Manufacturing expense, rather than try to 
 figure the amount used on each casting or job, but to do 
 this is to charge indirectly a portion of the expense to 
 castings that require no cores which, of course, gives 
 misleading and inaccurate costs, too high on some cast- 
 ings, too low on others, although the average cost may be 
 the same. The labor of making the cores and the cost of 
 molding can be estimated and placed in the labor column 
 and a certain percentage of the labor cost or of the labor 
 plus material is computed and placed in the expense 
 column, while the total of the three columns for the dome 
 is placed in the fourth column under the head of Total. 
 
 This plan is followed on each part of the heater and 
 the total cost of each part gives a basis to figure what 
 
24 MANUFACTURING COSTS 
 
 repairs shall be sold for, and an estimate figured in this 
 way permits a thorough analysis of the cost to be made, 
 should it be necessary. The average weight of a section 
 may be found easily, but it is better to know what the 
 weight should be than to know only what it is: By com- 
 puting the cubic contents of a casting and adding a per- 
 centage for strain, an approximate weight may be found. 
 Some molders will make castings year after year from a 
 set of patterns and there will be little loss and only a 
 slight variation in weight. Put another man on the job 
 and the loss may be greater and the castings much 
 heavier, as he is not as good a workman and finds it 
 easier to file the core than to set his chaplets or arbor 
 correctly. It is not considered good practice to figure 
 that castings ought to weigh a certain amount and then 
 use these figures. Weights are better than estimates and 
 then call the matter to the attention of somebody respon- 
 sible if the castings are running heavy. 
 
 The cost clerk in making up an estimate should get 
 his labor costs from the foreman or superintendent, since 
 they are best fitted to furnish information of that kind. 
 There is often a similarity of operation which must be 
 considered to arrive at reasonable estimates and it is of 
 course up to the factory to keep its part of the cost within 
 the estimate. There may be instances where this cannot 
 be done, but if it is given proper attention there is little 
 chance for error. The subject of estimates is considered 
 by some to be a superfluous operation, a waste of time, 
 giving results misleading and inaccurate. I hold that on 
 the contrary the estimate as outlined herein is only 
 exceeded in usefulness by the cost itself and that it is a 
 check on the cost which can be secured in no other way. 
 
AND SELLING COSTS 
 
 25 
 
 TIME CARDS 
 
 The time card form is commonly used iu taking up 
 the time of employes. One is taken from a supply by 
 
 No, DATE 
 
 NAME 
 
 No, 
 
 OPERATION 
 
 H 
 
 M 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total 
 
 
 
 
 = 
 
 FORM FOR TIME CARD. 
 
 each man on going to his work in the morning and is 
 turned in by him at night filled out. 
 
 This permits the employe to keep his own time, which 
 is not a good plan, for the reason that he is apt to get 
 careless and inaccurate and again the time spent by him 
 in making out the cards could be spent to better advantage 
 if some other plan for taking a record of the time were 
 in use. 
 
26 
 
 MANUFACTURING COSTS 
 
 Another plan is to 
 through the factory daily 
 and record the time direct- 
 ly in the time book. This, 
 too, is inaccurate, as the 
 employe cannot always re- 
 member the jobs he was 
 working on the day before 
 arid if he does remember, 
 he cannot give the actual 
 amount of time spent on 
 each. Of course, where 
 time cards are used, the 
 time must be copied from 
 them to the time book and 
 the name of the workmen 
 and amount due has to be 
 copied into the pay roll 
 book. Some factories use 
 a combined pay roll and 
 time book form which 
 makes it necessary to write 
 the name of an employe 
 only at intervals of from 
 one to twelve times per 
 year and further provides 
 for a monthly classification 
 of the time, by having a 
 column for each account 
 which is to be charged. 
 
 have the timekeeper go 
 
AND SELLING COSTS 
 
 FORM FOR FOUNDRY TIME BOOK. 
 
28 MANUFACTURING COSTS 
 
 This is an excellent plan when it can be used, but in 
 the factory having a large number of accounts on the 
 general ledger, the book would have to be so large 
 that its other good points would be defeated by its cum- 
 bersomeness. It is not a difficult job to classify a month's 
 time in the average factory if it is gone about in the right 
 way. In truth, it is often a saving of time to handle the 
 time by means of separate books for timekeeping and pay 
 roll, instead of attempting to use a combined book for the 
 two, which necessarily wastes a great deal of paper and 
 usually much time. 
 
 COST OF MATERIAL 
 
 The cost of material for an article is the value of 
 whatever stock it takes to build it Less the value of the 
 waste or left-over pieces, providing this material has a 
 value. 
 
 The lumber used in a table might cost $3.00, but 
 owing to the peculiar shape of some of its parts there 
 might be left-over pieces which would be worth twenty- 
 five cents in the manufacture of other articles. The cost 
 of the lumber for that table is then $2.75 and it should be 
 figured at this rate so long as the scrap pieces represent 
 a value of twenty-five cents. In the manufacture of other 
 things it will sometimes be found that there is nothing 
 left over which can be used, but these cases are unusual 
 and the wise manufacturer will see that this question is 
 given proper attention by the cost department. 
 
AND SELLING COSTS 
 
 29 
 
 Expense 
 
 Office 
 
 Factory or 
 Manufacturing 
 
 General 
 
 f Cost department, purchas- 
 
 I ing department, and what- 
 
 j ever other labor and material 
 
 is required in the office 
 
 chargeable to manufacturing. 
 
 This expense may be con- 
 sidered under the heads of 
 the various departments, an 
 account being kept for each 
 as Wood Shop expense, 
 Foundry expense, and this is 
 borne by the production of 
 the department in which it is 
 incurred and not necessarily 
 by every article made. 
 
 f Items of expense such as 
 rent, heat, light, depreciation, 
 
 <( taxes, etc., a part of which 
 is to be apportioned to every 
 article manufactured. 
 
 CHART SHOWING THE DIVISIONS WHICH MAY BE MADE OF 
 EXPENSE INCIDENT TO THE MANUFACTURING OF AN 
 ARTICLE. SELLING EXPENSE IS NOT CONSIDERED, AS 
 IT IS AN EXPENSE TAKEN CARE OF SEPARATELY. 
 
 CLASSIFICATION OF OFFICE EXPENSE 
 
 The various expenses are chargeable with the cost 
 of operating the office. 
 
 Some clerks work on manufacturing work entirely. 
 Others are taking care of the sales and some devote a 
 3 
 
30 MANUFACTURING COSTS 
 
 portion of their time to each of these departments in turn. 
 The classification of office expense then should provide 
 for both of these and as many other accounts as are 
 thus affected. 
 
 The manufacturing cost should be kept in one account 
 and the selling expense distributed over the goods sold 
 and shipped and at inventory time the selling expense on 
 goods sold but not shipped, may properly be considered 
 an asset, as is also unexpired insurance and other matters 
 of that class. 
 
 Manufacturing expense may be termed the expenses 
 incident to the manufacture of goods and selling expense, 
 the expense incident to their sale. Up to the time goods 
 reach the shipping room they are subject to various man- 
 ufacturing expenses, but after this time the selling 
 expense is usually considered, although there is a differ- 
 ence of opinion as to where one ends and the other begins. 
 Goods in the shipping room are subject to expense, but 
 their value is not increased by them. Rent, insurance and 
 other things are an expense which must be taken care of, 
 but should not be added to the cost of the goods. 
 
 SYSTEM 
 
 ''System is order" and whatever forms or methods 
 are used to maintain this condition may be rightfully 
 called systematic and whatever tends to confusion, inac- 
 curacy or incompleteness is not deserving of the name 
 System. 
 
 The institution having the most elaborate records is 
 not necessarily the most systematic. Real System aids in 
 the transaction of business. It is not a hindrance as many 
 so-called systems are. Many houses are keeping two sets 
 of records where one could be made to do the work more 
 satisfactorily by a rearrangement of the forms. 
 
 A cost system should have just as few different forms 
 
.VXD SELLING COSTS 31 
 
 as will properly handle the matters under consideration 
 and the cost system should work in with the books of 
 the concern. In truth they should be merely auxiliary 
 books, which give in detail the information found in totals 
 in the ledger. Considered in another way, a cost sheet 
 is merely a transcript from the various books used in the 
 accounting department of a business. 
 
 COST BY LOTS 
 
 In this method of figuring costs a cost is figured on 
 the completeness of each lot which comes through the 
 factory. A certain quantity is ordered from the factory 
 and the material necessary to make it is drawn from the 
 stock room. 
 
 When the order has all been run through there will 
 usually be a few parts on hand which cannot be assem- 
 bled, owing to shortage of other pieces caused by break- 
 age, etc. An inventory of these is taken and when the 
 cost is figured their value is deducted from the total 
 charges shown by the ledger. The balance is the net cost 
 and having this it is easy to find the amount made. The 
 stock book furnishes that information and the cost per 
 unit is easily found. 
 
 By lettering the lots Lot A, Lot B, etc., it is possible 
 to start the second lot before the first is finished and still 
 keep the costs separate and if the work is kept moving 
 through the factory in the proper way there will be no 
 boxes, barrels or shop cars full of partly finished material 
 side tracked and possibly overlooked when an inventory 
 is taken. 
 
 The storeroom is the proper place to keep material 
 which is not being \vorked on and the fact that a quantity 
 of parts is on the shop floor should be evidence that a 
 shop order for the article of which it is a part has been 
 issued and that it should be kept moving. Men and 
 
32 
 
 MANUFACTURING COSTS 
 
 machines must be kept busy and parts kept in motion if 
 the result is to be something worth while in the way of 
 profit. The statement often made that "No system is so 
 good that it cannot be improved," is very true and though 
 the cost keeping is done by the cost clerk, he usually has 
 very little to say about it, his work being to take the 
 information given him and from it to figure out the costs. 
 The cost clerk can make suggestions, however, if he finds 
 that things are not going as they should and may co-oper- 
 ate with the executive force to the advantage of the latter, 
 if he is properly encouraged. 
 
 The various departments must work in harmony to 
 secure the best results. There are but few problems 
 which cannot be solved, few difficulties which cannot be 
 overcome by an organization working in the proper spirit. 
 No friction should be permitted between departments. 
 There may be friendly rivalry, but friction produces wear 
 and means loss. 
 
 f ( Labor Cartage. 
 
 Shipping \ Packing material, other than 
 t standard packages. 
 
 Sales Manager, Assistants and Salesmen and 
 their expenses. 
 
 Advertising. 
 
 Selling Expense \ p ar t o f Administration expense in some 
 cases. 
 
 Commissions. 
 Part of Postage account. 
 Part of Stationery account. 
 I Mileage books. 
 
