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Title: Cyclopedia of Commerce, Accountancy, Business Administration v. 2
Author: Various
Language: English
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Copyright Status: Not copyrighted in the United States. If you live elsewhere check the laws of your country before downloading this ebook. See comments about copyright issues at end of book.

*** Start of this Doctrine Publishing Corporation Digital Book "Cyclopedia of Commerce, Accountancy, Business Administration v. 2" ***

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                        Commerce, Accountancy,
                        Business Administration

                               VOLUME 2

                     _A General Reference Work on_


                        METHODS AND MANAGEMENT

            _Illustrated with Over Two Thousand Engravings_

                              TEN VOLUMES

                      AMERICAN TECHNICAL SOCIETY

                            COPYRIGHT, 1909

                            COPYRIGHT, 1909
                      AMERICAN TECHNICAL SOCIETY

                  Entered at Stationers' Hall, London
                          All Rights Reserved

Authors and Collaborators

JAMES BRAY GRIFFITH, _Managing Editor_
 Head. Dept. of Commerce, Accountancy, and Business Administration,
 American School of Correspondence.

 Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public
 Editor of the American Edition of Dicksee's _Auditing_.
 Formerly Lecturer on Auditing at the Evening School of Accounts and
   Finance of the University of Pennsylvania, and the School of Commerce,
   Accounts, and Finance of the New York University.

 Of the Firms of Jones, Caesar, Dickinson, Wilmot & Company, Certified
   Public Accountants, and Price, Waterhouse & Company, Chartered

 Of the Firm of Lybrand, Ross Bros. & Montgomery, Certified Public

 Of the Firm of F. H. Macpherson & Co., Certified Public Accountants.

 Consulting Public Accountant.
 Author of "Loose─Leaf Bookkeeping," and "Anti─Confusion Business

 Of the System Department, Burroughs Adding Machine Company.

 _Editor─in─Chief_, Textbook Department, American School of

 Public Accountant and Auditor.
 President, Incorporated Accountants' Society of Illinois.
 Fellow, Institute of Accounts, New York.

 Of the Cleveland Bar.
 Lecturer on Suretyship, Western Reserve Law School.
 Author of "Principles of Business Law."

 Auditor, Westlake Construction Company.

 Secretary, American School of Correspondence.

 Associate Editor, Textbook Department, American School of

 Formerly Manager, System Department, Elliott─Fisher Company.

 Specialist in Industrial Organization.
 Author of "Machine─Shop Economics and Systems," etc.

 Assistant Editor, Textbook Department, American School of

 Cost Expert.
 Chief Accountant, Fore River Shipbuilding Co.

 Associate Professor of Mathematics, Armour Institute of Technology.

 Advertising Manager, The McCaskey Register Co.

 Registrar and Treasurer, American School of Correspondence.

 Managing Editor, _Engineering─Contracting_.
 Author of "Handbook of Cost Data for Contractors and Engineers."

R. T. MILLER, JR., A. M., LL. B.
 President, American School of Correspondence.

 Manager of Advertising, National Cash Register Co.

 Advertising Manager, Burroughs Adding Machine Company.
 Author of "The Credit Man and His Work" and "Financial Advertising."

 Consulting Engineer.
 Chief Engineer, Construction Service Co.

 Publicity Manager, American School of Correspondence.

 General Manufacturing Agent for the China Mfg. Co., The Webster Mfg.
   Co., and the Pembroke Mills.
 Author of "Cost Finding" and "Cotton Mills."

  Advertising Manager, Elliott─Fisher Co.

 Filing Expert.
 Secretary, Browne─Morse Co.

 Expert on Loose─Leaf Systems.
 Formerly Manager, Business Systems Department, Burroughs Adding
   Machine Co.

 Head, Instruction Department, American School of Correspondence.

Authorities Consulted

The editors have freely consulted the standard technical and business
literature of America and Europe in the preparation of these volumes.
They desire to express their indebtedness, particularly, to the
following eminent authorities, whose well─known treatises should be in
the library of everyone interested in modern business methods.

Grateful acknowledgment is made also of the valuable service rendered
by the many manufacturers and specialists in office and factory
methods, whose coöperation has made it possible to include in these
volumes suitable illustrations of the latest equipment for office use;
as well as those financial, mercantile, and manufacturing concerns
who have supplied illustrations of offices, factories, shops, and
buildings, typical of the commercial and industrial life of America.

 Formerly Professor of Principles and Practice of Accounts, School of
   Commerce, Accounts, and Finance, New York University.
 Author of "Accounts of Executors and Testamentary Trustees."

 Specialist in Factory Organization and Accounting.
 Author of "The Complete Cost Keeper," and "Factory Manager and

 Specialist in Corporation Accounts.
 Author of "Quasi Public Corporation Accounting and Management."

 Advertising and Sales Specialist.
 Author of "How to Do Business by Letter," and "Art of Writing and
   Speaking the English Language."

 Author of "Theory of Accounts."

 Managing Editor of _The Engineering Magazine_.
 Associate in Mechanical Engineering, Columbia University.
 Corresponding Member, Canadian Mining Institute.

 Public Accountant.
 Specialist in Factory Accounting.
 Contributor to The Engineering Press.

 Associate Editor of the _New York Journal of Commerce_.
 Author of "The Modern Bank."

 Dean of the New York University School of Commerce, Accounts, and Finance.
 Editor, _The Journal of Accountancy_.
 Author of "Money, Exchange, and Banking."

 Of the New York Bar.
 Author of "Classified Corporation Laws of All the States."

 Of the New York Bar.
 Author of "Corporate Management," "Corporate Organization," "The Modern
   Corporation," and "Partnership Relations."

 Author of "The Laws of Business."

 Advertising Manager, Burroughs Adding Machine Company.
 Formerly Manager of Publicity, National Cash Register Co.
 Author of "The Credit Man and His Work," and "Financial Advertising."

T. E. YOUNG, B. A., F. R. A. S.
 Ex─President of the Institute of Actuaries.
 Member of the Actuary Society of America.
 Author of "Insurance."

 Professor of Accounting at the University of Birmingham.
 Author of "Advanced Accounting," "Auditing," "Bookkeeping for Company
   Secretary," etc.

 Author of "Auditors, Their Duties and Responsibilities," and

 General Manager, The Herring─Hall─Marvin Safe Co.
 Formerly General Manager, National Cash Register Co.
 Author of "Profit Making Management."

 Specialist in Cost Analysis and Factory Betterment.
 Author of "Systematic Foundry Operation and Foundry Costing," "Maximum
   Production through Organization and Supervision," and other papers.

 Consulting Engineer.
 Director of Organization and Betterment Work on the Santa Fé System.
 Originator of the Emerson Efficiency System.
 Author of "Efficiency as a Basis for Operation and Wages."

