ILLINOI

UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

PRODUCTION NOTE
University of Illinois at
Urbana-Champaign Library
Brittle Books Project, 2010.

GENERAL I NST RU C TIO N$

PROGRESSIVE COST ANDACCUTZNG SYSTEM

A M'ERICAN ASSOCIATION OF THE BAKING INDUSTRY

1405 Ashlandi Block,

Chicago linov

In Public Domain.
Published prior to 1923.

This digital copy was made from the printed version held
by the University of Illinois at Urbana-Champaign.
It was made in compliance with copyright law.

Prepared for the Brittle Books Project, Main Library,
University of Illinois at Urbana-Champaign
by
Northern Micrographics
Brookhaven Bindery
La Crosse, Wisconsin

2010

651

GENERAL. INSTRUCTIONS

ZsANDARD COT AND) ACCOUNTING SYST"

AMERICAN ASSOCIATION OF THE BAKING INDUSTRY

CENERAL I)VIS 1S9F'COST AND WHAT THEY INCLUDE

The five general divisions of cost in the Baking Industry are;

1. RAW MATERIALS

2. PRODUCTIVE LABOR

3. MANUFACTURING EXENSE

4. GENERAL EXPENSE

5. COMME RCrhL EXPS

(1) RAW MAtERIALS are of two kinds:

First, INGREDIENTS, such as flour, sugar, lard, yeast, etc. These
are the items that the for las cal for in definite quantities. They can there-.
fore he charged direct to the manufacture of a given product, from the formulas,
at purchase price f.obb. bakery.
Second, WRAPPING MAERIA&, includingpper and cord, cartons, etc*
These items likewise can be charged direct to one particular kind of product,at
purchase price f~o.b. bakery.

iote Raw Materials do not include such supplies as brooms, soap,
towels, lubricatingoil,, fuel, etc., that do not enter into the product as an
ingredient or wrapping matera.

(2) PRODUCTIVE LABOR includes all items of labor entering into the manip
'04 ufacture and wrapping of products, which can be charged directly to product. A
method of distributing the -cost of 'productive labor according to a system of
control by sZtanarwilbe outl' 1 1ined ter. :h

(3) UF'ACTURING EXPENSE includes all expenditure, other than the cost
4 of raw materials and productive labor, which is incurred in the process. of man-
ufacture up to the time of delivery of the goods to the shipping clerk or wag-
on checker - including superintendent's and foruents salaries, fuel, repairs,etc.

The sum of "RAW MATERIALS, "PRODUCTIVE LABOR", and 'MAFACTURING
t. EXENSES' , Gives TOUTAL MFACTURING COST.
L.(4)GEE EXES is of two kinds:

First, A1MINISTRATION AND OFFICE EXPESE, including all expenditure.
in the operation o f the of fice and in the general administration of the business,
Asuch expenses being largely under the personal control of the management,
Second, FIXED AND DISTRIBUTABLE EXPENSE, including charges that are
~1incurred for the benefit of the business as a whole, such as interest, deprecia-
Stion, insurance, taxes, rent, light, heat, etc., but which are not entirely under
Sthe personal control of the management.

2ma.

(5) �2 IRCAL EXPENSE consists of:

a. SHIPPING DEPAR ThENT EXPENSE is the expense of inspecting,
assembling and packing the product ready for loading on
the wagon for city delivery or shipment'by express.
b. BARN AND GARAGE EXPENSE is all expense incurred in selling
in or near city.
C. COUNTRY SALES EXPENSE is all expense incurred in selling
goods for shipment by express or interurban.
4. GENERAL SALES EXPENSE is all expense chargeable to selling
but not chargeable directly to either city or country sales-
such as general advertising.

The sum of "0YTAL MANUFACTURING COST", "GENERAL EXPNSE, and"
1iERICAL EXPENSE" gives TOTA COM A C

The complete list of specific items entering into these general div.
isions of cost will be discussed later.

PURCHASING. RECEIING AnPSTRING MATERIALS

METHODS OF DETECTING STOPPING*WASTE.

Next to cash, bakery raw materials and' supplies require the most care..
ful watching. They enter heavily into the assets of-the business; they make
up the largest part of the cost of bakery products; they are Just a short step
removed from being actual cash itself. And yet our experience inia consider.
able amsber of bakeries shows a general neglect and laxity in this important
matter that is causing the bakers a loss of' thousands of dollars annually.
Hence, vs urge the installation of thoroughly accurate methods of. accounting
for raw materials and supplies, not only because such methods are fundamental
to cost keeping, but also because they will stop losses that are a-serious diain
upon the business.