 CHART SHOWING. SOME OF THE ITEMS WHICH MAKE UP 
 SELLING EXPENSE. THE TOTAL OF THIS EXPENSE 
 ACCOUNT IS TO BE CHARGED PERIODICALLY TO SALES 
 ACCOUNT. 
 
AND SELLING COSTS 33 
 
 
 RO 
 
 JTE FOR THIS WEEK 
 
 COMMENCING MONDAY 
 
 
 nONOAV 
 
 CARE 
 
 
 TUE50AV 
 
 1C 
 
 
 WEDNESDAY 
 
 . . iV 
 
 
 THURSDAY 
 
 U 
 
 
 FRIDAY 
 
 IV 
 
 
 SATURDAY 
 
 U 
 li 
 
 
 SUN DAY 
 
 
 LEAVE. ONE OF 
 
 THESE 
 
 EVERY SATURDAY 
 
 FORM FOR SALESMEN TO MAIL WEEKLY TO SALES 
 DEPARTMENT. 
 
 Chart showing some of the items which make up 
 selling expenses. The total of this expense account is to 
 be charged periodically to sales account. 
 
 SOME ITEMS OF INDIRECT LABOR EXPENSE 
 Expenses incident to the receipt and distribution of 
 material should be charged to the material delivered to 
 the factory on requisitions. A common way is to appor- 
 tion this expense over the material delivered, by adding 
 a certain percentage to the cost of the material to take 
 care of this expense. 
 
 WATCHMAN. This item of expense is properly 
 chargeable to general expense or that expense of which 
 each article made takes its proper share. 
 
 SPECIAL POLICE. ^The superintendent, engineer, 
 firemen, oilers, electrician, gate tenders and timekeepers 
 as well as many others all come under this head. The 
 rule is that whatever item of labor or material which 
 enters indirectly into an article or which benefits the 
 whole plant, is to be charged to an account usually called 
 
34 MANUFACTURING COSTS 
 
 General Expense and from there distributed to the vari- 
 ous departments and Stock in Process account. 
 
 A foreman's time is a charge only against the work 
 done in his department. It is not a general .expense. If 
 each department has a sweeper his time should be 
 charged the same as that of the foreman and all the 
 indirect labor and material used in a department increases 
 the cost of the articles produced in that department and 
 in no other. General Expense then is an expense which 
 must be borne by each part of the plant in proportion to, 
 the benefits received, the space occupied or on some other 
 basis of distribution, while Machine Shop expense goes 
 no further than the machine shop. 
 
 Pattern, Tool, Machine or Repair Order. 
 
 Order No. 6997 
 
 [Foreman _ 190 
 
 Rep.acement ' 
 
 Make 
 
 IMPORTANT. 
 
 All labor and material 
 used on this order must be 
 charged to t h e ORDER 
 NUMBER. 
 
 All-tabor ant- -material 
 must be itemized on the 
 back of this order, and 
 must agree with items 
 charged to this number on 
 time books, stock reports, 
 and Invoices. 
 
 Return this order to the 
 superintendent whe the 
 work is completed. 
 
 ICh.rge .T.ryihi 
 number, not (o the , 
 
 tbe order 
 ! ol the job. 
 
 Charge- 
 
 Supt. 
 
 Order Completed 
 
 Foreman 
 
 190 
 
 Correct Supt. 
 
 EXPERIMENTAL WORK,- DESIGNING, ETC. 
 
 The charges for experimental work in a factory are 
 not always easy to apportion correctly. In some cases 
 it is all loss and in others something is added to the assets. 
 Because the designing department is located in the pat- 
 
AND SELLING COSTS 
 
 35 
 
 Report of Labor and Material Used on this Order. 
 
 DATE 
 
 NAME OF WORKMAN AND 
 DESCRIPTION OF MATERIAL 
 
 NO. OF 
 
 HOURS 
 
 RATK 
 PEN 
 
 HOUK 
 
 TOT A I, 
 I.AtOK OR 
 MATERIAL 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 . 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 TOTAL COST 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 SHOWING BACK OF FORM 15. 
 
36 MANUFACTURING COSTS 
 
 tern room is no reason why the pattern room should have 
 the expense of its maintenance. 
 
 It is a good plan to issue special orders for that work 
 and when it is completed charge the amount it has cost 
 to the accounts that should stand the expense. If a special 
 jig is designed for a machine of which thousands are to 
 be made, the disposition of the charge will be entirely 
 different from when the tool is required only on a special 
 order. A manufacturer must get the cost of special tools, 
 drafting, designing, etc., out of the goods made on the 
 first order or he will NEVER get it. If this work is 
 required for articles regularly made, the handling is 
 entirely different. 
 
 Some manufacturers charge the cost of this work to 
 the Stock in Process account of the article -it is for and 
 when it shows up in the cost, make allowance. for it ; that 
 is, figure what the cost would be without it. 
 
 PATTERNS 
 
 As a rule patterns are assets and should be treated 
 as such. Thus, the patterns required for an article to be 
 manufactured would be charged to the pattern account 
 of that article. 
 
 The charges are thus where they will not confuse 
 anybody in figuring costs and confusion might easily hap- 
 pen if the patterns were carried in the Manufacturing or 
 Stock in Process account of the article. Repairs or replace- 
 ments are proper charges to expense accounts and these 
 repairs or replacements should, as a rule, maintain the 
 actual or insurable value, so that little or no depreciation 
 will have to be charged off from the pattern accounts. In 
 case a pattern becomes out of date and is no longer to be 
 used, it should be charged off the books, as it has ceased 
 to be an asset. If the manufacture of an article should be 
 discontinued, there would be no further use for the tools, 
 
AND SELLING COSTS 
 
 patterns, etc., and either all or part of their value should 
 be charged off, the amount depending in every case on the 
 circumstances surrounding each transaction. If the article 
 is never to be made again and it is not desired or is not 
 possible to sell the patterns, they should be "scrapped" 
 and whatever they are worth as old material is all the 
 
 PATTERN 
 
 NAME 
 
 RECORD 
 
 NO. I NO. PCS. 
 
 NO. CORE 
 BOXE.S 
 
 NO. CARDS 
 
 COST U || 
 
 REMARKS 
 
 
 
 
 
 DAT E 
 
 
 S5 t IN 1 1 U 
 
 
 V I f\ 
 
 i OAT E 
 
 - 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 value they represent and the balance should be charged 
 off. There is nothing made by declaring dividends on 
 material of this kind, which is really what it amounts to, 
 if the proper disposition is not made. There will, of 
 course, be some patterns which cannot be treated in the 
 way mentioned. For instance, a pattern of a jig is made 
 for some special work, which will never be needed again.' 
 
38 MANUFACTURING COSTS 
 
 In such case the 'whole cost should be charged to the job. 
 In bidding on work which requires special tools or 
 patterns, their cost must be included in the price quoted, 
 either as a separate charge or included in the lump sum 
 price or price per unit. It makes little difference how it 
 is done, so long as it IS done. In making patterns the 
 expense or burden is not so great as in many other parts 
 of the factory, and this should be taken into consideration 
 when making up the basis of apportionment. The pattern 
 expense rarely includes any item of material, since prac- 
 tically every nail and screw can be charged directly to the 
 job on which it is used and not as expense to be appor- 
 tioned over the entire product of the room. It is, there- 
 fore, advisable to have an account for pattern room 
 expense, which will of course be charged with its proper 
 share of Heat, Power, etc., but which will not have to 
 bear any of the material expense of other departments. 
 The head pattern maker, except in larger shops, can divide 
 his time among the different jobs better, as a rule, than 
 the cost keeper can, by charging it all to expense and 
 afterwards distributing it over the various orders. This 
 must be determined by each manufacturer for himself, 
 as no absolute rule can be made. 
 
 NAME OF ACCOUNT 
 Debit Credit 
 
 STORES ACCOUNT 
 
 Debit for all material re- 
 ceived which is to enter into 
 manufactured stock later. 
 
 Credit for value of what- 
 ever drawn from stock room 
 at cost plus expense of han- 
 
 dling. 
 LABOR 
 
 Charge for all wages paid 
 
 ,to employes. 
 
 Credit as charged to the 
 different expense and stock in 
 process accounts. 
 
AND SELLING COSTS 
 
 39 
 
 Charge for total amount 
 delivered to stock room at es- 
 timated cost price. 
 
 For cost of returned goods. 
 
 MERCHANDISE 
 
 Credit for sales at esti- 
 mated cost price. 
 
 SALES 
 
 Charge for merchandise 
 sold at cost prices. 
 
 For selling expenses 
 For credits. 
 
 Credit amount of sales as 
 shown by sales journal. 
 
 STOCK IN PROCESS ACCOUNTS 
 
 Charge for material frm 
 stock room, labor from labor 
 account and expense from each 
 of the various expense ac- 
 counts. 
 
 Credit value of goods 
 made and delivered to stock 
 room at estimated cost prices. 
 
 EXPENSE ACCOUNTS 
 
 Charge for labor and ma- 
 terial constituting expenses. 
 
 Credit as apportioned to 
 stock in process accounts or 
 otherwise disposed of. 
 
 The accompanying diagram shows how one factory 
 handles the various accounts relating to its costs. 
 
 The balance of stores account shows the value of all 
 stock remaining in the stock room. This information is 
 given in detail on the stock book (Form 7). As mer- 
 chandise is charged and credited at cost prices, the balance 
 of this account shows the value of merchandise on hand 
 and the detailed information is given on the stock 
 book. Sales account is handled in a way which 
 permits the balance to be considered as the net profits 
 
40 
 
 MANUFACTURING COSTS 
 
 niNiMun 
 
 UNIT 
 C05T PF 
 
 
 NAMF 
 
 UCE 
 
 DATE 
 
 NO.nADE 
 
 VALUE 
 
 BALANCE. 
 
 DATE 
 
 N0.5HIPPED 
 
 VALUE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FORM 17. 
 
AND SELLING COSTS 41 
 
 insofar as they can be shown without consulting the 
 expense and profit and loss accounts. The balance on any 
 stock in process account is assumed to be equaled by the 
 value of the material coming through the factory until 
 an inventory is taken at the close of a lot and the small 
 difference then found is placed in adjustment account. 
 
 Of course, the expense accounts are many for this 
 particular factory and all are closed monthly and charged 
 to the various stock in process accounts and to whatever 
 other accounts are affected. It is not necessary to do this 
 in every factory, as a cost can be figured by taking the 
 material and labor charges and adding the proper expense, 
 but as a rule a monthly distribution of expense to the va- 
 rious accounts is more desirable, although requiring more 
 work. The form (18) shown herewith illustrates how the 
 net profit or loss of a branch house may be determined 
 monthly and has to do with selling expense, only the 
 material being billed to the branch at certain prices which, 
 although not representing actual costs to the home office, 
 represent the amount the branch is supposed to pay for 
 them. 
 