 Specialist in Accounting Methods.
 Editor, _Beach's Magazine of Business_.
 Founder of The Bookkeeper.
 Editor of _The American Business and Accounting Encyclopedia_.

J. J. RAHILL, C. P. A.
 Member, California Society of Public Accountants.
 Author of "Corporation Accounting and Corporation Law."

 Ex─New York State Examiner of Certified Public Accountants.
 Ex─President, American Association of Public Accountants.
 Author of "American Accountants' Manual."

 Specialist in Industrial Organization.
 Formerly Comptroller, Sears, Roebuck & Co.
 Author of "Organizing a Factory," and "Woods' Reports."

 President of the Union Dime Savings Bank, New York.
 Author of "The Accountancy of Investment," "Extended Bond Tables," and
   "Problems and Studies in the Accountancy of Investment."

 Author of "Business Education and Accountancy."

 Author of "Bank Directors, Their Powers, Duties, and Liabilities."

 Of the Wharton School of Finance, University of Pennsylvania.
 Author of "Funds and Their Uses."



With the unprecedented increase in our commercial activities has come
a demand for better business methods. Methods which were adequate for
the business of a less active commercial era, have given way to systems
and labor─saving ideas in keeping with the financial and industrial
progress of the world.

Out of this progress has risen a new literature──the literature of
business. But with the rapid advancement in the science of business,
its literature can scarcely be said to have kept pace, at least, not to
the same extent as in other sciences and professions. Much excellent
material dealing with special phases of business activity has been
prepared, but this is so scattered that the student desiring to acquire
a comprehensive business library has found himself confronted by
serious difficulties. He has been obliged, to a great extent, to make
his selections blindly, resulting in many duplications of material
without securing needed information on important phases of the subject.

In the belief that a demand exists for a library which shall embrace
the best practice in all branches of business──from buying to selling,
from simple bookkeeping to the administration of the financial affairs
of a great corporation──these volumes have been prepared. Prepared
primarily for use as instruction books for the American School of
Correspondence, the material from which the Cyclopedia has been
compiled embraces the latest ideas with explanations of the most
approved methods of modern business.

Editors and writers have been selected because of their familiarity
with, and experience in handling various subjects pertaining to
Commerce, Accountancy, and Business Administration. Writers with
practical business experience have received preference over those with
theoretical training; practicability has been considered of greater
importance than literary excellence.

In addition to covering the entire general field of business, this
Cyclopedia contains much specialized information not heretofore
published in any form. This specialization is particularly apparent in
those sections which treat of accounting and methods of management for
Department Stores, Contractors, Publishers and Printers, Insurance, and
Real Estate. The value of this information will be recognized by every
student of business.

The principal value which is claimed for this Cyclopedia is as a
reference work, but, comprising as it does the material used by the
School in its correspondence courses, it is offered with the confident
expectation that it will prove of great value to the trained man who
desires to become conversant with phases of business practice with
which he is unfamiliar, and to those holding advanced clerical and
managerial positions.

In conclusion, grateful acknowledgment is made to authors and
collaborators, to whose hearty coöperation the excellence of this work
is due.

Table of Contents

(For professional standing of authors, see list of Authors and
Collaborators at front of volume.)


  PURCHASING AND STORES DEPARTMENT          _By James B. Griffith_ Page 11

 Lists of Dealers──Catalogue Filing and Indexing──Special
 Quotations──Department Routine──Requisitions──Purchase Orders──
 Receipts and Invoices──The Stores Department──Organization──Taking
 Inventory──Installing a Stores System──Record Files──Materials and
 Supplies──Parts and Finished Stores──Machinery and Equipment Records


 Labor Records──Wage Systems──Day Wage──Piece Rates──Premium
 Systems──Efficiency Systems──Time─Keeping Systems──Time
 Clocks──Production Time Records──Time Cards──Mechanical Time
 Recorders──Piece─Work Records──Production Orders──Shop Orders──Order
 Register──Tracing the Order

  GENERAL EXPENSE                          _By Chas. E. Hathaway_ Page 127

 Expense Distribution──True Cost──Selling Expense──Methods of
 Distribution──The Man─Hour─Rate Method──The Machine─Hour─Rate
 Method──The Percentage Method──Productive and Non─Productive
 Labor──Expense and Production Cost Ledgers──Departmental
 Expenses──General Expense──How to Use Percentages──Operating
 Expense Statements──What the Statement Should Show──Comparative
 Figures──General Expense Statements──Charts

  COST SUMMARIES                           _By James B. Griffith_ Page 165

 Collecting Cost Data──Material Cost Records──Labor Cost──Job
 Cost──Comparative Cost Records──By─Products──Production
 Records──Controlling Accounts

  MACHINE─SHOP MANAGEMENT                   _By Oscar E. Perrigo_ Page 193

 Methods of Modern Manufacturing──Organization of Manufacturing
 Plant──Official Communications──Successful Management──Shop Methods
 and Records──The Employment Agency──Time Keeping──Time Cards──Paying
 Employes──Production Orders──Plant Orders──Storing and Issuing Stock
 and Materials

  COST─ANALYSIS ENGINEERING    _By R. T. Dana and H. P. Gillette_ Page 251

 The Science of Management──Subdivision of Duties──Cost
 Getting──Punch─Cards──Cost Distribution──Process Cost
 Subdivision──Output──Checking up Charts──Cost Reduction──Bonus
 System──Labor Saving Devices──Chronological Charts

  REVIEW QUESTIONS                                                Page 319

  INDEX                                                           Page 331




=1.= If the old axiom, "Goods well bought are half sold," holds true,
the purchasing department may well be considered one of the most
important in any business. In referring to the purchasing department
we have in mind that department, or division of the business, whose
duty it is to attend to the buying. In a large industrial enterprise
this may mean a department headed by a purchasing agent with several
assistants; in a department store, the buyers for the several
departments; in a small retail business, the member of the firm who
buys the goods. No matter whether the department be an extensive one,
or one requiring but a part of the time of one man, the principle is
the same.

Perhaps no other head of a department has greater need of complete
information and systematic records of his department, than does the
buyer. A man may have every qualification for a successful purchasing
agent, but, unless he has the most detailed information to aid him in
judging qualities and prices, his cannot be considered a successful
department. On the other hand, many a man, with no other qualification
than common sense, has built up a most successful purchasing department
because his work was thoroughly systematized.

We will consider the purchasing department from two standpoints: The
_information required_, and the _routine work_ to be performed. Under
the first head the requirements may be stated as:

 1. List of dealers.

 2. Full information about lines carried by each dealer or manufacturer.

 3. Records of special quotations.

 4. Information about qualities supplied by various dealers, to be
 obtained from records of past purchases.


=2.= The purchasing agent will have no difficulty in securing a list of
dealers. Even a new business is usually well supplied with circulars,
catalogues, and other information showing which dealers handle certain
lines. The principal concern of the purchasing agent is to so record
this information that it will be instantly available.