In~ the larger bakeries requisitions should be made out in duplicate on a
suitable form (preferably a book of numeredt forms) so that the person whoy does
the actual purchasing will have a written record of his authority in each case,
and the person- who is responsible for having the materials on hand when needed,
will h a ve evidence t ha t requisition w as made to the purchasing officer or agent.

PURCHASE ORDER

ensure an actual count, measure or weight by the Stock Clerk for checking
against the dealer's invoice. It can be done by grouping these ites on the
sheet and cutting the 'carbon paper so they shal not be copied through., Only
the' description of the articles ordered should appear on the Receiving et.

RECEIVING

The duty of receiving, storing and issuing all raw mterials and sup.
plies should be vested in one person. In bakeries of fair size these functions
will take all the time of one person. He should be desigoated as Stock Clerk.

Is3 r

The Stock Clerk gets a copy of every Purchase Order, known as bipRs-
ceivtng Sheet. When raw materials or supplies are received he should count
weigh, or measure them accurately, and enter the-qutity on the Receiving
Sheet, wich should then go to the bookkeeper for checking against the quan-
tity charged in the dealer's invoice.

STORING SA1.S

No one but the Stock Clerk should have access to the stock. The ideal
arrangement is to have stock of every kind stored in one room and that room
kept locked at all times. Practicall all baker materials are a licable to
domestic use and have a habit of disaearin rather m steriousi *Remove all
temptation by putting them under lock and key so far as possible ard by making
one person responsible.

MAMIRY ANI SUPPLY RE I STIONS

Absolutely nothing should'leave the stock room except as it is given
out by the.Stock Clerk'on written requisition signed by an authorized person:
The requisition should show the date, the articles wanted, the quantity of
each, the department for which wanted and the signature of the person making
the requisitions

STOCK RECORDS

Just as you insist upon knowing each day theamount of cash on hard
or the balance at the bank, so you should insist on knowing at all times the
exact quantity of stock on hand. In other words, every baker should maintain
a oer #..ua1. stock inventor . It will enable him to know when purchases should
be made and in what quantities, to make correct insurance claims in caseof
fire; and will help him to locate wastes of materials, to understand his costs,
and to figure his monthly profit or loss.

For this purpose, a Stok ord Inventor should be provided, showing
separately each kind of material, showing receipts (date and quantity) , issues
(date and quantity) :q C~anities on hand. Entries are made inn this Stock
Record from Receiving Sheets, and Material and Supply Requisitions; and the
quantities on hand are obtained by adding the quantities received and subtract-
ing the quantities issued from previous quantities on hand. In starting the
record the original quantities on hand. must be obtained by an actual Inventory.

In the smaller bakeries, heone or perhap s two persons attend to'

from stock for use in manufacturing.

Even greater care must be excercised to make sure that 'these terials
pass- through'the various ufacturitg processes without le, and that -they'
prcd"^uce the quantity of finished goods of a satisfactory quality, that tey
Oug.it to produce if properly handled.

r-4 -,

FOUR CHECKS NECESSARY

To secure efficient bake shop control, the product should be checked,
at four separate and distinct stages of mnufacture, to determine:

First, That the correct quantity of each ingredient goes into the
dog& mixture.

Second, That each dough produces the standard number o f counts" in
the pan.

Third, hat losses occur in baking, or in delivery to the wrappers
or Shipping Clerk.

Fourth, hat number has to he rejected as unsalable during inspection,
grapping, aosezlthing and packing of goods.

tITII OP' A I"COUNT*

By the term "eount", as used in this and subsequent paragraphs,
will be meant that unit of production whose wholesale price is 4 cents. Thus
a loaf of bread that wholesaesor 4 cents will represent one countp a loaf
that wholesales for 8 cents, two counts; a cake or a dozen doughnuts that
wholesales for 12 cents, three cunts.

MIXINODOUGH ACCORI G TOA)OUCH DER

A D Seet for each dough mixed, is fundamental to any accurate
system of accounting for ingredients. The Dough Sheet should show in pounds
and ounces the eact quantity of each ingredient that is to be put into that
particular dough. The ingredients must be care ful y weighed out and put into
the miixture exactly in the quantities called for by the Dough Sheet.