 Manufacturing cost as a rule goes no further than 
 the shipping room. Whatever expense is incurred in 
 marketing an article must be added to the manufacturing- 
 cost as a selling expense, in effect at least. 
 
 If a concern has a representative who handles their 
 material in a certain section of the country, it is evident 
 that a large part of the selling expense is eliminated from 
 this transaction, and they can generally make a much 
 lower price to their representative than to a customer 
 called on by their own salesmen and at no sacrifice of 
 profits. Where a salesman sells on commission there is 
 
42 
 
 MANUFACTURING COSTS 
 
 fl 
 
 ! 
 
 li i i * * i i I * ! 
 I II I } I * If 1 I f 
 
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AND SELLING COSTS 
 
 43 
 
 no guess work as to his selling expense. It is a known 
 quantity. True, where a salesman is working on a salary 
 basis there is no guesswork about it, but nevertheless it 
 is a variable quantity. It may therefore be considered 
 good business practice to tabulate the results and show 
 
 NAME OF SALESMAN 
 
 MONTH 
 
 NET SALES 
 
 PROFITS 
 
 EXPENSES 
 
 C05T OF SELLING 
 
 JANUARY 
 
 
 
 
 
 
 
 THIS 
 
 ^fEAR 
 
 LAST 
 
 YEA* 
 
 FEBRUARY 
 
 
 
 
 
 
 
 
 
 MARCH 
 
 
 
 
 
 
 
 
 
 APRIL 
 
 
 
 
 
 
 
 
 
 MAY 
 
 
 
 
 
 
 
 
 
 JUNE 
 
 
 
 
 
 
 
 
 
 JULY 
 
 
 
 
 
 
 
 
 
 AUGUST 
 
 
 
 
 
 
 
 
 
 SEPT. 
 
 
 
 
 
 
 
 
 
 OCT. 
 
 
 
 
 
 
 
 
 
 NOV 
 
 
 
 
 
 
 
 
 
 DEC. 
 
 
 
 
 
 
 
 
 
 TOTAL AND 
 AVERAGE 
 
 
 
 
 
 
 
 
 
 LAST YEAR 
 
 
 
 
 
 
 
 
 
 FORM FOR SALESMAN S REPORT. 
 
 just what salesmen are profitable and what are not. 
 This will result in very interesting statistics, resulting 
 usually in showing that it is not the cheap man who is 
 getting the best results. The amount of money spent by 
 a salesman is not the only thing to be considered. Take 
 his net sales for a given period and find out what his 
 selling expense is in percentage. This is the important 
 
44 
 
 MANUFACTURING COSTS 
 
 SALESn 
 
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 POST AGP & T. 6ft^wH 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 TO TAUS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 REMARKS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FORM FOR SALESMAN'S WEEKLY EXPENSE REPORT. 
 
AND SELLING COSTS 
 
 45 
 
 thing to consider, although where available the net profits 
 mav be considered as well. 
 
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46 MANUFACTURING COSTS 
 
 SALESMEN'S ACCOUNTS 
 
 In the majority of cases it is a good plan to open a 
 ledger account with each salesman, charging him with 
 the amount advanced him for expenses and crediting him 
 for his expenditures as they are O. K.'d by the sales 
 department. Form 20 is a suggestion for an expense 
 report which gives in detail the required information, a 
 common form which may be changed as required, in 
 fact some houses only require a report of this kind 
 monthly. 
 
 It is a common practice to advance a salesman a 
 certain amount when he starts on his first trip, the amount 
 being determined of course by the circumstances in the 
 case, and as soon as an expense report is received and 
 checked up the amount of it is sent to him. It is quite 
 essential that these reports be sent in promptly at the 
 close of the month, for they are chargeable to selling- 
 expense and without them it is of course impossible to 
 arrive at the exact cost of selling for a month. 
 
 SHOP ORDERS 
 
 No lot of goods should be started in the factory until 
 the proper production order has been issued, and this 
 applies to special work tools and jigs as well. Emergency 
 work is an exception to this rule, but such cases are not 
 of frequent occurrence, and Form 22 gives the informa- 
 tion usually required on it. The superintendent may issue 
 auxiliary orders to the foremen or may simply tell them 
 what to do. The size of the business determines that, and 
 the foremen in turn pass the instruction along to the 
 workmen. On completion the orders are returned to the 
 
AND SELLING COSTS 
 
 47 
 
 DAT E 
 
 MAKE 
 
 19O 
 
 o ROER NO. ___ 
 
 SUPT 
 
 DELIVER TO 
 
 CHARGE TIME AND MATERIAL TO- 
 
 TO 
 
 SUPT. 
 
 FORM 22. 
 
48 
 
 MANUFACTURING COSTS 
 
 superintendent, who O. K.'s them and sends them to the 
 main office. 
 
 If the order is for a pattern, new tool or for repairs, it 
 may be given on the special order blank shown by Figures 
 14 and 15, but the principle is the same. On all orders ior 
 stock to be manufactured, a report should be made daily 
 of all finished material sent to the store room and this 
 information is noted daily on the shop orders in the super- 
 intendent's office. This report may be on a properly pre- 
 pared sheet which can be sent to the office to be copied 
 into the stock book daily, and where this is done it is 
 essential that the person receiving the goods sign the 
 report, showing that the material has been delivered. 
 
 DATE 
 
 ARTICLES SENT TO SHIPPING ROOM 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 DELIVERED BY 
 
 
 
 SIGNED 5HIPPIN6CLERK 
 
 FORM 23. 
 
 It is a good plan to use tickets "similar to Form 23, 
 printed in triplicate and require one of these to be sent 
 with each lot of finished goods sent to the store room. 
 One is retained by the person making the delivery and 
 
AND SELLING COSTS 
 
 49 
 
 one goes to the office. Of course the order department 
 should be the source of all orders, and another fact 
 equally important is, that no order should be started in 
 the factory until all the material is on hand or in sight 
 for it. Having to set up machines the second or third 
 time to finish a lot of parts naturally increases the cost. 
 
 INDEXING ORDERS 
 
 For indexing orders a book called the Order Register 
 is used. The accompanying form gives the information 
 
 REGISTER 
 
 OER CU5T. NO. 
 
 FORM 24. 
 
 usually found on this book, and for convenience in looking 
 up an order number these books may be printed with fifty 
 lines on a page, one for each order, and may be numbered 
 by the printer. Two pages will then bear the same num- 
 ber at the top and each two pages be numbered from one 
 to one hundred inclusive. 
 
 To look up an order, say number 4012, open the book 
 
50 MANUFACTURING COSTS 
 
 to page 40 and number 12 will be the order required. In 
 other words, the page number is the first part of the 
 number and the numbering in the lines completes it. 
 This book is supplemented in many houses by an order 
 index ; either cards or a book may be used for the purpose, 
 in which a certain space is allotted for each customer and 
 all the order numbers for him entered in this space. This 
 facilitates looking up an order if the number is not known, 
 as all the numbers allotted to a customer are in the proper 
 place and may be readily found. 
 
 STOCK ROOM 
 
 Theoretically, at least, all material should be charged 
 to the stock room on arrival and from this point be dis- 
 tributed on requisition as required. Everything in the 
 stock room is an asset, and when an article is charged out 
 it merely passes into another account, where it may still 
 be an asset or an expense. 
 
 Those items which are charged to expense accounts, 
 such as cotton waste, etc., should be drawn in limited 
 quantities for two reasons. In order that one month's 
 production shall stand only its proper share of expense as, 
 if a large amount of waste is drawn for use in the machine 
 shop its cost is charged to the production of the machine 
 shop for the month in which it is drawn, although possibly 
 a good share of it might be used in subsequent months. 
 Where the supplies of this nature are drawn in limited 
 quantities, the workmen will be more careful than if they 
 are allowed to help themselves at will from a full bin. 
 Material purchased for office use should be treated in the 
 same way. A dozen boxes of carbon paper may be pur- 
 chased which will last perhaps several months, and it is, 
 
AND SELLING COSTS 
 
 51 
 
 of course, irregular to make any one month stand the 
 whole expense. It makes little difference what the articles 
 are, until used they are assets and should be considered 
 as such. 
 
 Sometimes a separate stock room is used for office 
 supplies and it is not suggested that in all cases an order 
 be given every time a pen or pencil is required. The point 
 is to charge up in any month only what is used in that 
 month and this applies particularly to that class of material 
 entering into the expense accounts. It is often advisable 
 to purchase in excess of immediate requirements. This 
 plan has advantages, such as lower prices, fewer invoices 
 to credit, etc., and if the proper disposition of the article 
 is made on receipt, one month's selling or manufacturing 
 expense will not be inflated to the gain of the succeeding 
 months. 
 
 FORM 25. 
 
 REPORTS 
 
 There are some reports of so confidential or private 
 a nature that it is advisable to keep them from all except 
 
52 
 
 MANUFACTURING COSTS 
 
 the one who makes them out and the manager. Where 
 printed forms are used for this purpose anybody who sees 
 them can absorb all the information they contain, and 
 to avoid this the following plan was devised. (See 
 Form 25.) 
 
 The record cards secured were merely the ruled 
 stock cards, and on one of these was written a kev as 
 
 DAILY CASH REPORT ^ <> 7 
 
 BALANCE 
 
 /25 
 
 oo 
 
 
 
 RECEIPTS 
 
 *% / 
 
 3-0 
 
 
 
 TOTAL 
 
 6fcofc 
 
 2,0 
 
 
 
 
 
 
 
 
 DISBURSEMENTS 
 
 33V 
 
 00 
 
 
 
 BALANCE 
 
 (=^y^ 
 
 io 
 
 
 
 
 
 
 
 
 ACCOUNTING 
 
 
 
 
 
 
 
 
 
 
 CASH IN BANK 
 
 
 
 6000 
 
 t 
 
 CASH ON HAND BILLS 
 
 
 
 2oo 
 
 00 
 
 GOLD 
 
 
 
 
 
 06 
 
 SILVER 
 
 
 
 72 
 
 7o 
 
 
 
 
 (,271; 
 
 10 
 
 BANK DER TODAY 
 
 
 
 
 
 BILLS REC. 
 
 
 
 
 
 BILLS PAY 
 
 
 
 
 
 FORM FOR DAILY CASH REPORT. 
 
 shown on the top card. The spaces for the date and 
 amounts were cut away as shown, and when it was neces- 
 sary to write up one of these reports, this key was placed 
 
AND SELLING COSTS 
 
 over one of the blank cards and the proper figures entered. 
 After the key is removed the figures are absolutely mean- 
 
 
 
 
 GOODS RETURNED. 
 