In some cases it is found necessary to make special lists of dealers,
and these are usually made on cards. A card is used for each article or
class of material that may be of interest, and the name of the class
is written at the top of the card. Below this are listed the names and
addresses of dealers and manufacturers supplying that particular class
of material. Since in most concerns this information can be combined
with the system of catalogue indexing, we do not show a special form
for this record.


=3.= A purchasing agent must necessarily gather much of the information
required in the operation of his department from catalogues supplied
by manufacturers. These catalogues are his technical library, in many
cases supplying the only available information relative to a particular
class of goods. Needless to say, some method must be provided for
carefully preserving these catalogues. They must be filed in such a
manner that they can be located quickly.

While every office has plenty of opportunities to accumulate an
oversupply of catalogues, resulting in a tendency to discard all except
those in which the purchasing agent may be interested at the time, it
is better to err on the side of a liberal supply. A catalogue that
comes in to─day may be of no immediate value, but it may become useful
a little later. It would be impracticable to keep every catalogue and
circular that reaches the office, but, if it is from a new concern, or
offers any new ideas, it should be kept, even though the subject is not
of especial interest at the moment.

Many systems of catalogue filing have been devised, and there are
almost as many styles of catalogue files on the market as there are
manufacturers of such equipment. No one system or style of filing will
answer the requirements in every concern. Each must build up a filing
system that will conform to existing conditions.

Though a system of universal application cannot be laid down, some
general suggestions may prove of value. No matter what the style
of receptacle used, catalogues are filed according to one of two
methods: The _alphabetical_, or the _numerical_. The alphabetical
method consists in the arrangement of catalogues in bookcases or other
suitable devices, according to the names of the publishers. For a
small number of catalogues, this is a very satisfactory system, for
the very reason that a purchasing agent soon becomes familiar with the
catalogues of different manufacturers, recognizing them by their size,
shape, or color.

A modification of the alphabetical system is one in which the
catalogues are arranged alphabetically by classes; that is, the lines
of goods in which the purchasing agent is interested are divided into
specific classes. In each of these divisions, the catalogues of all
manufacturers listing that class of goods are arranged in alphabetical
order. This method is also very satisfactory for a limited number of

For a large catalogue file the numerical system will prove the most
satisfactory. By this system each catalogue is given a number which
should be plainly shown on the back of the catalogue. All catalogues
of a specific class are placed in one group, and a series of numbers
is set aside for the group. To illustrate, we might have machinery
catalogues, numbers 1 to 100. All machinery catalogues would then be
given a number in that series. If the number be increased beyond 100,
the numbering system would be repeated by using 1_a_, 2_a_, etc.

With the numerical system, the catalogues of each group must be
arranged in exact numerical order, so that any catalogue may be
instantly located.

=4. Files.= As has already been stated, the style of file, as well as
the method of filing, or indexing, must conform to the conditions in
each individual office. However, the experience of the past is the
best guide for the future. As a general rule, sectional bookcases
will be found the most satisfactory for catalogues in bound form,
that is, those with substantial covers, and particularly those that
will readily stand on edge. An advantage of the sectional bookcase is
that all catalogues can plainly be seen, and even though a numerical
system be used, a man soon learns to recognize catalogues of certain
manufacturers without referring to any number or indexing system.

In every catalogue file will be found pamphlets, circulars, and
price lists which are not easily cared for in bookcases. For these
a section of a vertical file is recommended, and in many cases this
file has been used successfully for filing all sorts of miscellaneous
catalogues. It may be expanded to any capacity, and can be used with
equal success for either the alphabetical or numerical system of

Which is the better depends upon the circumstances, but in nearly every
case either the sectional bookcase or the vertical file, or perhaps a
combination of the two, will be found most satisfactory.

=5. Catalogue Indexing.= The principal value of a file of catalogues
lies in the index. A miscellaneous lot of catalogues is of very little
value unless it be properly indexed. True, most catalogues contain an
index, but this is not the sort of index required by the purchasing
agent. He does not care for an itemized list of every article
manufactured by John Jones & Co., but he does want an index that will
show him where he can find descriptions and prices of machines of a
certain class. A catalogue may list thousands of articles in which the
purchasing agent has no interest, where it lists ten that are of use to
him. These ten articles are the ones which should be shown in his index.

[Illustration: Fig. 1. Subject Card for Catalogue Index]

The principal index of the catalogue file is one arranged by subjects.
A card used for this purpose is shown in Fig. 1. At the top of the card
is listed the subject. Below this is given the names and addresses of
all manufacturers supplying the goods listed. In the columns at the
right are recorded the section number, catalogue number, and page. The
section number refers to the section in the file where the catalogue
will be found; the catalogue number to the catalogue itself; and the
page to the number of the page in the catalogue. In making up such
an index, it is unnecessary to include a long list of articles of no
especial interest, but simply those which the concern is obliged to
purchase. If an entirely new subject comes up, it can then be listed
after suitable investigation.

These cards are filed alphabetically, according to the name of the
subject. While in some large concerns a more elaborate file will be
necessary, this index can usually be kept in a small card tray in a
desk drawer.

[Illustration: Fig. 2. Title Card for Catalogue Index]

When the numerical system of filing is used, another index is necessary
to locate the catalogues by name. In most cases our chief concern would
be to locate the catalogue by subject, but there are times when it
becomes necessary to locate a catalogue by name. To provide for this
cross─index, the card shown in Fig. 2 is used. It will be noted that
the arrangement of this card is just the opposite of the subject index,
the name and address of the manufacturer being given at the top of the
card together with the reference to the section and catalogue numbers.
On the lower half of the card are listed the names of articles, made by
that manufacturer, in which we are interested. This card is also filed
alphabetically, but, of course, under the name of the manufacturer.
When the number of cards is limited, both forms can be filed in the
same index by using contrasting colors. For instance, a buff color
might be used for the subject index, and salmon for the name index.


=6.= Every purchasing agent receives, in addition to published price
lists, many special quotations on material and supplies in which he is
interested. Very frequently quotations are received at a time when he
is not in the market for the particular material offered, but they are
nevertheless of value for possible future use, and should be carefully

[Illustration: Fig. 3. Card Form for Special Quotations]

One method of handling special quotations is to set aside a special
file, or a drawer, or a section of the regular file, to be used
exclusively for quotations. The quotations, when such a file is used,
are usually filed alphabetically according to the name of the material
offered. This method of filing necessitates a cross─index to locate the
letters by names of firms and is not entirely satisfactory, owing to
the difficulty of locating the most advantageous quotations. There may
be a dozen or more letters from different firms quoting prices on the
same material, and, to find which is the lowest, all must be examined.
Again, a firm will make quotations on several lines in the same letter,
which necessitates copying a part of the items or reorganizing the
filing system.