Wherever conditions permit, the best way to issue materials is in the
*xactquantities required ror each individual dough. This plan necessitates
providing suf ficieht buckets, pans, etc., to hold the various ingredients for
each dough to be made. The exact quantity or each ingredient required for
each dough should be weighed' out in the se buckets and pans. If there are
six doughe, six bucets of milk, six buckets of oil, etc., should be made up.
It is a .good plan to weigh out sugar first and put it in the bottom of a buck..
et, then weight out the salt arnd put it on top of the suga. This will be
found a preventive to theft.

ATANDARDS OFPRODUClTON pi C9+nT

A. Vhe Mulded and Put in the Pan. A re brt should be obtained o f
the rnmer of counts moulded and panned. This quantity should check with the
standard for that particular sice and kind of dough.

B.&WenDlivered from the Ovens' In the larger bakeries it is ad-.
visable to make a report of the number of "counts" baked and delivered to the
wrappers or Shipping Cl.ak. S ller bakeries do not require this check. By
checking the quantity thus reported against the standard, the loss in baking
can be determined.

C. Then Assembled Read for Salesmen or for Shipment. A daily report
should be made by the Shipping C.erk of the total number of perfect "counts"
and of imperfect "counts" ('cripples" of all kinds received by him. To do
this he must inventory the supply he carries over from one baking day to the
next. This inventory should be taken at the period of the day when his sup-
ply is lowest. This gives a comparatively simple but effective check, and
shows up the losses between output of the moulders and perfect 'count" ready
for sale.

FIGURING COSTS OF 1ATRIALS

FIGURING STANDARD UNIT COST OF NGREDIENTS

The basis for figuring costs of ingredients is the &S men.
tioned-in a previous paragraph. This sheet shows, in pounds and ounces, the
exact quantity of each ingredient put into each kind of dough. The method
by which the superintendent can check his men to make sure that no more and
no less than the specified quantities were used, was outlined in a previous
paragraph. When this check is applied, the Douconstitutes an accur-
ate record of the c anift of ingredients used.

Multiply the quantity of each kind of ingredient by the latest price
paid for it, and the total is the standard cost of ingredients for each kind
of dough.

This cost divided by the number of "counts" that each kind of dough
should prduce, gives the standard unit csto ingredients per "count".

WHY ADDITION IS NECESSARY TO COVER LOSSES

If, then, there were no loss in counts due to fermentation causes
or to inaccurate scaling; or to burned, poorly baked, undersize, dirty or
broken loaves ("cripples, as they are called), this standard unit coot of
ingredients would be the complete cost. But there is very likely to be a diem
crepancy between what doughs actually produce and what they ought to produce,
and there are sure to be some "cripples". How much losas there will be from
these sources will depend to a large extent on the energetic and intelligent
use of the checks mentioned in a previous paragrph, but even under best con-
ditions and best control there will be some losses. and unless they are acf-
counted for in the cost, the cost will be incomplete.&

The result 6f this would be one of those leaks that cause so many
bakers to think their costs are lower than they really are, and who there fore ,

unit cos+1MWt of ingre 4dietsto ov r e oses( ndalo etrfltat+i iV %V. %ma saine tuit

2. "Counts" that should have been produced, based on the standard of
production for that kind of dough.

3. Perfect "counts" actually produced.

4. Losses (difference between items 2 and 3) divided between:

a.' Fermentation, saling, etc.

b . Cripples of various kinds.

g 6.m

By sizunariing the Daily Production Records for a month, an average
percentage of "counts" lost, to perfect "counts" produced can be obtained.
This percentage must then be added to the standard unit cost of ingredients,
figured froe the Dough Sheet) to get the actual unit cost of ingredients.

FIG'JINE: COST OF WRAPPIG'MATER IAS S

The principles involved in figuring the cost of wrapping materials
are the same as for ingredients, that is, a standard unit cost of wrapping
matterials must first be obtained and a waste percentage added to cover the
losses that occur through carelessness in handling materials, etc. The st-
dard cost of wrapping materials should be obtained separately for each kind
of brand of bakery goods wrapped.

The waste percentage should be obtained as follows:

.1 Determine the standard qgutity of each kind of wrapping material
that should be needed for the wrapped production of a three months period, as
saning no waste and basing the figures on an overage actual wrapped production.

2. Compare this standard quantity of each kind of wrapping material
with the q2 tit actual used during the same period as shown by the perpet-
ual stock records the difference represents the 'gaste.

3. Determine the percentage of waste to be added to the standard
wrapping cost, by dividing the standard quantity into the quantity wasted.