 SYRACUSE WORKS. 
 
 
 
 
 
 
 90 
 
 
 
 
 Dei 
 
 t 
 
 
 
 
 
 
 
 
 
 
 ^"?" 
 
 D C.,PT,OH 
 
 ,,-c. 
 
 
 
 IT 
 
 own 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Was M.lcri 
 RccM In <j(K 
 
 ll 
 
 t 
 
 
 
 
 
 
 Received. 
 
 ion Ry 
 
 
 No_ 
 
 
 
 
 F-rt . or H> 
 
 p. Date Credited 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FORM FOR RETURNED GOODS. 
 
 ingless to anyone who does not possess a key. These 
 records may be used for sales reports, cash reports, etc., 
 and will be found satisfactory. 
 
">4 MANUFACTURING COSTS 
 
 RETURNED GOODS, DEFECTIVE AND 
 OTHERWISE 
 
 When goods are sold the quantity is noted on the 
 stock book, perpetual inventory or whatever you choose 
 to call it and is deducted from the balance on hand. It 
 therefore follows that where goods are returned which 
 are to ^ placed in stock again, the amount received must 
 be added to the balance on hand. 
 
 Since the credits to the stock in process accounts are 
 made from these sheets, it will be necessary to handle 
 the recording of returned goods in a way to avoid con- 
 fusion. Returned goods must not be credited again to 
 the stock in process account of the article, yet they must 
 be considered as being in stock. The proper entries for 
 matters of this kind are: 
 
 Chg. Mdse Cost value of goods 
 
 Sales Acct. Difference between cost and amount 
 
 credited. 
 Credit Customer Amount allowed 
 
 and make the entries on the stock book in red ink. This 
 will indicate that the figures represent returned goods, 
 and when figuring the production at the end of the month 
 the necessary deduction may be made in order to find the 
 quantity actually manufactured. 
 
 If the goods returned are defective, a somewhat 
 different handling of the matter is required. Merchandise 
 cannot be charged since the goods do not go back into 
 stock, and sales account should not be charged with any 
 more than the profit originally figured on the transaction. 
 If there is any salvage the stock in process account of the 
 article should be charged with the parts saved at cost 
 prices and the balance goes into profit and loss account, 
 although it may be advisable in some cases to open a 
 
AND SELLING COSTS 55 
 
 special account for matters of this kind, which will enable 
 the management to know just how much of this business 
 is occurring. 
 
 Suppose a cast iron radiator Is returned to the 
 manufacturer. He finds on examining it that all the 
 sections are broken. His entries would be 
 
 Debit. Credit. 
 
 Iron Account. For value of old Customer for 
 
 metal as scrap. amount allowed. 
 
 Sales Account. For profit figured 
 
 on transaction. 
 Profit .and Loss or 
 
 Special Account. For balance. 
 
 Instances have come under my observation of foun- 
 dries charging returned castings to sales account and then 
 wondering at the close of the year why iron account 
 showed a credit and why sales account showed much less 
 profit than it should show. Matters of defects may be 
 traced back to the workmen in many instances, yet having 
 done this it is seldom that he can be made to pay for the 
 damage or any part of it. If the transportation company 
 is at fault, a claim may be entered and when paid should 
 be credited to the profit and loss account if this account 
 was charged when the goods were received. 
 
 To keep the records of a manufacturing concern 
 correctly requires in addition to a technical knowledge 
 the faculty of reasoning, yet there will probably always 
 be a class who will persist in doing a thing in a certain 
 way because it has always been done that way by some- 
 body else, and these same men resent suggestions as to 
 improved methods because they are afraid that the person 
 offering them has his eyes on their job. When making 
 suggestions to a department head or manager it is always 
 a good plan to make them in writing. Then if he is busy 
 at the time he receives them, the matter can be laid aside 
 
56 
 
 MANUFACTURING COSTS 
 
 until he has the time to give it the consideration it 
 deserves. 
 
 PERPETUAL INVENTORY 
 
 One of the best things in an office system is the 
 perpetual inventory. The accompanying form gives the 
 essential information required in a record of this kind, 
 
 NAME 
 
 UNIT 
 
 DATE 
 
 AMTRECQ VALUE 
 
 BALANCE 
 
 QUANTITY VAUUE 
 
 DATE 
 
 f SOLD 
 
 '(OR USED 
 
 VALUE 
 
 although the form may be changed or combined with 
 other records as in the stock book, Form 17, from which 
 stock manufactured and sold may be determined. 
 
 Whether the records are to be on cards or loose leaf 
 books must be decided bv each man for himself, but 
 
AND SELLING COSTS 57 
 
 about the value of the record there can be no question. 
 These forms may be used for manufactured stock on 
 hand and for material in the stock room, although they 
 are not con fined exclusively to these two lines. 
 
 CHANGING OF PRICES 
 
 Changes in prices, which are by no means infrequent, 
 require that this subject be given attention by every 
 manufacturer. For much of the material purchased it is 
 possible to make 1 contracts for the season's requirements. 
 This method merely names the figure which has to be 
 paid for that article during the life of the agreement. 
 
 No matter what is to be paid for material, estimates 
 for future work should always be based on the market 
 price at the time the estimate is made. When figuring 
 on a job a manufacturer might find that by reason of his 
 foresight in contracting for material he could safely figure 
 below the market price, yet it would not be policy to do 
 this without an absolute knowledge of the facts, from 
 which he could determine what part of the saving he 
 could afford to give the customer. Some bidders might 
 not have protected themselves against a raise in prices 
 and of course they are at a disadvantage. In matters of 
 that kind a good plan would be to consider all the facts 
 bearing on the subject and quote according to the peculiar 
 circumstances of each transaction. 
 
 A manufacturer may find that he has in stock certain 
 articles on which the market is lower than when thev 
 were purchased, and as soon as a fact of this kind is 
 brought to light, the difference should be charged off. 
 This difference is a loss and if it is charged immediately to 
 the Profit and Loss account it is disposed of for all time, 
 but if not, it will result in increased costs on every article 
 using it. The ultimate result is the same in dollars and 
 cents, and in some factories it might not be advisable to 
 
58 MANUFACTURING COSTS 
 
 follow this plan except on occasional articles, yet at the 
 time of taking inventory nothing should be valued higher 
 than the prevailing market prices. 
 
 Dividends declared on fictitious values have to come 
 out sometime and somewhere, and besides this the modern 
 business man wants to get right down to bed rock and 
 wants to know where he stands. 
 
 CONTINUOUS PROCESS FACTORIES 
 
 There is one class of factories, "Continuous Process 
 Factories," on which it is comparatively easy to figure 
 costs. In a factory making paper, for instance, the 
 expense is easily apportioned over the product and the 
 expenses are as easily determined. 
 
 As a rule these factories or mills do not have the 
 multiplicity of expense accounts which a hardware factory 
 requires, neither do they have to purchase such a variety 
 of stock -or material, and these two factors are instru- 
 mental in enabling their proprietors to arrive at correct 
 costs without an elaborate system or great expense. The 
 factory making but one article in one size has a much 
 simpler proposition than one making hundreds of articles. 
 In the first case, all the expense is borne by one article, 
 but as soon as another article is added a subdivision of 
 expense becomes necessary and it is here that the subject 
 of costs requires the most attention. 
 
 RECEIVING DEPARTMENT 
 
 The receiving department of a business is usually in 
 charge of the shipping department, which turns the 
 material over to the stock room, or it may be in charge 
 of the stock room direct. In either case a record of 
 material received must be kept, which will show all the 
 necessary information, and the usual practice seems to be 
 
AND SELLING COSTS 
 
 59 
 
 to ente/ the material received in a receiving book and 
 from that book check the invoices. 
 
 In a moderately large factory this takes a great deal 
 of time. There is a great number of articles coming in 
 
 
 ReceiviNc, RECORD 
 
 DATE 
 
 o 
 p 
 
 NAM 6 
 
 
 WILU SHiPuS BY 
 
 THE FOLLOWING ARTICLES 
 
 Rece.veo *. PRO.NO. CHGS. 
 
 CAR NO PLACED STARTED FINISHED 
 
 COOIMTBO o INVOICE SENT 
 WEIGHED BY CHECKED BY TO OFFICE 
 
 
 daily and the following plan will do away with nearly all 
 of the copying and will, as a consequence, cut down the 
 expense of operating this department. 
 
 The receiving record (Form 29) is made when the 
 order is placed. In fact, it is made out with the order 
 and is simply a third copy of it, the first being the order 
 which goes to the concern from which the material 
 
 is 
 
<><) MANUFACTURING COSTS 
 
 purchased, the second being the record kept in the office 
 and the third constituting the receiving record which goes 
 to the receiving department. It is necessary to have these 
 records of uniform size and to have the arrangement such 
 that will insure the information being copied in the correct 
 spaces, and in addition the serial number will be similar 
 on all three sheets. A binder should be provided in which 
 these sheets may be placed where the material is received 
 and the arrangement, whether by order number or by 
 date received, may be determined by the user. Up to the 
 time the material is received these sheets may be kept in 
 a file arranged alphabetically. 
 
 The advantages of this system are so evident that an 
 extended discussion is not necessary, and although it may 
 not be possible to adopt it in its entirety, it is possible to 
 so arrange the form that they may be used in any business. 
 Of course, where a shipment is not made complete at one 
 time, a record of what is not shipped will have to be 
 made, but the instances where this is necessary will be 
 rare if judgment is used in issuing the orders. The car 
 record book (Form 30) is quite necessary where the 
 receipts in this way are large, as it enables the shipping 
 clerk or receiving clerk to keep after the cartmen and not 
 allow demurrage to accumulate unnecessarily and in addi- 
 tion furnishes a complete record of all cars received, date 
 unloaded, etc., which are valuable in checking bills for 
 demurrage should there be any. Invoices may be secured 
 in duplicate. The duplicate may be without prices, if 
 desired for the use of the receiving department, which 
 enables that department to check them up without know- 
 ing the prices and permits a copy to be kept in the office 
 at all times. To be sure, prompt action is necessary in 
 every department of a factory if the costs and other 
 
AND SELLING COSTS 1 
 
 records are to be of the greatest value and this is particu- 
 larly true of the receiving department. 
 