In a business receiving many such quotations, it is advisable to
reserve a special file for them, but we recommend their being filed
according to the names of firms. To provide an accessible record of
special quotations, the use of a special form, either on cards or loose
leaves, is recommended. While no form universally applicable can be
devised, the several forms herein presented are very good examples of
forms in use and offer some valuable points for study.

Fig. 3 is a conventional form. This is a card, at the top of which
is provided space for recording the name of the article or class of
material. Below this is a record of all quotations received, giving
date, name of the firm from whom the quotation is received, and
initials of the salesman making the quotation, when made in this
manner. The columns following are for quantity, or size on which the
quotation is based, the list price, discount, net, whether f. o. b. or
delivered, and terms. The last two columns are for a record of orders

One of these cards is used for each article or class of material on
which special quotations are received. Every quotation is recorded,
no matter from whom, and when the card is filled a new one is added.
Whenever records on any one card become obsolete, the card can be
destroyed, keeping the file up to date.

The cards are filed according to the names of the articles or classes
of material. When the number of classes is limited, it will be
satisfactory to index the cards by means of a straight alphabetical
index. In this case quotations on bolts and all other articles, the
names of which commence with _b_, would be filed back of the _B_
index. If the number of articles is large, it is advisable to use
blank index guides and write the names of classes of material. As an
illustration, in some lines of manufacture, bolts will be used in all
sizes. On the index would be written the word _Bolts_, and back of
this the cards would be filed according to sizes, one card being used
for each size of bolt. The same plan can be carried out for each class
of material. It is also advisable, in a manufacturing business, to
subdivide the file as, between materials──representing materials which
actually enter into the construction of the product manufactured──and
supplies──representing all classes of factory supplies.

A card especially designed for a record of quotations on articles which
are listed in several sizes is shown in Fig. 4. The special feature of
this form is the inclusion of several columns in which to record prices
on a number of different sizes of the same article. This form would be
especially applicable in recording prices on such articles as bolts,
mentioned in the preceding paragraph.

[Illustration: Fig. 4. Quotation Card for Records of Prices of Several


=7.= Of equal importance is a record of orders placed. A purchasing
agent needs to know where orders for a given article have been placed
in the past, prices paid, promptness of delivery, and general character
of goods received. A convenient method of recording this information
is to use a card similar to the illustration, Fig. 5, which shows a
form used for recording purchases of a given article between specified
dates. The record itself shows the order number, quantity, name of
vendor, and full information about prices, including total cost per
unit. These cards are filed alphabetically, according to the name of
the article, exactly as described for the records of special quotations.

Fig. 6 omits some of the details, but provides for notations relative
to quantities, etc., under the heading, _description_. This form also
shows total amount, thus furnishing a record of the gross investment in
material of a given class.

[Illustration: Fig. 5. Detailed Record of Orders Placed]

[Illustration: Fig. 6. Record of Orders, Including Price and Amount]

Fig. 7 is used in a manufacturing business, and is intended to provide
a record of orders placed which will prevent a duplication of orders.
At the extreme right of this form is a column headed _purpose_. In
many manufacturing businesses, orders for certain materials are placed
after contracts have been received, and the material is specified
for use on a certain contract or order. In other establishments
several lines of goods are manufactured, but certain materials
enter into the manufacture of all lines. The purchasing agent may
receive requisitions from different sources for material required in
these various lines, and his records should show for what lines or
departments orders have been placed. Both of these contingencies are
provided for in this form, as the purpose of each order is plainly

[Illustration: Fig. 7. Order Record of a Manufacturer, Showing Purpose
for Which the Goods are Required]

[Illustration: Fig. 8. Record of Orders Providing for Details of Each

Fig. 8 is another special form, designed for use where certain
particulars are required. In devising a form, it should be made as
simple as possible, but, at the same time, provision should be made
for recording all particulars that may be of especial value in the
business in which it is to be used. The forms shown are presented, not
as being ideal for use in all cases, but for their suggestive value.

It is immaterial whether these forms be on cards or in loose─leaf form.
That is a question of individual preference, and can only be decided by
the person who is to make use of the system.

A good example of a form designed especially for use in a loose─leaf
system is shown in Fig. 9. This gives full information about both
orders and receipts, furnishing complete information relative to
quantities of any particular line handled.

[Illustration: Fig. 9. A Loose─Leaf Record of Goods Ordered and

The manner of filing is the same as with the card system, except that
these sheets are arranged between suitable indexes in a loose─leaf
binder. If desired, the order records and special quotations can be
filed together. By using forms of different colors the two can be filed
in the same index. This is a very convenient arrangement, for then all
records of both quotations and orders are found together. In some cases
all of the information required will be found on the order records.
When special quotations are received they can be filed in front of, or
immediately back of, this record.

While in some offices other special records may be advisable, all
necessary information for the average office relative to sources
of supply, prices, etc., are provided by catalogues and records of
quotations and prices described. Any other information required can be
provided for by a modification of the forms referred to.


=8.= Any discussion of the routine duties of the purchasing department
is necessarily more or less theoretical and any method of procedure
laid down is subject to such modification as will reduce it to a
practical working basis for the individual establishment. To present
the subject in a practical manner, therefore, this discussion will be
confined to the needs of an average manufacturing business. As has been
stated elsewhere in these papers, it is much less difficult to modify a
system designed to care for all details in a large establishment than
to expand the simple systems of a small business.

The duties of the purchasing agent in respect to the actual purchase of
goods may be classified as follows:

 1. Receiving _requisitions_, or orders for materials and supplies
 required for stock or in different departments.

 2. Placing and following up orders.

 3. Checking receipt of goods.

 4. Checking invoices for prices.

 5. Filing order copies and requisitions.

=9. Requisitions.= Under ordinary circumstances the purchasing agent
will place no orders until he has first received a requisition from
either the stores department or the department that requires the
material. The requisition should in every case state the purpose for
which the material or supplies is required, as well as by whom wanted.

Each department should be supplied with its own requisition blanks,
and, to make them distinctive, a different color should be adopted for
each department. Each department should also be identified by a letter
which will be printed on the requisition blank in connection with a
serial number. Thus the requisition numbers of one department will
start with _A_1, another _B_1, etc.

A positive rule should be laid down that all requisitions issued by one
department are to be signed by one person, usually the foreman. This
rule must be rigidly enforced and no requisitions honored without the
proper signature.

While requisitions should be drafted in a form to meet individual
requirements, Fig. 10 is given as a typical example that will be found
suitable in a large majority of offices.