4. Add this percentage to the standard expressed in dollars and cents,
and divide by the number of packages to get the actual unit cost of wrapping
the several kinds of goods.

Th SUM OF ACTUAL UNIT COST OF INGREDI:ENTS AND ACTUAL UNIT COST OF
WRAPING GIVES Th TOTAL. ACTUAL UNTIT COST OF RAW MARIALS.

. I . .sT~ GLAOR COST

CHECKNTG LABOR AGAINST PRODUCTION

ELIMINAION OF WASTES IN LABOR

The cost o f shop labor represents on the average about l0of the+ks

purpo sec in any plant, a labor cost per "count" for bread dough producto, and
for pastry of all kinds, including cake, is division enough.

The actual unit cost of labor is obtained by simply dividing the labor
payroll for each pay period ('as a week) by thoe production in cocunts"f for the
same period, as figured from the Daily Baking' Records, performing this opera-
tion separately for bread 'f advisinismitand
1WE S . f a d . . s lcr is maintained,

CHiECKING LABOR BY COMPARISON OF LABOR COT

A comparative record of the unit costs of labor should be kept, not
only for costs reccrd purposes, but also for the purpose of checking and con-
trolling labor. This record may be in the following form:

Actual Unit Cost of Labor per 1000 "counts"
Bread Making Department
F'or Week Endinn

Perfect "Counts" for Week -.r "- -.-- 30,000
Shop Labor Payroll for Week at l0%W-......- 4130, 00
Unit Cost per 1000 "Counts" ----- . ... $4.00

Note: Thee figures are assumed, and are based upon a sae of 30,000
"counts" for the week, sore at 4 cents per "count", and a shop labor cost of
10% of the selling price.

Table of Comparative Unit Costs of Labor Per 1000 "Counts"

Average Average Average
Best Fc This for Same For April in
Record Year to Period Pre- Previous-
Date ous Year Ari8 il15 etc

$3.90 $4.10 $4.25 $4.20 $4. 00 $3.95

Note: It is easier to compute all unit costs in terms of 1000 "counts"
carrying the cost in dollars and cents, than in terms of a single "count",
which would require fractional figures.

By following the cost of labor each week and comparing it with other
weeks of the srmae month, with the average of that month a year ago and with
the'best record"; also by comparing the average cost for this year to date, with
the average cost for the same period of the previous year, and with the-"Best
record", the proprietor can keep himself informed about his labor cost. Then,
if he is willing to exchange cost data with other association members ( any
many will be glad to do this), he can find out how his cost, week by week, an+-
how his "best record", compares with that of other bakers, among whom he can
undoubtedly find, some whose solume of production and working conditions are
similar enough to his own to make the comparison of valuee.

I* Manaer' s Supervision - by a careful study of labor cost figures

ANALYSIS AN!) DISTRIBUTION

REGULAR AND ADEQUATE SALARY FOR PROPRIETOR

IDstances are frequent 4n which administration and office salaries and
expenses are not included at all in what the manager is willing to consider his
cost of production. This is usually the case when he is anxious to figure a
low enough cost to permit reduction of selling price in order to influence a few

so 8 .

customers that be think he needs in his business. Then we find instances
where the cost price is made to include something for these important and
prcper charges, but by no means an adequate amount. We are therefore taking
this opportunity of impressing on the bakery manager the necessity of,

Firs t handling his bakery on the well established business principle
that his personal and family money matters must be kept entirely separate from
his business finances, even when the proprietor is the sole and only owner of
the bakery.

Second taking out and charging the business with angular salary for
his own services and the services of members of his family who work in the bak-
ery and doing this on the regular pay days.

third, making this regular salary at least equal to the commerc
value of his service, that is, what his particular services would be worth
in the open market if he were to hire out to someone else; or, to put it-in
another way, what he woUig have to pay to get some one else to do the-work
he is doing, and to do it equally as well.

In this connection, it should beismembered that the human machine is
subject to wear and tear just the same as the mixer or the oven, and that
therefore, after reaching a certain point, it gradually deteriorates. A per.
son's salary must, tb #efore, be fixed sufficiently high during the period of
greatest energy and activity, to permit of laying aside a sufficient portion
of it to provide for the time when his earning capacity will have depreciated.

Moreover, every business man is entitled to at least one vacation a
yearand it is generally a benefit to his business if he takes it. He should
have no hesitancy* whatever in charging his regualr salary for the vacation
period; he is entitled to it, and his cost of production should include it
always assuming that his selling price shall include his entire cost of pro-
duction plus a profit.