 Invoice's for material received must be checked up 
 and sent to the office daily, in order that all the invoices 
 
 Car Record Book 
 
 Date 
 
 Received 
 
 Initials dnd 
 Car NO 
 
 Loaded with 
 
 Placed 
 
 Started 
 
 r mithed 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FORM 30, FOR CAR RECORD BOOK. 
 
 for material received may be credited on the first of the 
 month for the preceding month's business. This will 
 provide for a correct accounts-payable record, which will 
 help in arriving at a correct balance sheet. 
 
 It may be urged in contrary to the foregoing state- 
 ment that it makes no difference whether an invoice is 
 credited promptly or not as if it is not credited it is not 
 charged to the stock room and consequently one offsets 
 the other ; but material received the latter part of a month 
 may be drawn out immediately and charged to a stock in 
 process account, in which case the stock room will be 
 credited for something for which it has not been charged. 
 5 
 
62 MANUFACTURING COSTS 
 
 Aside from this there is a correct way to do things, which 
 is just as easy as the incorrect, slip-shod method when 
 once the habit of doing correctly has been established 
 and where things are done correctly no allowances need 
 be made or anything taken into consideration when a 
 record is being looked over. It will be correct. 
 
 BASIS OF APPORTIONMENT 
 No absolute rule can be given for the basis of appor- 
 tionment. Conditions vary so much that what would be 
 proper for one concern would be entirely wrong for 
 another. The more common methods are to base the 
 apportionment on one of the following : 
 
 Production Labor 
 
 Productive Hour 
 
 Space Occupied 
 
 Material and Labor 
 
 Output of machines or price per hour for use of machines 
 
 .In some cases two or more of these items are com- 
 bined. A popular method is to figure the apportionment 
 of manufacturing expense on the production labor, since 
 material is subject to no expense beyond that of receiving, 
 storing and disbursing and this expense may be charged 
 as it leaves the stock room. To be sure, a part of this 
 expense belongs to the stock left in the room, but the 
 value of this does not change except as the market changes 
 and to add a percentage of expense to this cost is to 
 fictitiously increase assets. 
 
 All articles manufactured should be subject to a 
 certain amount of the general expense; for instance, of 
 the cost of the rent, heat and light items, although they 
 do not require power or the use of any machinery in their 
 manufacture. Take on the one hand a list of goods made 
 by a factory and the knowledge of what expense is 
 incurred by them, a portion of which they should stand, 
 and on the other hand a statement of the various items 
 
AND SELLING COSTS 63 
 
 of expense, and it will be found that there are some 
 articles which should bear a part of each expense item 
 and others will be subject to expense from only a few. 
 In this way correct conclusions may be reached. It would 
 not be correct in every case to apportion the expense in 
 proportion to the amount of direct labor, while in other 
 cases it might be entirely proper. 
 
 Each instance has its peculiar circumstances which 
 must be given proper consideration in the distribution of 
 expense, since on this depends correct costs and on correct 
 costs depends in nearly every case the success of the 
 business. Knowledge is required, not guess work or 
 supposition. There is not a producing concern in exist- 
 ence which can afford to neglect this vital part of their 
 business. The sale of goods for a profit is the aim of all 
 and to grope in the dark for want of proper costs is sure 
 to invite disaster. With the manufacturing cost and the 
 selling expense known, nothing need be taken for granted. 
 
 If it is necessary to take certain orders at a specified 
 price or lose them, a reference to the cost book is all that 
 is necessary. It may be advisable to take orders in some 
 cases at a figure close to the cost, possibly a shade under 
 the cost in order to keep the force intact, and with the 
 cost as a known factor the element of chance is eliminated 
 from the transaction. The correct result is known in 
 advance. Each shipment should bring an amount over 
 the cost large enough to be noticed and if a large part of 
 the shipments cannot be made to do this, it is better to 
 close down and quit while it is possible to save a part of 
 the investment. 
 
 There are some manufacturers who wish to know the 
 cost but do not want their cost clerk to know it, so they 
 have the cost clerk turn in the material and labor charges 
 and add the manufacturing expense themselves. There 
 are others who have their cost clerks add so much ex- 
 
64 MANUFACTURING COSTS 
 
 pense that all profit is apparently absorbed. These show 
 the methods some men will take to keep their cost men in 
 the dark and these methods are not desirable and are not 
 generally used. 
 
 RUSH ORDERS 
 
 There are instances where certain orders must be 
 rushed out in preference to others, orders which are of 
 such a nature that they admit of no delay and to properly 
 designate them the following is suggested : 
 
 Have colored slips on which are printed the necessary 
 instructions pertaining to the business. These may be 
 gummed on one end and attached to the shop order for 
 the material. The superintendent then knows the neces- 
 sity of keeping after that order. The colored slips 
 attached call attention to the urgency of the matter when 
 an imprint from a rubber stamp would probably be over- 
 looked. Of course, everything on an order, or for that 
 matter on any communication, should be given proper 
 attention. In the press of other business some matters 
 often quite important may be overlooked, but there is less 
 chance for it if the special slips are used, for where 
 special attention is required that fact is indicated by the 
 slip. 
 
 There is one point not always considered in rushing 
 special orders through a factory and that is the increased 
 cost. It is important in bidding on work to give this 
 factor proper attention. If stock orders have to be side- 
 tracked in order to let a special job have the right of way, 
 it is only proper that the special job should pay for the 
 privileges it enjoys. It costs more to get that kind of 
 work out and therefore the job should bring more. What 
 this extra cost is will have to be determined by the man- 
 ufacturer after considering all the facts in the case, but 
 it should not be overlooked no matter what is made. 
 
AND SELLING COSTS 
 
 65 
 
 Possibly some things are being made in departments 
 which require a great deal of space and the department is 
 not charged enough for rent. And again, perhaps a 
 certain line would show up better if the department in 
 which it is made did not have to stand expense for rent 
 
 SUMMARY. 
 
 Munfber 
 Men 
 
 DEPARTMENT 
 
 w^Vcl*' 
 
 .Average 
 per Man . 
 
 Average per- 
 Day per Man 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Tot aland Average 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Pay Roll Week Ending 
 
 FORM SHOWING AVERAGE AMOUNT EARNED BY EACH 
 EMPLOYE IN A GIVEN PERIOD OF TIME. 
 
 on space which it does not occupy. To consider theoret- 
 ically each department of a factory as a separate institu- 
 tion and to figure as such what its share of the various 
 expenses ought to be, will often help in solving the ques- 
 tion of distribution of expense. Direct labor and material 
 are easy to handle but when the question of expense is 
 taken up, it requires careful thought in order to be sure 
 that correct costs are known. 
 
66 MANUFACTURING COSTS 
 
 WATER POWER 
 
 Where a factory runs by water power its expense 
 for power is usually much less than when steam is used 
 and in cases of this kind power account equipment should 
 be charged with the cost of flumes, turbines, etc., which 
 constitute this equipment. 
 
 These items are subject to a depreciation, the amount 
 of which may be determined by a careful estimate of the 
 probable length of time the apparatus will last. This 
 expense, together with the cost of labor and material for 
 operating, forms the power operation account which is 
 periodically distributed over the product as an expense. 
 The bill for water for boilers where steam is used, is a 
 charge to "power account operating," while the water used 
 for drinking purposes would be a charge to the depart- 
 ment using it, and if only one bill is furnished by the 
 water company >an estimate may be made and a certain 
 percentage of the amount charged may be charged as 
 desired. 
 
 SINKING FUND 
 
 A certain percentage of the earnings of a company 
 is sometimes set aside for the purpose of taking care of 
 depreciation. It is better to take care of this item in 
 another way. 
 
 Depreciation is always present and should be consid- 
 ered as part of the manufacturing cost, as it is one of the 
 expenses incident to manufacturing. Some charge depre- 
 ciation regularly every month and at the end of the year 
 inventory at the original cost, which shows up on the 
 balance sheet as a profit. This makes a nice looking 
 statement to send to a bank, but by no means represents 
 the actual state of affairs, as instances where a factory 
 increases in value from year to year with no added 
 buildings or equipment are very rare. 
 
AND SELLING COSTS 67 
 
 ADMINISTRATION EXPENSE 
 
 The salaries of the officers of a concern are properly 
 chargeable to whatever part of the business they devote 
 their time. If the president gives his time to all the more 
 important matters of each department, his salary should 
 be distributed in a way which will result in each depart- 
 ment being charged with its proper share. 
 
 In one factory with which I am familiar the president 
 devotes his entire time to the manufacturing end of the 
 business, the vice-president and treasurer take care of the 
 sales and financial matters, while the secretary looks after 
 the accounting including the cost department. The salary 
 of the president is charged to manufacturing expense, the 
 salary of the vice-president and treasurer is charged half 
 to selling expense and half to office expense and the secre- 
 tary's salary is charged, one-quarter of which goes to man- 
 ufacturing expense and three-quarters to selling expense, 
 A little thought will show what disposition is proper and 
 the proper preparation once arrived at will require no 
 further attention, being taken care of by the bookkeepers, 
 unless changes in administration cause a new apportion- 
 ment. 
 
 RENT 
 
 Where the factory space is leased there is usually 
 little expense chargeable to rent account beyond occasion- 
 ally putting in a light of glass or some other small item 
 of this character and since each department requires space, 
 it is proper to charge each department with the proper 
 proportion of that expense. 
 
 The office is no exception to the rule and it would 
 seem that this arrangement would be a proper one for 
 some factories, even though the buildings are owned by 
 the concern. The item of rent is no less evident even if 
 
68 MANUFACTURING COSTS 
 
 carried under another name. Repairs to buildings, depre- 
 ciation, yard help, carpenter work, etc., all enter into it 
 and there can be no serious objection to charging each 
 department with its proper share, instead of apportioning 
 its cost over the whole production. 
 
 DEPRECIATION 
 
 Except in rare instances equipment becomes less 
 valuable from year to year, notwithstanding the fact that 
 necessary repairs have been charged to expense accounts. 
 This brings up the question of depreciation which, briefly 
 stated, should be a certain percentage of the value of 
 buildings, machinery, etc., charged to depreciation and 
 from this account is charged to various expense accounts. 
 
 A certain machine will last, say ten years. It is 
 evident, therefore, that to allow for the proper amount of 
 depreciation, 10% of its cost must be charged off each 
 year so that the cost of the machine is borne by the 
 production each year. In matters of this kind it is well 
 to remember that if 10% of the cost is charged off the 
 first year there is left, at the beginning of the second year, 
 only 90% of the original cost, at which the machine should 
 be inventoried, and in figuring further depreciation 10% 
 per year of the original cost, not balance, should be taken, 
 for if 10% of the balance is used the entire cost will never 
 be charged off. In fact, there will be on the books at the 
 end of ten years over 35% of the original cost which 
 should have been charged off long ago. 
 