The requisition, as a rule, is made in duplicate. The original goes
to the purchasing agent and the duplicate is retained by the foreman.
In some of the larger establishments a triplicate form is used,
the original and duplicate being sent to the purchasing agent. The
duplicate is then returned to the foreman with proper notations to show
that the order has been placed.

There are very few cases, however, where this is necessary. It is
not a good plan to require the foreman to keep records that can be
eliminated, and the average foreman does not care when or where the
order is placed; all he wants is the material. He has no interest in
going back of the purchasing agent on whom he has made requisition.

When the factory is located at a distance from the office, requisitions
should be in triplicate and bear the O. K. of the superintendent or
factory manager. The duplicate will then be filed in the factory office
pending the receipt of the goods.

[Illustration: Fig. 10. A Typical Form of Requisition Blank]

Foremen who make requisitions on the purchasing agent will retain their
copies until the material is received.

On receipt of the requisition, the purchasing agent first investigates
to find if the material, or some other that will answer the same
purpose, is in stock. If not, he looks up his sources of supply
and prices, and then he is ready to place the order. When a large
investment is involved, it is usually necessary to obtain special
quotations, and sometimes samples, before the order can be placed.

=10. Low Stock Report.= Another form of requisition is the low stock
report furnished by the stores clerk. Every article and class of
material in stock is given a _low_ limit. When this limit is reached
the stores clerk makes a report, Fig. 11, to the purchasing agent. This
is recognized as a notice to purchase. The report shows the low limit
and quantity in stock. It is important that the low limit be included,
for in some cases it will be found advisable to change the limit.
Material formerly used in large quantities may now be in so little
demand that it will be thought best to reduce the limit. At other times
it will be necessary to increase the limit.

[Illustration: Fig. 11. The Stores Clerk's Report of Low Stock]

The report is made in duplicate, a copy being retained by the stores
clerk until advised that the order has been placed. There is no special
need for keeping these reports permanently; all information that they
would supply may be had from copies of purchase orders.

=11. Purchase Orders.= When an order is placed, it is of course
necessary to keep one or more copies. The best practice is to make
purchase orders in manifold, providing as many copies as may be
required. Modern typewriters and carbon paper render it possible to
make all necessary copies at one writing.

The number of copies will be governed by the requirements of the
business. In a small business where the goods are received by the
purchasing agent, one copy is sufficient. When a receiving clerk is
employed, a second copy will be needed by him to check the receipt of

The illustration, Fig. 12, shows a set of six blanks, the original
and five copies, which will meet the requirements of the average
manufacturing business. These copies will be used as follows:

[Illustration: Fig. 12. Typical Form of Manifold Order Blanks]

_Original._ This is to be mailed or delivered to the vendor.

_Follow─Up Copy._ This copy is retained by the purchasing agent to
follow up the order. It is first filed in a tickler, or date file,
back of the date when an acknowledgment should be received. If no
acknowledgment is received, the vendor is followed up and the order
filed ahead.

The order is next filed under the date when the invoice should be
received. After the invoice is received, the order copy can be used to
follow up the transportation company for delivery.

_Receiving Copy._ This copy goes to the receiving clerk who files it
according to the name of the vendor. When the goods are received, he
checks the items against the copy and returns it to the purchasing
agent. In some cases he reports the receipt of goods by means of a
receiving slip, which will be explained later.

_Auditor's Copy._ In a highly organized business a copy of every order
is given to the comptroller or auditor. The principal use of this copy
is to furnish information in respect to obligations incurred, that
finances may be provided in advance.

_Cost Department Copy._ The copy furnished the cost department is to
post the cost clerks in prices. In many large factories complete files
of all orders placed are kept in the cost office. This is an excellent
plan since it provides a complete price record.

_Shop Copy._ This is intended for the special use of the factory when
located at a distance from the office. It is filed in the office of the
factory manager, under the name of the vendor, and supplies him with a
record of all orders placed for the factory.

=12. Checking Receipts.= The purchasing agent will be advised of the
receipt of goods by the return of the receiving clerk's copy of the
order, properly checked. Or, in some cases, it may be advisable to have
all goods reported on a special form, Fig. 13.

[Illustration: Fig. 13. A Form of Report of Goods Received]

Reapportionment of Work, Concentrating all Manufacturing Operations at
Topeka, Made it Possible to Return to General Stock Many Small Tools,
to be Used as Needed Instead of Held in Unnecessary or Excess Local
Reserve Courtesy of the _Engineering Magazine_]

In those factories where a receiving clerk, as well as a stores clerk,
is employed, the receiving slip should be made in duplicate. One copy
will go to the stores clerk with the goods and will later be sent to
the purchasing agent, furnishing a double check on the goods. The
purchasing agent will send one copy to the cost clerk, first noting
the account to be charged. This gives the cost clerk the necessary
information for charging out material when used.

One argument in support of this plan is that, having no record of
quantities ordered, the receiving clerk will be compelled to carefully
count and list all articles received. But it is also true that he is
obliged to make a detailed copy instead of merely checking the items
against his copy of the order.

Another point in connection with the work of the receiving clerk that
has caused much discussion, is the wisdom of furnishing him with a
record of prices. The prevailing opinion among manufacturers seems
to be that this should not be done. This need not interfere with the
operation of our system, for prices can be left off the receiving
clerk's copy by using a short carbon. This will keep all blanks uniform
in size.

=13. Checking Invoices.= It may be laid down as a rule that invoices
should first go to the purchasing agent, not for audit, but to be
checked for quantities and prices. The purchasing agent will check the
invoice, note on it the purpose, or the department for which the goods
were purchased, and forward it to the auditor. The transaction is then
closed so far as the purchasing agent is concerned.

=14. Filing.= After the O. K.'d invoice has been forwarded to the
auditor, the following papers remaining in the purchasing department
are to be filed:

_Follow─up copy of the order_, filed alphabetically under the name of
the vendor.

_Receiving clerk's copy of the order_, filed with the original

_Requisition from the department requesting the goods_, filed
numerically according to the departmental serial number; that is,
all requisitions from _Dept. A_ will be filed together in numerical

When a record of goods received has been made on the forms prescribed,
the purchasing agent's records will be complete.


=15.= In this discussion, the _stores department_, or _stock
department_ as it is frequently called, is treated as a subordinate
division of the purchasing department. Properly organized, it becomes
one of the most valuable from a profit─making standpoint. Without
organization it may degenerate into one of the most useless.

To attain the state of efficiency of which it is capable, the
organization and system of operation of the stores department must
be of the highest order, otherwise it cannot be expected to fulfill
its mission. So much has been written about the failure of stores
departments and stores systems to produce desired results, that a
statement of what is meant by _stores department_ seems to be demanded
before we can arrive at intelligent conclusions regarding its functions
and operation.