If the cash balance should be low, there is no reason why the owner.
cannot-leavre a portion of his salary in the business, or. his. entire salary
if he can afford it;. but it should be considered strictly as a loan, credited
to his personal account, charges into-administration and office expense, and
so included in his cost of. production. If he doeasn'#t do-that he merely gives
away his time, . energy and thought to his customers, and int1e long run he
will not even be thanked for it.

Administration and Office Eonse Properly Includes the followin:

Inasmuch as the wholesale and retail selling expenses., and the mari
ufa.cturing costs, in the department at bread, cake and pastry should be kept
separate, it is desirable to make an apportionment of Administration and
Of fice Expense into

Manufacturing and Operating Department
Sales and Delivery Department
Sh~x~g3a~ aDepartment

-, 9-,.

This apportionment should be of the-total only, of the Administration
and Office Expense for each month; and should generally be made on estimated
percentages, determirned by the proprietor after carefully considering the rel-
atiE7C assistance rendered by the office ( including himself ) to each of the
divisions mentioned.

For example, he might determine the following apportionment to be
about correct:

50% Chargeable to Manufacturing and Operating.
40% Chargeable to Sales and Delive "
1%,Chargeable to Shipping Sales.

COWPARATIVE RECORDS

This approtionment should be studied once a month, since the relative
assistance rendered by the office to each department of the business will vary
from time to time. Comparative records should be kept and comparisons made
each month with the expense of the last previous month, the next preceding
month, the corresponding month of the previous year, and with the best record
- that is, the lowest expense for any month of record. This will enable the
proprietor to check his progress intelligently; and regular consideration of
the subject will gradually perfect his methods of figuring.

DEPRECITON. INSURANCE TAXS AND INTEREST

AMPORTA EE OF THEIR CORRECT CONSIDERATION IN COSTS

ANALYSIS AND DISTRIBUTION

There are no items of expenditure so frequently omitted in figuring
costs, as the fixed overhead expenses, that is, depreciation, insurance, taxes
and interest, Many a business failure can be traced definitely and unquestion
ably to the management failure to consider these items adequately in establish-
ing his selling price. Not only the smaller industries, but many of the larg .
er ones as well, are guilty of unsafe practice in this particular.

The danger from this source is particularly treacherous because the
evil effects do not show quickly nor in a pronounced manner. Slowly and grad-u
ually, though none the less surely, however, such neglect will sap the life
blood of the business.

The process may be compared to the ef~fedt of certain poisons which is
indefinitely delayed, and isqneithe cute npinful until it has run its

man ent value; is going to last a good many years. 2ff it is a building, it may
last thirty years, if a horse, it may last only six years; if a breadpnit
may on y last one year; but at any rats it is, for the time being at least.
an .nvastment, an asset; and the baker therefore correctly charges the purchase
cost: to an asset or investment account in his ledger.

40 10 Of

As the years pass, the building gradually deteriorates, despite the
fact that it is kept in ropatr# a4 in the course of time it will iritably
have to be sacrificed'and repla ed: The delivery equipipt 4pt4'iorates more
rapidly, and the pans and similar equipment still more rapidly.

Besides the wear and tear, there is another factor that effects the
useful life or many items in the investment list; and that is the possibility
or probability of being discarded as obsolete, long before they are worn out,
The building, the oven, or the machine, gets out of date; new and better build..
ing layouts are discovered; improved sanitary conditions are demanded; new
machines are invented and put on the market, which are so superior and oper-
ate at such a saving over the old that a baker may feel he cannot afford to con-
tinue the use of the old.

And so it becomes necessary to charge manufacturing costs each month
and to include in the selling price, such proportionate part of the purchase
cost of all the asset items as will equal the amount originally paid for them
by the time they are worn out or for any reason discarded. If this is done,
money will be available out of the income of the business, to replace outworn
or obsolete equipment; and no new capital will be required for that purpose.
If it is not done, nothing will be available for replacement, and unless new
capital is furnished, the bakery of necessity passes out of existence, having
gradually given away its plant to its customers.

DIVISION OF ASSETS AND RATES OF DEPRECIATION

Inasmuch as the average life- of the different kinds of plant equip.
merit varies, it is necessary to carry the purchase cost of such equipment
under several groups on the ledger, as for example-

Buildings
Machinery and Ovens
Other Shop and Store Equipment
Of fice Furniture 'nd Fixtures

Well constructed brick bakery buildings will last from 2S to 40 years
and a depreciation rate of 3% a year should be ample* For frame buildings
at least 5% a year should be charged off.