 One way to handle matters of this kind is to charge 
 off the correct amount at the end of the year, charging 
 it with profit and loss and inventorying at the proper 
 figures to allow for this, a permissable way for concerns 
 satisfied to know at the end of a year whether they have 
 lost money or made money. But the manufacturer who 
 
AND SELLING COSTS 69 
 
 is up-to-date will consider this item, monthly and will 
 know every month 'how he stands. 
 
 Repairs to buildings, machinery, etc., are an expense 
 as a general thing in addition to the depreciation figured. 
 Thus, if a new belt is purchased it is charged to some 
 expense account unless it is for new equipment, in which 
 case it should be charged to belting account. In other 
 words, additions to the plant are assets, repairs and 
 replacements are expense items, and to be sure that the 
 assets are actual and that they will inventory properly, 
 it is necessary to charge depreciation in addition to main- 
 taining so far as possible by repairs and replacements the 
 actual value. In some instances the depreciation will be 
 a small item of course, but the factory and equipment 
 which is worth as much ten years from the date bought 
 as when purchased, is hard to find. Some factories are 
 purchased at sheriff's sale at a small percentage of their 
 real worth. It is not necessary to figure depreciation on 
 them if they are entered on the books at purchase prices. 
 It is usual, however, to make entries which will show 
 purchases of this kind at actual value. 
 
 As has been stated before, circumstances govern all 
 these matters and it is not the intent of the author to lay 
 down any set rules in matters of this kind, but rather to 
 express his views on the popular methods. Even real 
 estate is not always exempt from depreciation. Values 
 decline and it is true that they sometimes take the upward 
 tendency. In either case a revaluation is entirely proper. 
 
 FREIGHT AND DEMURRAGE 
 
 Freight on material purchased is a part of the cost 
 of the goods and should be so considered. Coal might 
 cost, for instance, $1.50 per ton at the mines and have a 
 
70 .MANUFACTURING COSTS 
 
 freight rate of $2.19 per ton. It is evident, therefore, that 
 this material costs $3.60 per ton. 
 
 Nobody would think of handling a matter of this 
 kind differently, yet small items of freight are frequently 
 handled in a separate account which is, of course, 
 incorrect unless from that account proper distribution is 
 made. Demurrage charges are properly a charge against 
 cartage and not against the contents of the car or boat. 
 If given his own way, the head cartman might arrange 
 his work so that there would be no demurrage charges, 
 but it sometimes happens that the contents of a particular 
 car is needed immediately and all teams are set to work 
 unloading and by reason of that demurrage accumulates 
 on the cars placed prior to that time. If outside help is 
 secured for carting, the expense would be charged to 
 cartage account, so that it is perfectly proper to charge 
 demurrage which accrues, to the same account. 
 
 Demurrage is not always an item of unnecessary 
 expense, for it will frequently be found cheaper to pay 
 a few dollars demurrage charges than to employ extra 
 cartmen. Freight allowed on goods sold may be deducted 
 from the invoice or credited on receipt of the paid freight 
 bill. The former is much the better plan although not 
 the more common one. These items are charged to sales 
 account and the vouchers must be returned promptly for 
 credit if the accounts receivable of the shipper are to 
 be kept correctly. To allow customers to return freight 
 bills for credit once or twice a year will result in many 
 cases of dividends being declared unintentionally perhaps 
 on imaginary profits. The customer can be educated on 
 this point as well as on any other, if the matter is gone 
 about in the right way. 
 
 For those who wish to keep their accounts receivable 
 in the proper way, yet do not wish to credit freight on 
 invoices the following is suggested. Figure the freight 
 
AND SELLING COSTS 71 
 
 on each shipment on which it is allowed and at the end of 
 the month charge sales account and credit special freight 
 account for the total. Then, when freight bills are 
 received for credit, credit the customer and charge special 
 freight account. The balance of special freight account 
 should be deducted from the accounts receivable to find 
 what the balance of this account really is, and after a 
 time a portion of it may possibly be credited to profit and 
 loss account, as some bills may never be returned for 
 credit. 
 
 DISCOUNT 
 
 When a bill is paid and a discount deducted for 
 payment within a certain specified time it is customary to 
 credit discount for the amount so saved. 
 
 It is true that the goods cost just that much less than 
 the invoice price and some may consider it proper to 
 handle these matters in such a way that the books will 
 show that. The general plan, however, seems to be to 
 credit this saving to the discount account. No appre- 
 ciable difference in the costs will be noticed, however, as 
 the average rate of discount allowed is less than 2%. 
 Discount allowed for prepayment of invoices of goods 
 sold is charged to sales account, in effect at least, although 
 discount is charged with this account by some. In 
 making the prices we virtually name two prices and the 
 customer chooses which he will take. 
 
 ROYALTIES AND PATENTS 
 Certain articles may be manufactured on a royalty 
 basis, that is a certain amount per unit may be paid to the 
 owner of the patent for the privilege of using it. In such 
 cases this amount must be charged to the cost of -the 
 goods. This is easy as it is a known/ quantity. 
 
 Where the patent on an article or process is acquired, 
 the method of handling it must be different. 
 
72 
 
 MANUFACTURING COSTS 
 
 ANALYSIS OF EXPENSE 
 
 MONTH Y^AR 
 
 ire AI 
 
 AMOI//VT 
 
 DtST F\ 1 & U T/ON 
 
 
 
 
 M F6. 
 
 SL.l~IWG 
 
 OFFICE EXPENSE 
 
 
 
 ^ 
 
 
 
 <?<> 
 
 
 
 HEATPOWtKtUGHT 
 
 
 
 
 
 
 
 
 
 DEPRECIATION 
 
 
 
 
 
 
 
 
 
 ADVERTISING 
 
 
 
 
 
 
 
 
 
 POSTAGE 
 
 
 
 
 
 
 
 
 
 TELEPHONE 
 
 
 
 
 
 
 
 
 
 INSURANCE 
 
 
 
 
 
 
 
 
 
 SUPTC, FOREMEN 
 
 
 
 
 
 
 
 
 
 STATIONERY 
 
 
 
 
 
 
 
 
 
 CARTAGE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 , 
 
 
 
 
 TOTALS 
 
 
 
 
 
 
 
 DIRECT LABOR 
 
 
 
 ^ 
 
 
 SALES 
 
 
 
 
 % 
 
 FORM 32. 
 
AND SELLING COSTS 73 
 
 The life of a patent in the United States is seventeen 
 years and no renewal is permitted. It is evident that the 
 cost of the patent must be distributed over the material 
 manufactured during this time. It must also be consid- 
 ered that a new patent may make practically worthless 
 the one you hold and may make it unprofitable to con- 
 tinue to manufacture a certain line, which suggests that 
 it is wise to get rid of the cost of a patent, as a rule, 
 during the first half of its life. 
 
 It is a common practice to charge patents to a patent 
 account and to consider them as assets. That is well 
 enough providing that a certain amount is charged ofT 
 periodically. Otherwise the value is inflated. 
 
 It should be remembered that the ratings given in 
 the commercial reports are not always correct. The 
 balance sheet of the concern giving them is used as a basis 
 in compiling them and balance sheets sent to the bank 
 are often miskading as to the true state of affairs and 
 many times unintentionally so. Otherwise why the failure 
 of so many manufacturers? It sifts down to the subject 
 of cost and this includes not only the cost of manufac- 
 turing, but the cost of selling and if properly handled 
 provides for a balance sheet from which all estimating 
 has been eliminated. In other words, a balance sheet can 
 be made to show the actual state of affairs. 
 
 BURDEN 
 
 The name burden is applied by some writers on the 
 subject of costs to that portion of a cost which is treated 
 herein as indirect expense, such as rent, heat, light, 
 power, depreciation, etc. It matters little what it is 
 called so long as it is recognized and treated in the proper 
 way. 
 
 The manufacturer who finds that 100% added to his 
 direct labor represents the average amount he must use 
 
74 
 
 MANUFACTURING COSTS 
 
 as overhead expense or burden, should endeavor to see 
 that the items of expense do not exceed this figure and 
 
 w 
 
 3 
 H s- 1 
 
 tn !> 
 O O 
 
 ^H W 
 
 H- 1 Ci 
 
 O < 
 
 z 
 
 comparative statements showing both by value and per- 
 centage of each expense item will enable him to keep 
 account of this subject. In making an estimate he can 
 
AND SELLING COSTS 75 
 
 add one-hundred per cent to the estimated labor cost and 
 will thus arrive at a pretty accurate figure, safe enough 
 to take business on. The cost of estimating is a man- 
 ufacturing expense in some cases and in others a selling 
 expense. To illustrate : A factory making a line of shelf 
 hardware to carry in stock would charge the expense of 
 estimating its cost to manufacturing expense, while a 
 foundry making castings only on orders and estimating 
 on the requirements of a customer, would consider the 
 estimating charge as a selling expense. 
 
 HEAT, LIGHT AND POWER 
 
 These subjects are usually considered in the same 
 account since the source of production is usually the 
 same. Power is a general expense. All departments of 
 a factory use it to some extent at least and also require 
 heat and light. A subdivision of this account or the 
 expense part of it may be as follows : 
 
 Power account Labor 
 Power account Material 
 Power account Repairs 
 
 The item of labor is made up of whatT is paid the 
 engineers and firemen. 
 
 Material includes coal or whatever else is used for 
 fuel, including in some places scrap pieces of wood and 
 s'havings from the wood shop, which is credited to the 
 department delivering it. 
 
 Repairs will be charged with whatever expenditures 
 of labor and material are necessary to keep the plant in 
 running order and to maintain so far as possible its 
 insurable value. New boiler tubes and the labor of 
 putting them in would be an illustration of what is meant 
 by this item. The power account will thus be kept in a 
 way which will admit of a statement being made monthly, 
 
76 MANUFACTURING COSTS 
 
 which will show the cost of the various items constituting 
 this account. Comparative statements of this kind are of 
 great value. Coal purchased for use under the boilers 
 would naturally be charged to power account material, 
 yet it is not proper to do this unless all the coal charged 
 during a month is used in that month. Where apportion- 
 ments of expense are made monthly, it would be a much 
 better plan to charge the coal to coal or fuel account and 
 as it is used credit this account and charge power account 
 material. 
 
 Of course it makes no difference in the long run, but 
 it does not give correct costs to treat matters of this kind 
 carelessly. It might result in the wiping out of all profits 
 for the month, if the inventory were not taken into con- 
 sideration and besides, what is the use of having approx- 
 imate costs when actual costs are so easily found? 
 