Broadly, the stores department is that department of a business which
has the custody of its stock in trade, materials, supplies, and
other physical property, except real estate. Reduced to a concrete
example, in a trading business the term means that department which is
responsible for the storage and proper care of the goods purchased for
resale; also the materials and appliances required in the operation of
the business. There may be no department known by this name; there may
be no one man whose duty it is to supervise the work; nevertheless,
the department exists. Every clerk in a small retail store may be
a receiving clerk, a salesman, and a stores clerk; or in a larger
establishment several men may be employed as stockkeepers; but in both
cases the responsibilities of the stores department are shouldered by
some one, perhaps by several people.

Like every other department of a business, the organization of a stores
department depends largely upon the nature of the business. To furnish
an illustration that can be readily understood, we will treat the
organization and operation of the stores department from the standpoint
of a manufacturer.


=16.= The stores department is properly under the direct supervision
of the purchasing agent. In the last analysis he is the man who is
responsible for the maintenance of a stock of materials and supplies
which will at all times be adequate for the business. It is proper,
therefore, that he should have supervision over the _receipt_,
_storage_, and _delivery_ of the goods which he has purchased.

In the actual operation of the stores department, the purchasing agent
will delegate his authority to the chief stores clerk, who will in turn
be assisted by the necessary number of stock men and a receiving clerk.
It will be the duty of the chief stores clerk to see that all materials
are properly stored, to maintain the records prescribed, and to furnish
such reports as may be necessary regarding the movement of the stock.
He will have general supervision over the entire department. In the
actual physical operations of the department, he will be assisted by
stock men who are subject to his orders.

In small establishments the stores clerk also acts as receiving clerk,
but in the larger enterprises, a separate receiving clerk is required.
He will check the receipt of all goods, deliver them to the storage
places prescribed by the chief stores clerk, and make such reports as
may be prescribed. While he is, generally speaking, under the orders
of the chief stores clerk, he also makes certain reports direct to the
purchasing agent.


=17.= Before a stores department can be successfully organized an
_inventory_ must be taken, for this inventory will be the basis on
which the records of the stores department are founded.

Stores record systems are quite commonly referred to as perpetual
inventories, and, occasionally, such a system is pointed to as a
failure for the reason that at the end of the year, or other fiscal
period, the inventory, that is, the actual physical inventory of the
stock, does not check with the records. The fact that systems of stores
records have been regarded as inventories _in fact_, is responsible for
most so─called failures. Regarded in its proper relation, a perpetual
inventory is nothing more nor less than an accurate accounting of all
goods that come into and go out of the establishment, these records to
be checked by an actual physical inventory with such regularity and
frequency that the accounts can safely be considered as exhibiting
a correct inventory. In considering the question, how to take an
inventory, we refer, therefore, to an actual physical inventory, that
is, a count of every article in stock. When once this inventory is
taken and properly recorded, it is entirely possible to install and
maintain systems which will make it unnecessary to inventory all of
the physical property at any one time.

It has been the general custom in a large manufacturing establishment
to shut down for a period of greater or less duration, running all the
way from two or three days to as many weeks, for the purpose of taking
an inventory. Since it has been considered necessary to shut down for
this purpose, inventories have, as a rule, been taken but once a year.
All this is unnecessary, for, with proper methods, it is possible to
take even a complete inventory without perceptible interruption of
the operation of the plant. The first step is to decide, at just what
time the inventory is to be taken, and to have all foremen get their
shops in readiness. This means a general cleaning up which will make it
easy to locate and count, weigh, or measure the _materials_, _tools_,
_supplies_, and _work in process_. Then, at a specified time the work
of taking the inventory should be started simultaneously in every shop.

The making of the necessary records will be in charge of a clerk who
will be assisted by the foremen and as many helpers as may be required.
Each clerk is given a supply of tags, ruled as shown in Fig. 14. These
are made in the form of shipping tags, but larger than the usual sizes
used for that purpose. It will be noted that the tag is perforated near
the top. The portion above the perforation shows the season and date of
inventory, the card number, and the department. The card number and the
department are repeated on the lower part of the card, which is also
divided into two parts. The upper half is for an inventory of material,
finished stores, and work in process, divided as to _description_,
_name of last operation_, the _quantity_, and the _unit_. The lower
half is for an inventory of tools, machinery, equipment, and supplies,
with provision for the _description_, _quantity_, _unit_, _numbers_,
and _location_. By _unit_ is meant the unit in which the material or
supplies are priced, as pounds, yards, dozen, gross, etc.

The first operation is to attach one of these cards, which are
consecutively numbered, to each machine, tool, bin, rack, or pile of
material. Then the clerk and his assistants will go through the shop
and weigh and count the material represented by each tag, recording
the items on the tag itself. As this is done, the lower half of the
tag is torn off. Since a record is kept of the card numbers given to
each clerk, it will be necessary for him to turn in every one, and if
care is used in placing the tag on every article before the count
has begun, there is no possibility of material being overlooked. As
a further precaution against the loss of cards, the remaining part
of the tag is afterward removed and sent to the office for checking
against the main record. As the tag is used merely to insure a record
of quantities of all property, it is unnecessary to include prices.

[Illustration: Fig. 14. Labor─Saving Inventory Tag]

With this method an inventory can be taken in a very short time. There
are cases on record where an inventory in the largest industrial
enterprises has been taken by this method without shutting down the
plant in any department for a longer period than two days.

=18. Inventory Records.= When the physical inventory has been taken,
the next step is to record quantities and prices, and make the
extensions that the record may show total values. The records of the
inventory should be classified; that is, all material or equipment of
a certain class should be recorded on the same form, so that the total
value of each class can be ascertained.

For a manufacturing business, the inventory is subdivided as follows:

  Machinery and Equipment.
  Machine Tools.
  Small Tools.
  Drawings and Patterns.
  Materials and Supplies.
  Parts and Finished Stores.
  Work in Process.
  Manufactured Goods.

One form might be made to answer the purpose for all these inventories,
but as certain special information is needed in each case, it is
considered the better plan to use special forms. We, accordingly,
illustrate forms for each of these classes.

_Machinery and Equipment._ Under this heading is listed all
_machinery_, _furniture_, _office appliances_, and _equipment_ of all
classes required in the operation of the business. The form for the
inventory is shown in Fig. 15, this being a loose─leaf form, about 10 x
12 inches in size.

For this section, a sheet is used for each specific class of equipment,
and, where the same class of equipment is required in different
buildings or departments, a sheet is used for each department.
For instance, all typewriters used in a given department will be
inventoried on one sheet, and no other equipment will be inventoried on
the same sheet.