Ovens will average approximately a ten year life, and 10% a year shu~ld
be charged off for them.

Machinery 8 years, 12j% to 1510,

l ETA A S ANDINTERST

These are fixed charges that are paid but once a year, or at most but
a few times a year, and have to be spread over the expense of each month.The
best way of doing this, is to charge aoch month with oneiwtwelfth of the totml
cost of each of these items for the previous year ; unless for. some kn~own rea..
son, such as reduction of no tes cutef a . ng, or decrease in insurance rate,
or increase in taxable vaLue s, tle-Thia--e for the current year is going to
be greater or less; in whichx ;ase o'-s ytvle. fthi of the estimated cost for the
current year should be taken.

"r UI

MAFACTURING, EW&]aENS

CCIaPOSITION OF TOTAL MANUFACTURING EPENSE

Manufacturing Expense is composed of the follwig three item':-

(1) DIRECT MANUFACTUJRING EXPENSE.

(2)-THE PORTION OF ADMINISTRATION AND -OFFICE EJZNS
PROPELY CHARGEABLE TO WJUFCTURITG

(3) E PORTION OF FIXED AND DISTRIBUABLE E ,
PROPERLY CHARGEABLE TO lANUFAVTUNG

DCT MUFCTURNG EXPENEincludes thoseiteaw ae i
able exclusively to manufacturing. The main groups that fal nd theshead

Fuel for Ovens - all wood, coal, coke0gato6 etc.,s sed
exclusively for heating ovens.

Sho Suples stationery used exclusively by and for the
Manufacturing Department, bread labelsf brooms, soap and
other cleaning' supplies, towels, motor o, g*'ae, peels,
and any other similar articles used by arid for the Manu-
facturing Department.

R-aepairs to is oOenufacturinrse "e st n
machines and other equipment used exclusively by th.
Manufacturing Department.

POWer Li t and Water Purchased or. rove .

undry anufacturi Exe miscellaeous items ot
included in above groups.

FIXED AND DISTRIBUTABLE EXPENT~i includes:

Depreciation, Insurance, Taxes. and Interest wIt~ will be ixiadvis.
able for most baker s to attempt an intricate division of these items. U
would recommuend that a. division of the total o f these items be maetween
Manufacturing Expense and Selling Expense in the ratio that the asset -value
of etore, and delivery and shipping equipment, including stables. garagoe
and wagon room, bewis to the asset value of the balance of the plant. which

UIIT COoF MANUF'ACTURING EXPENSE

. Having obtained the Total Manufacturigg Expense by combining the
tems. mentioned above, the unit cost of Man ufacturin Expense should be
rlg~rsd (as for Labor) by divi"ding the production in "counts" for the month
into the Total Manuf acturng xn se for that mon th. Comparative record of
the unit costs of manufacturing Expense should be kept, not only for cost
record purposes, but al so for the purpose of checking and controlling such
expense. This record should be kept in the same manner anid in the asm form

am 12 s

as that for unit costs of labor, except that the period wul4 a month in-
stead of a week. In fact, everything under the head "Checking Labor by Cow.
parison of 'Labor Costs"' will also apply to checking Manufacturing Expense,

BARN AND GARAGE EXPENSE

WH RE ThEY BELONG IN COSTS

HOW THEY ARE CONTROLLED

Unlike most industrial managers, the proprietor of the bake shop has
by no means ended his worries nor his expense when he has delivered his man-
ufactured goods to the shipping floor ready for delivery. There is no trans
portation company ready and. anxious to relieve him of further responsibility
by giving him a bill of lading guaranteeing safe delivery to the customer.
Nor can he sell his goods F. 0. B. bakery.

He is obliged to go into the delivery business himself; to purchase,
own and maintain delivery equipment, to hire help and incur all the risk and
liability until his manufactured products have been delivered at the door of
the customer, and generally into the very show case (or kitchen) itself. More-.
over, hemust pay all the. expenses of this delivery service, and his only means
of getting it back is to include every penny of it in his cost, and therefore
in his selling price.

DIVISIONS TO BE CARRIED IN LEDGER

The detail of carrying Barn and Garage Expense in the accountsvaries
with the' size of the bakery. In a bakery turning out an average of 30,000
counts per day,. the expense of each automobile may be kept separately on the
ledger in order that the proprietor may have a check on the care ercised by
several drivers.