 In a certain factory the various departments were as 
 follows: W'oodshop, machine shop, foundry and pattern 
 department and in addition space in one of the buildings 
 was rented to a concern making bicycles. In order to 
 determine what pro'portion of expense for power was 
 properly chargeable to each department, an engineer was 
 called in who went about it in the following way : 
 
 He found the actual horse-power used when each 
 department was running in the usual way. He then had 
 every machine in the factory thrown off so that only the 
 line and center-shafts were in use. At different times he 
 had each of the various departments run all their 
 machinery as usual, while all the other rooms had no 
 machinery running. This was done by a system of signals 
 from the engine room, the whistle being blown as per a 
 program of which each foreman had a copy. When this 
 test was finished, it was easily determined just how much 
 of the expense for power was chargeable to each of the 
 departments, something they had been guessing at, and it 
 
AND SELLING COSTS 
 
 77 
 
 was also found that by trueing up the line shafting a 
 considerable amount of power was saved, enough so that 
 the saving in that alone paid for the test in less than a 
 
 Reports of Accounts Unpaid at the beginning of the month and 
 Cash Collections and Bank Deposits during the month. 
 
 Office Month of 190 
 
 190 Accounts Unpaid 
 
 1 
 2 
 3 
 4 
 5 
 6 
 7 
 8 
 9 
 10 
 11 
 12 
 13 
 14 
 15 
 16 
 17 
 18 
 19 
 20 
 21 
 22 
 23 
 24 
 25 
 26 
 27 
 28 
 29 
 30 
 31 
 Totals 
 
 Cash 
 Collections 
 
 Bank 
 Deposits 
 
 Remarks 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 DAILY COLLECTIONS FORM 34. 
 
78 MANUFACTURING COSTS 
 
 month. Tests of this kind do not have to be made often, 
 but are of immense value to some establishments. Where 
 electricity is used a test of this character is not needed, 
 since the power company can furnish the required infor- 
 mation and it might be remarked that the saving in elec- 
 tricity is considerable, since the line shafts are eliminated 
 to a great extent. 
 
 In apportioning the expense for power the office 
 should not be overlooked, since it requires light and heat. 
 In some cases a flat amount is charged to the office for 
 rent, which includes these items and the amount credited 
 to general expense, which simplifies matters to quite an 
 extent. 
 
 CARTAGE ACCOUNT 
 
 This account is usually charged with the expenses of 
 operating the department maintaining the equipment, 
 salaries paid, expenses of repairing harness, etc., are all 
 a part of this account. To determine how the amounts 
 charged to this account shall be apportioned requires a 
 careful study of conditions. Part of the work done by 
 this department is the drawing in of material to be man- 
 ufactured, part is in taking finished goods to the railroad 
 station or to customers. 
 
 It can easily be found what proportion of the expense 
 incurred should be borne by the several departments 
 served and the charges can be based on these figures. 
 Thus a certain percentage might be charged to factory 
 manufacturing expense, part to wood shop expense and 
 part to power account and the proper proportion once 
 arrived at will require no changing, as a rule, for a long 
 time. As assets, this account will have the value of the 
 equipment, which should be subject to a change for depre- 
 ciation. The account may be divided into two parts, one 
 of which represents the equipment or assets and the other 
 
AND SELLING COSTS 79 
 
 the charges for maintenance, which are of course expense 
 items and should be charged to other expense accounts 
 periodically. 
 
 MECHANICAL APPLIANCES 
 
 Machinery has much to do with the reducing of costs 
 in the factory and in the modern offices are found many 
 machines which give absolutely accurate results at a large 
 saving of time. Time recorders, typewriters, numbering 
 and computing machines are made in such variety that 
 all business requirements can be met. 
 
 It is unnecessary to dwell on the fact that the concern 
 using these modern up-to-date appliances has a great 
 advantage over those who still stick to old fashioned 
 ideas and methods. Nor is it advisable to mention in this 
 treatise the manufacturers of these devices, since the 
 reader can get all the information necessary by writing 
 to the advertisers in the technical and business magazines. 
 
 INSPECTION 
 
 The cost of inspecting an article is part of the cost 
 of that article, yet it is not always advisable to treat the 
 matter in just this way. The cost of inspection therefore 
 is sometimes made an expense item against the whole 
 department and reaches the articles inspected through the 
 manufacturing expense. 
 
 If each article produced in a department were subject 
 to inspection charges, possibly there would be no great 
 difference whichever method were used, but the fact 
 remains that there are usually some articles which do not 
 require inspection and this leads to the conclusion that the 
 former plan is the more desirable. 
 
 The cost of boxing an article may be made to include 
 the final inspection in many cases and it is desirable to do 
 this where possible. Where more than one employe is 
 
80 MANUFACTURING COSTS 
 
 engaged in this work tickets may be furnished giving a 
 letter or number and one of these packed in each box. 
 This serves to identify the packer should a complaint 
 against the packing be received. The item of boxing is a 
 part of the cost of an article, as is also the cost of the 
 box, label and direction sheet if one is used. These are 
 considered in the estimate when one is made and may be 
 deducted from the cost when quoting on material to be 
 furnished in bulk. 
 
 It often happens that concerns purchase in the open 
 market some finished part which they have not considered 
 it advisable to make for themselves. In order to know 
 that they are saving money by this method, it is advisable 
 to make an estimate on the part to see what the cost 
 should be. The outlay for special machinery, tools, etc., 
 should be considered in order that an intelligent 
 comparison may be made. 
 
 In changing from buyer to manufacturer it is well 
 to proceed slowly, for there are some manufacturers who, 
 by specializing their product, making only one line of 
 goods, are able to produce them at a minimum figure. 
 The utilization of scrap often plays an important part in 
 reducing cost. Brass parts of machines may often be 
 made for less than steel parts, for the reason that the 
 scrap has a much greater value than steel scrap and owing 
 to its softness brass may be worked on faster. Often it 
 is possible to more than triple the output. And again, the 
 saving in selling the scrap where possible has its saving 
 effect. Even scrap tin, which is usually thrown on the 
 dump, is worth many dollars per ton and the skimmings 
 from a brass furnace are saleable at several dollars per 
 barrel. A large saving is possible in many of the large 
 factories and practically all of the small ones in this 
 saving of waste material alone, enough in many instances 
 to enable them to declare a larger dividend than before 
 
AND SELLING COSTS 
 
 81 
 
 COST OF JOB 
 
 F 1163 
 
 NAME 
 
 & 
 
 / ? 
 
 31 
 
 '0 
 
 Expense 
 
 53 
 
 Sundry Charges 
 
 Cost 
 
 0? 
 
 Amouirt Rec'J 
 
 ?/ 
 
 AMOUNT CH'C'D 
 
 
 5^o 
 
 3 
 
 /i'oo 
 
 00 
 
 Cj 00 
 
 SIMPLE COST SHEET FOR JOBBING FOUNDRY. 
 
82 MANUFACTURING COSTS 
 
 and possibly to enter into the manufacture of articles on 
 which the apparent profit has seemed too small. 
 
 INSURANCE 
 
 Insurance is an expense which should be apportioned 
 to the various departments in a way which will insure 
 each department getting its rightful share. The charges 
 for the year must be divided into twelve parts and one 
 part charged each month, so that each month's production 
 stands the proper amount, for the production has to stand 
 this expense eventually. Liability insurance, plate glass 
 and fly-wheel insurance are all treated in the same way, 
 as is also the subject of taxes. 
 
 LOOSE-LEAF BOOKS AND CARD SYSTEMS 
 
 A great deal of thought has been given to the subject 
 of loose leaf and card systems of accounting and in most 
 factories their use is an advantage. A combination of 
 cards, loose leaf books and bound books is usually best, 
 as there are some places where each may be used to good 
 advantage. 
 
 There are some who yet use the old bound books 
 exclusively and there are others who have gone cards- 
 and-loose-leaf crazy. Neither is getting the best system, 
 for there are places where cards and cards alone give 
 the best results, and the same can be said of loose-leaf 
 systems and bound books and it is well for the manufac- 
 turer to remember that a fad or mania in this connection 
 will often defeat the desired results. The ideal system is 
 that which gives the best results with the fewest number 
 of forms for the work in hand. 
 
 ARRANGEMENT OF FACTORY 
 The arrangement of departments has much to do 
 with costs. A factory which is so arranged that material 
 
AXD SELLING COSTS 83 
 
 starts in at one end of the plant an:l goes directly through, 
 coming out as finished product at the other end, is pretty 
 well equipped. It is the continual carting of partly fin- 
 ished material back and forth that increases cost with 
 nothing to show for it. Of course, this ideal arrangement 
 can never he maintained absolutely, for as a plant grows 
 the additions can not always be made to conform to this 
 idea. The thing to avoid is unnecessary trucking. Keep 
 the material where it is easy to reach and arrange so far 
 as possible to send work from one department to another 
 quickly, and avoid such things as having the woodshop 
 the length of the plant from the lumber piles. 
 
 PURCHASING 
 
 The purchasing department plays an important part 
 in costs. The material must be selected not only on 
 account of price, but quality as well. There is a factor 
 which must be reckoned with in some cases, dishonest 
 foremen, and this matter shall now receive our attention. 
 
 While talking with a salesman for a varnish house 
 a short time ago, I mentioned our neighbors across the 
 street and said: "They use large quantities of varnish. 
 Do you sell them?" and his answer, "No, they have a 
 crooked finisher," surprised me. To overcome similar 
 conditions the following plan is submitted in the hope 
 that it may be of benefit to manufacturers and purchasing 
 agents in placing contracts, even if the article in question 
 is not varnish. 
 
 Get your samples together, the same quantity from 
 each bidder for the contract and transfer these to new 
 tin cans on which has been pasted a label bearing a 
 number only. Send the whole outfit to the finishing 
 department and have a test made. The finisher cannot 
 tell without the label whose goods he is testing. He 
 must make the report then on merit and if it shows that 
 
84 MANUFACTURING COSTS 
 
 the kind you have always used is the best, keep on using 
 it. I do not mean to suggest that any great proportion of 
 finishers is dishonest. Rather I would say that they are 
 all honest and then proceed to prove that by a test as I 
 have suggested. 
 
 The purchasing agent should do the buying. It is 
 not a profitable thing for a factory to have its foremen 
 do that work and the firm which permits salesmen to 
 interview employes outside the purchasing department is 
 taking long chances. I have known representatives from 
 oil houses who never asked for the purchasing agent. They 
 wanted to see the engineer and through him work back 
 to the ''Purchasing Department," with a requisition 
 tion for an order. The salesman of the future is going to 
 be a salesman, not merely a traveling man and will be 
 straightforward and honest in his methods, as indeed most 
 of them are now. Permanent service is never built on 
 anything less than 16 oz. to a Ib. and 100 c. to a dollar. 
 If it is necessary for a salesman to interview a foreman, 
 I believe it is a good plan for the interview to take place 
 at the purchasing agent's desk and samples to be tried 
 should be distributed from this same department after 
 making provision for a report on them. Finally, I believe 
 that a purchasing agent does himself an injustice if he 
 does not see every salesman who attempts to call on him. 
 Many of his callers will, it is true, fail to interest him, 
 but it is necessary to see them all in order to find the one 
 who will do best by you. 
 