The information given at the head of the sheet includes the _location_,
_cost_, _estimated life_, _name_, _series number_, _our number_, and
_from whom purchased_. The form provides for a record of date (meaning
date purchased), and description of the equipment, original cost, cost
of additions and repairs, per cent and amount of depreciation, and the
net value. Reference to this record shows the exact number of machines
of a given class in use and just where they are being used.

_Machine Tools._ Under the head of machine tools, an inventory covers
all tools of this character, whether purchased or manufactured in
the plant. Since large plants usually manufacture their own machine
tools, this form is used to show _date of manufacture or purchase_,
_description_, _cost of material and labor_, _per cent_, and amount
added to cover the _factory burden_, and the _total cost_. Like the
form used for machinery and equipment, all machine tools of a given
class should be inventoried on the same sheet, Fig. 16.

[Illustration: Fig. 15. Loose─Leaf Form for an Inventory of Machinery
and Equipment]

[Illustration: Fig. 16. Inventory Form for Machine Tools]

[Illustration: Fig. 17. Inventory Record of Small Tools]

[Illustration: Fig. 18. Form of Inventory Sheet for Drawings and

[Illustration: Fig. 19. Form of Inventory Sheet for Materials and

[Illustration: Fig. 20. An Inventory of Parts and Finished Stores]

[Illustration: Fig. 21. Special Form for Inventory of Work in Process]

[Illustration: Fig. 22. Sheet for an Inventory of Manufactured Goods]

_Small Tools._ Most small tools are purchased, but some of them may be
made in the plant. These tools may be purchased singly, or in lots of
one dozen, or in other quantities. To meet these conditions the form,
Fig. 17, provides for a record of _date of purchase_, _description_,
_quantity_, _unit_, _material and labor costs_, _per cent and amount of
burden_, and _total cost_. When the tools are purchased ready for use,
only the last money column is used.

_Drawings_ and _Patterns_. This inventory includes all drawings and
patterns that are in use or of value to the business. In placing a
value on this property, conservatism is necessary. A new pattern is
supposedly worth what it cost to manufacture it. But a pattern may
become obsolete in a very short time. It is necessary, therefore,
when taking the inventory, to estimate the probable life of all
patterns, basing this estimate not only on wear and tear, but on
the probability of their being replaced by later models. The cost
of drawings and patterns should be entirely absorbed in the cost of
the goods manufactured, and to cover this a very liberal rate of
depreciation must be provided. In the inventory form we do not show the
depreciation, as we consider it more practicable to take a complete
inventory, and make a new appraisal of drawings and patterns at the
end of each fiscal period. The form given for this inventory, Fig. 18,
shows _date put in stock_, the _number_, _description_, and _details of

_Material_ and _Supplies_. The inventory of material and supplies
includes all material which goes into the construction of the goods and
all supplies required in the operation of the plant.

In recording this inventory, supplies and material should be kept
separate, and each should be thoroughly classified. One sheet should
show but one special class; that is, if one of the items is hardware,
nothing but the hardware inventory should be included on the same
sheet. This form, shown in Fig. 19, gives the _description_, the
_purpose for which the material is used_, _quantity in stock_, _unit of
measure_, _unit value_, and _total value_.

_Parts_ and _Finished Stores_. This section is intended to include all
finished parts in a plant manufacturing parts to be later assembled
into complete machines, also any finished stores or semi─completed
parts. Under the latter head would come such items as castings, which
are made in advance, to be used as needed. This inventory is recorded
on the form shown in Fig. 20, giving the _description_, _for what
used_, _the number of the part_, _quantity_, _unit_, _unit value_, and
_total value_.

_Work in Process._ Under the head of _work in process_ is included all
partially completed orders in the plant at the time of inventory. If an
efficient cost system has been maintained, it will not be a difficult
matter to arrive at accurate costs of all such material. Without a cost
system it is necessary to use extreme care in estimating the cost of
material and labor to date.

One of the most important items of information in this inventory is
the last operation, which means the last completed operation. It is
necessary to have this information before we can figure the actual
cost. The form for this inventory, Fig. 21, includes _description_,
_name of last operation_, _cost of material_, _cost of labor_, _per
cent and amount of burden_, and _total value_.

_Manufactured Goods._ The inventory of manufactured goods includes
all goods completed ready for the market. In a trading business this
would include the regular stock in trade. Fig. 22 shows a form for the
inventory of manufactured goods, which, with slight changes, would
answer the purpose for the stock in a trading business. The form shows
the _order number_ (meaning the shop order number on which the goods
were manufactured), the _description_, the _quantity_, the _material
and labor costs_, the _burden_, and _total value_.

When these inventories are completed, and the extensions made, it will
be seen that a complete record of values of all physical property is
provided. From these records the ledger accounts should be adjusted
so that all records will correspond. The records also furnish the
necessary information from which to make the stores record, which is
necessary when installing the system.

These inventory sheets may be filed either in the drawers of a vertical
file or in a loose─leaf binder, though the latter is preferred. The
sheets for each class should be kept by themselves and classified as
explained above. The index may be alphabetical, or blank indexes, on
which the names of the classes are written, may be used. The sheets
in each class should be numbered consecutively and kept in numerical



=19.= Although a stores department is the first essential in the
operation of a cost accounting system, manufacturers sometimes hesitate
to install such a department on the ground of expense. Without
considering its valuable features, the claim is made that the operation
of this department involves a larger expenditure than is warranted by
the results. But such claims are not borne out by the experience of
manufacturers who have tested the efficiency of the department. Where
results are found which appear to support this claim, investigation
will invariably reveal faulty installation or faulty operation, or both.

Opposed to this claim, the experiences of many manufacturers show
that the stores department is an actual money saver. If anything like
an efficient cost─accounting system is to be maintained, a stores
department is an absolute necessity; but even if there is no cost
system, a stores department can be made profitable. An adequate system
of records in a well─organized stores department will show at all
times the exact condition of the stock, and this alone should justify
the maintenance of such a department. Slow moving stocks are pointed
out, so that a greater effort may be made to move them; if a stock
is running low, the records give warning before the danger point is
reached. All this applies with the same force to a trading business as
to a manufacturing enterprise. By showing the volume of stock on hand,
by pointing out its movements, a stores─record system prevents the
accumulation of _dead_ stock, yet makes it possible to maintain active
stocks at the lowest volume consistent with safety, and thereby saves
money by keeping the investment at the lowest possible point.

Surprising results in money saving through stores─record systems
have been shown by some manufacturers. In one case which came within
the writer's observation, a reduction of more than $10,000.00 in the
average investment was made. A certain manufacturer of machinery, who
had an inadequate stores system, found that his stock of material
averaged $30,000.00, while the business required a stock of not more
than $20,000.00. He engaged a competent man to install and operate
the system, paid him a liberal salary, and at the end of a year found
that his stock averaged less than $20,000.00. Moreover, the stock
was clean──there being nothing in it that was not needed──was well
arranged, and in every respect in a more satisfactory condition than
before. That meant a saving of the earnings of $10,000.00, and by using
it in extending his business, the money was worth 20% to him.