In other bakeries separate accounts may be kept according to the nature
of the expenses, A bakery may subdivide the expenses as -follows;

Repairs and Maintenance of Barn
Repairs and Maintenance of Garage
Repairs and Maintenance of Harness
Repairs and Maintenance of Wagons
Repairs and Maintenance of Automobiles
Barn Wages
Garage Wages

For small bakeries it is not necessary to keep such an extensive list
of accounts. Perhaps four Accounts "repairs, wages, supplies and udrChig
es, l will give the proprietor all the detail. he will need, as his close contact
with all phases of the business makes greater detail unnecessary.

Barnard Garage expenses should be kept in separate accounts in order
that a comparison may be had c f the cost per mile traveled, and of this cost
per 1000 "counts" delivered%, by wago~n and by automobile respectively. Of
SCourse, in any such cornparI c-Rthe density of customers along the route must
by given due consideration, as tis factor has a most important bearing on both
the cost per mile and the cost per 0,i0 "counts" delivered.

- 13 ..

t2_ TT%' ' SPEC;IAILY IMPORANT

The portion of depreciation chargeable to Barn and Garage Expense as
one of the *actors of Fixed and Distributable Expense is particularly important.
The average life of horses and automobiles is comparatively short, and new ex-
penditures have to be made in this connection at rather frequent intervals.

CHARGING OF BARN AND GARAGE SUPPLES
but
We would recommend for all/the largest bakeries, that Barn and Garage
Supplies be charged immediately and directly to Expense, rather then to the
Raw Material Stock Account when purchased, and later to Expense when the 'Supi.
plies are given out for use. Nevertheless, these supplies should be kept un-
der the supervision of the Stock Clerk and should be given out by him as need.
ed, the requisition to be signed b) some authorized person. This requisition
would serve only as authority for the Stock Clerk, and would not be needed for
accounting purposes.

RECORDS TO BE KEPT

A record of the amount of gasoline delivered to each automobile should
be sent to the office and the Stock Record Sheet for gasoline credited there':
with. An individual record of gasoline consumption by automobiles should be
kept, together with a record of the miles traveled by each automobile, so that
the miles traveled per gallon can be figured at the end of each month. In this
way all of the geoline will be accounted for, or the records will show a shrink.
age in the stock of gasoline or a decrease in the mileage per gallon. In either
case the person responsible will be known, and the leak can be corrected.

A record of mileage obtained from tires should also be kept.

It will be difficult to check the consumption of horse feed, if the
barn man is permitted to use his own judnient. We know of one baker who re"s
quires that his barn man weigh out the feed for each anid. strictly in ac-.
cordance with orders. Incidentally his horses are always in good condition.
He credits the Stock Record Sheet for feed with the quantity prescribed. If
the record shows more, he knows, there is either loss by theft or that the barn
man is disobeying orders. A thorough control is quite possible by such methods.

SHIPPING DEPAR2I4ET AND SALES EWENS

INCLUDING LOSS ON STALES

SHIPPING PD4'A(NEXPENSE consists of*

and the expense consists of (a) bor of the shippin clerk and his helpers,
properly chargeable to each of these divisions; and (b) s or pro-
portion of other expenses of the Shipping Iepartmnt, chargeable to each of
these two divisions.

SES EXPENSE consists of:

1. CITSy jSINES EXNSE

This includes all expense incurred in selling and delivering in or near
the city and may be carried under the following headings:

"14 -

Salaries and Commission of Salesmen and Route Su erintendent -in-
eluding bonuses of any kind.

Barn and Garage Expense - Previously explained.

Advsitn - c rds, circulars, newspapers, postage, samples, signs,
calendars, posters, premiums and all other more or less regular advertising.

sales Develo rient Eyp ense c olic itors and demonstrators' salaries
the expense of corveyances for them, and all other expense incurred in any
special effort to get new business.

LOss on Stale Goods difference between the cost of manufacture q
the returned goods, and the amount obtained from the sale of such goods.

The Portion of Administration and Office Epense Properl Chargeable

The Portion of Other Distributable E ense Pro erl.Char sable to Cit
Whclesae Sell.in - rent and heat, repairs to buildings, etc.

Sundry Charges and Exenses a expenses not specifically mentioned
above that are chargeable to City Wholesale Selling.

2. SHIPPING SALES EXPENSE

This includes all expense incurred in selling and delivering goods
outside the city, and may be carried under the following headings:

Containers includes cost of all paper shipping carriers; and the
depreciation, niaintenance and return express charges on all returnable ship-
ping carriers.