 CLAIMS AND HOW TO HANDLE THEM 
 
 In this article no special forms are shown, as but few 
 are required and they are so simple as to be readily under- 
 
AND SELLING COSTS cS5 
 
 stood from the descriptions. The question of claims 
 
 naturally divides itself into two classes : 
 
 1. The claims made on an establishment by its 
 customers and 
 
 2. The claims made by a concern against the 
 transportation companies and the people from whom 
 they purchase. 
 
 Some houses make a practice of paying every bill 
 sent them by a transportation company and if there is an 
 overcharge they enter a claim for it later. To me this 
 seems a reckless way of doing business to say the least. 
 If a bill is rendered for car service, for instance, it should 
 be checked up by the shipping clerk from his car book, 
 which is a record easily kept and if correct, it may be 
 paid. If it is incorrect, don't pay it. Make them submit 
 a bill which is correct. If this plan is followed, it means 
 one less claim to enter in case an error is discovered in 
 the bills, a dozen or so fewer letters to write, to say 
 nothing of loaning the amount of the overcharge to the 
 transportation company for a few months without interest. 
 
 When freight bills come in they should be examined 
 the same as invoices, the rate checked by the traffic man- 
 ager and if correct in every way should be O. K.'d and 
 paid. But if it is paid on presentation (a common prac- 
 tice) and errors are discovered later, it becomes a case of 
 getting down on your knees and humbly asking for the 
 return of your own money. The claim clerk, traffic man- 
 ager or whatever he may be called, can be as useful in 
 keeping down the number of claims as he is in properly 
 following up those which it has been necessary to make. 
 The time extended by the local freight agents in which 
 bills may be paid is, of course, a courtesy on his part and 
 is of just as much value to the transportation company 
 as to the consignee, as where the practice is to pay 
 monthly or semi-monthly, clerical work is reduced in 
 
80 MANUFACTURING COSTS 
 
 both offices. This must answer the argument often put 
 forth, that if you don't pay the bills as rendered you will 
 have to pay on delivery of freight which, of course, would 
 make an immense amount of extra work. 
 
 To sum up the claims against transportation com- 
 panies : They should consist of claims for goods lost or 
 damaged in transit and possibly for overcharges on the 
 freight bills sent in by customers for credit. In entering 
 a claim a letter should be written giving all the essential 
 information and to this should be attached the original 
 bill of lading. This letter is mailed to the transportation 
 company and a copy kept for the office files. All claims 
 should be numbered and a quantity of letter heads with 
 blank spaces for the numbers will be found very conveni- 
 ent and in addition a request may be printed asking that 
 your claim number be referred to in all correspondence 
 relating to the matter. A charge is made whenever a 
 claim is made against a transportation company and the 
 number of the claim should be posted in the ledger. When 
 a remittance is received paying a claim, the number of 
 the claim it pays should be placed on the cash book in 
 order that the book-keeper may post it and then check 
 both the charge and the payment. The unchecked items 
 will then represent unpaid claims and when the auditor 
 makes an examination of the books he can see the situation 
 at a glance and if necessary can ask for the correspond- 
 ence, especially if he has reason to think that the matter 
 has been unduly delayed. 
 
 If the man who enters the claims and follows them 
 up, has charge of the routing and interviews with 
 the representatives of the railroad companies, it will be 
 found that the claims will receive better attention than 
 if these matters are handled by separate departments. 
 The rule, no just claim need ever be withdrawn, is a 
 
AND SELLING COSTS 87 
 
 good motto for the traffic manager to have on his desk. 
 The ledger accounts of the various companies against 
 whom claims are entered thus serve as a check on the 
 claim department and no claim can be cancelled once it 
 is entered, unless a credit is put through, and in the 
 matter of authorizing credits there is not much laxity in 
 any of the business houses of today. 
 
 In filing claims a vertical file will be found very 
 satisfactory. Folders are provided one for each claim 
 and are numbered the same as the claim. As soon as a 
 claim is paid or otherwise disposed of, it is transferred 
 so that the files in daily use will contain nothing but live 
 matter. Index cards numbered in multiples of ten will 
 be very desirable where there are many claims, as they 
 will enable the claim clerk to pick out readily what are 
 required for the day's correspondence. A filing box 
 should be used which contains cards, one for each claim, 
 arranged according to the date it is desired to write 
 regarding them. These contain 
 
 1. Name of transportation company 
 
 2. Date Claim was entered 
 
 3. Amount of claim 
 
 4. Number of claim. 
 
 The rest of the space on the cards may be used to 
 stamp the dates on which letters were written regarding 
 it. The general practice seems to be to write once a 
 month on matters of this kind, but in any event a set of 
 index cards from one to thirty-one is all that is required, 
 as when writing in regard to a claim the card may be 
 placed ahead to the date it is desired to take it up again. 
 This arrangement brings the list of claims which require 
 attention to the notice of the claim clerk automatically. 
 A claim register which is simply a cheap index book, 
 may be kept in which each claim is indexed alphabetically 
 and in the back of this the numbers may be placed con- 
 secutively, so that in taking out the cards for any one 
 
88 MANUFACTURING COSTS 
 
 day a reference to the serial numbers will show if any 
 have been disposed of or paid. A line is drawn through 
 the number of claims paid or withdrawn. This is not 
 absolutely necessary however as, if the correspondence 
 regarding a claim is not in its place, it is proper to con- 
 sider that the claim has been disposed of, in which case 
 the card may be placed in the back of the filing tray 
 for future reference. 
 
 The claims made against a house by its customers 
 will require a little different treatment. They usually 
 consist of items of freight, discount, shortage and errors 
 in prices or extensions. There is no necessity of permit- 
 ting matters of this kind to run month after month. They 
 can be settled better when they are new, than at any 
 other time, as later many of the facts bearing on the case 
 are likely to have been forgotten. If it is a "question of 
 discount or freight, it is either allowable or not allow- 
 able and it should be up to the claim clerk to make the 
 necessary credit if it is allowed or to advise the customer 
 if it is not. This part of the office correspondence calls 
 for considerable tact. A customer resents abruptness in 
 telling him that his claim is not a proper one and this 
 work will be handled better by having it directly under 
 the supervision of the sales manager, than in any other 
 way. He is in a position to know the peculiarities of the 
 customer and can outline what is best to say in those 
 cases where the claim clerk is in doubt. There is no 
 doubt whatever that many firms lose thousands of dollars 
 worth of business annually just because the complaints 
 are not handled in the proper way. An explanation will 
 often smooth things over and you can reason with a man 
 where you cannot drive him. Keeping a customer is just 
 as necessary as getting one and a customer once lost is 
 hard to get in line again. It will often be found advisable 
 to send the salesman a copy of letters written in matters 
 
AND SELLING COSTS 89 
 
 of this kind and it may be a good plan to have the sales- 
 man settle the whole matter the first time he calls on 
 that customer. 
 
 The whole matter of handling claims will simmer 
 down to system and tact. A proper system of filing and 
 a tactful man at the head of the department, one who will 
 remove the edge from a sometimes disagreeable statement 
 by stating the proposition in a fair and square business- 
 like letter, are all very desirable. 
 
 HOW TO FILE CLAIMS 
 
 The problem of filing claims is not very perplexing 
 when the number is small, but when there are hundreds 
 of them to look after there must be a system devised 
 which will enable a letter regarding a claim to be given 
 proper attention, even though the customer does not give 
 the claim number as requested. 
 
 It is the small consumer as a rule who ignores 
 requests of this character. The claim number means 
 nothing to him. He keeps his invoices on a spindle and 
 when they are paid throws them into a drawer and he 
 forms his own idea of your business from his own 
 reasoning, that as his claim is important to him it must 
 be to you. This view is correct in a way, yet the point 
 he does not consider is, that where one credit is due him 
 the house he is doing business with may have hundreds 
 daily equally important. The following plan may assist 
 in the handling of matters of this kind and is given in 
 the belief that it is new and untried. Yet in spite of 
 this fact it should work out entirely satisfactory. An 
 alphabetical index is used, in which the names of the 
 
90 MANUFACTURING COSTS 
 
 customers who make claims and the names of the people 
 from whom material is purchased are written as often 
 as they are required. The number given, a name is 
 never changed. Subsequent claims are designated by a 
 letter, thus: Claim 4i8A would be the number of the 
 first claim entered, 4186 the second and so on. A vertical 
 file will be found very convenient for filing the folders 
 relating to a claim, one of which is used for each letter 
 required, although as a rule one folder for a customer 
 will be all that is required. If a letter comes in regard- 
 ing a claim and does not give the claim number, a refer- 
 ence to the index will show where the rest of the papers 
 may be found, while if the number is given it is only 
 necessary to turn to the file and get the needed documents. 
 
Modern Methods 
 
 Is a monthly magazine for business managers, 
 office, factory and sales managers, department 
 heads, buyers, bookkeepers and young men 
 ambitious to get to such positions. Five years 
 old, 35,000 such men have become subscribers. 
 
 Subjects Covered in Coming Issues: 
 
 Relations of Employer to Employe. 
 
 How Employer May Get Best Work from Employes. 
 
 Department Heads and Their Relation to Other 
 Departments. 
 
 How to Create Public Interest in Advertising. 
 
 Writing Copy for Advertising. 
 
 Practical Systems for "Follow Up." 
 
 Order-Getting Talks to Inside and Outside Sales- 
 men. 
 
 Salesmanship for the Benefit of the House. 
 
 Secrets of Successful Buyers. 
 
 Duties of an Office Manager and How Best to Per- 
 form Them. 
 
 How Employe May Gain Promotion. 
 
 Relation of Business Office to Bank. 
 
 Practicable "Short Cuts" in Bookkeeping. 
 
 Keeping Track of Correspondence. 
 
 Keeping Track of Orders Through the House. 
 
 Fundamental Principals in Figuring Costs. 
 
 Promotion, Organization, Management. 
 
 Subscription Price 50 Cents a Year 
 
 YOU CAN'T AFFORD TO MISS ANOTHER 
 NUMBER. Address 
 
 Modern Methods Magazine 
 
 DETROIT, MICH. 
 
YC 24708 
 
 239126