P paid Express and Parcels Post o includes outgoing charge-s obut
does not include charges for return of empty carriers.

Sud eivrLbr Supplies and Expense includes charges for
service rend~ered- to the Shipping Sales Department by Barn or. Garage Labor and
Equipment. This service should be credited to Sundry Ehargea and Expenses
of Wholesale Selling Department, -to which all barn and garage expenses .were
originally charged.

Advertising as explained under City Wholesale Selling Expense.

Sn Ch esnEen tall expenses not specifically mentioned
abovoe a'e h:eablI to Shipping Sales.

15 ..

METHOD OF FIGURING LOSS ON STALES

It has been our experience that comparatively few bakeries are in-
cluding this most important, and, in many instancea, exceptionally heavy
item, in their costs.

Stales returned should be listed by kinds of goods and then priced
and ae ede at the total ostb If actual cost is not available, use es-
t;mated os , The diffore b,- hetween the total manufacturing cost so ob-
tained and the total amznV '. received from the sale of the returned goods
represents the loss or. stales

In order to keep down this loss, a record should be kept on each
sal sr an showinig the nu~her of "tount s" delivered to him, the number of
"Countse" returned by hi; and the effort should be made to keep each sales.
mn bew a naxima e stab lished percentage.

DTS'1'1' "Ir"O BET ' I ASer"'T LABILTYAD OT COU

ETERPJMTNATION OF MONTHLY ?ROFIT OR LOSS

DEFINTTON OF ASSETS

Assets are thos items that have a more or less permanent value, and
may b' converted into cash at any time. They are of two kinds.

Current or yick Assets are such as may be readily converted into
csh, at cr near full value. They include cash in bank or elsewhere, accounts
r3eivabio, (money due from customers), and merchandise stock - such as raw
maeriair, wrapping supplies and shop supplies.

Fixed or Permanent Assets are those items that cannot be so readily
converted ii r o ca y II they are to be sold, they must be sold at second-
hand value, wit.. the single exception of the building eite. They include
site or othler land owned by the business; buildings of all kinds; machinery
of all kinds; miscellaneous shop equipment, such as troughs, racks, pans,
tafle , eta; ; horses, wagons and harness; automobiles, store fixtures, and
of fioa f~rnituue.

A 3SET AGCCUITT3

The acccounts carried on the ledger for assets are known as "asset
1c ou9&- No matter how small] a baker"'s business may be,- he should have
a seixtrate a4c.cun t on his ledger for each of the assets listed above.

D-' COST ACCOUNTS

T1 azccunts to which expenditures essential to the processes of
ma-, ctvrir g, selling, delivering and collecting, are charged, are known
as cct acc'ounts". These accounts are divided as follows:

Manufaturi~xpense ( to be kept separate for bread and other
products): A record of :: rawr material used, wrapping supplies used, shop
labor employed, taxes 1insup rano e rent or depreci ion of buildings, depreciaw
tion cf machines and miscetlaneuus shop equipment, repairs to buildings, re-
pairs to machine and to miscellaneous shop equipment, power and light, water
fuel, shop supplies.

r156.

Seling arid Delivery �xpen-e * A record of shipping department labor
palaries and commissions of salesmen, barn labor, horse and wagon expense,
auomobile expense,- advertising, sundry development expnse,, loss on stale
goods, depreciation on horses wagons, depreciation on automobiles.

Adminstrative and Office E ense : - A record of the proprietor's
salary avd other office salaries, printing and stationery, tolephon and tel.-
egaph, postage and office supplies, association dues, donations and charity.,
depreciation on office furniture, attorney and other professional fees.

FR()FUT' AND LOSS

The sum of all the charges for a month included in the Cost Accounts
gives the total cost of doing business.

The sales for the month (bLlls rendered and cash collected) represent
the total income from the business.
The difference is the profit or loss for the month, and should b e the
exact amount required to balance assets and liabilities at the end of each
month.

The essential feature, without which it is impossible to figure thes
profit or loss, is to know the value of the stock on hand (raw materials) at
the end ot the month and used during the month.

This book is a preservation facsimile produced for
the University of Illinois, Urbana-Champaign.
It is made in compliance with copyright law
and produced on acid-free archival
60# book weight paper
which meets the requirements of
ANSI/NISO Z39.48-1992 (permanence of paper).

Preservation facsimile printing and binding
by
Northern Micrographics
Brookhaven Bindery
La Crosse, Wisconsin
2010