=20.= When the inventory has been completed, the next important step
in the organization of a stores department is to provide the necessary
_storage_ places for all materials and supplies and see that these are
properly stored.

The question, as to what is a proper storage place is one which must be
worked out to fit conditions as found in the individual establishment.
Generally speaking, in a manufacturing business, materials should be
located as closely as possible to the departments in which they will
be used. In a large plant it is usually necessary to have several
storerooms to accommodate the various classes of material, and in
order that they may be located conveniently. The question of proper
storage is a vitally important one in every business, and especially
so in a manufacturing plant. Ideal conditions are impossible to
obtain in all plants, but the first consideration should be to have
a definite storage place for every class of material, and to always
keep the material in that especial place. Go into a plant having no
well─defined system of storage, and you will find workmen spending more
time looking for materials needed than would have been required to take
the same material to a stockroom and withdraw it as needed. In trading
businesses the necessity for systematic stock keeping has long been
recognized. Wholesale houses have their stock arranged in departments
and stored on different floors of the warehouse with special men in
charge of stock keeping. A retailer, no matter whether he is operating
a department store or dealing exclusively in one class of merchandise,
has his goods arranged by departments. But in too many manufacturing
plants the question of storage for raw material and supplies has
received little consideration. A manufacturer will invest dollars in
raw material and keep no record of it; yet the same man would regard
as preposterous the suggestion that he should keep no record of cash.
As a matter of fact, the material should be as well cared for, and
as strictly accounted for, as cash. Every dollar's worth of material
should be regarded in the same light as a dollar in gold.

Next in importance to the location of the storerooms is the question
of the storage of the material itself. The storerooms should be
equipped with such bins, racks, shelves, boxes, and drawers as may be
required for the proper care of the material. In storing the material
the question of its size and weight, and the frequency with which it
will be needed, should be considered. Extremely heavy articles should
not be stored on the floor, but should be raised to about the height
of a truck, thus saving labor both in unloading and loading. Material
which is constantly being called for should be kept on shelves that
are within easy reach. The top shelves and inaccessible corners can
be reserved for articles seldom called for. As far as possible, all
articles of the same class should be kept in the same section of the
storeroom. Above all, a given article should always be kept in the same
place. In some storerooms it is not uncommon to find, hidden away in
some dark corner, articles which are not supposed to be in stock, all
because no definite storage place has been provided. The record system
can be of little value unless the articles are to be found in the
sections allotted to them.

All of this but emphasizes the importance of having the storeroom and
stores system under the exclusive control of one man. No one should
be allowed to interfere with the work of the chief stores clerk. If
there is any cause for criticism it should be taken to his superior.
Suggestions from foremen and others who are obliged to make use of the
storeroom, should, and probably will, be welcomed by the average stores
clerk, but no foreman should instruct one of his men to place material
in the storeroom except as instructed by its head.

Aside from the storeroom proper, the stores clerk will have charge
of material stored outside of the plant. Lumber, fuel, and heavy
castings are examples of material coming under this head. Nevertheless,
his records should include all of this material, and he should have
general supervision over its storage in order that he may more readily
determine, or more closely estimate, quantities in stock.

=21. Receiving.= In the organization of the _stores department_, it
is necessary to provide for a record of the _receipt_ of all material
and supplies. The system must be so constructed that it will not only
insure a record of all goods coming into the establishment, but prevent
the acceptance of goods which should not be received.

All receiving should, therefore, be in charge of one man. In the larger
industrial enterprises, a receiving clerk is employed, whose duty is to
receive and receipt for all goods coming into the establishment, and to
deliver them to the storeroom or the department in which they are to
be used. The stores clerk may, in a small concern, perform all of the
functions of the receiving clerk.

When goods come in, the receiving clerk will refer to his file of
purchase order copies to find if the goods have been ordered. It will
be remembered that an alphabetical file has been recommended for these
orders, which are to be filed under the name of the shipper. The reason
for this is that the package does not always show the nature of its
contents, while the name of the shipper is almost invariably shown
somewhere on the package or on the shipping tag.

Goods should not be accepted by the receiving clerk unless he has an
order. To do so is liable to cause trouble. As an illustration, we will
suppose that the concern has made a contract for material on which
deliveries are to be made at stated intervals. The first shipment
received shows that the material is not up to specifications and the
contract is cancelled. Pending an adjustment, the receiving clerk is
instructed to accept no more material on the contract. If he does so,
the concern will very likely be obliged to pay for it, and it may even
have a bearing on the entire contract.

Another class of shipments which must be carefully watched is the
return of goods by customers of the concern. In some businesses, this
question is not important; in others, great care must be exercised to
insure proper credit. In a manufacturing or a trading business other
than retail, the customer will usually notify the house that he is
returning goods. When such a notice is received, instructions should be
given to the receiving clerk whether to accept or refuse them.

One class of business in which the receipt of returned goods must be
handled with extreme care is the installment business. Most installment
contracts vest title to the goods in the seller until all payments are
made. To avoid payment, a customer may return goods without notice.
Acceptance by the seller cancels the contract at once. A safe rule to
follow, therefore, is to accept no returned goods until authorized to
do so by one in authority.

The receiving slip, Fig. 13, Page 16, is to be filled out by the
receiving clerk. One copy will go to the purchasing agent and the
other to the stores clerk. From these reports the stores clerk makes
his record of material received. In some cases material ordered for the
use of a particular department is to be sent direct to the department
and not to the storeroom. A third copy of the report should be made
which will be sent to the department, from whence it will go to the
stores clerk, properly receipted.

=22. Deliveries.= The stores clerk, being in custody of all stock, is
responsible not alone for its safe keeping but for deliveries. He must
be in a position to show what stock has been delivered, to whom, and
for what purpose.

There is but one method that will insure an accurate record of
deliveries and that is, to deliver no goods without a written order or
requisition, signed by one having authority to authorize withdrawals.

Each department, or shop, should be supplied with storeroom
requisitions, numbered consecutively with the department number or
letter; that is, a requisition from one shop might be numbered _B_ 100,
another _C_ 100. These requisitions should be made in duplicate or
triplicate. When the duplicate form is used, the original is sent to
the stores clerk and the duplicate retained by the foreman. When the
stores clerk has completed his records and the foreman has received the
material, both copies are to be sent to the cost department. One copy
acts as a check against the other, making it impossible for either the
stores clerk or foreman to make false returns. To make identification
easy, the two blanks should be printed on paper of contrasting colors.
In the cost department one copy should be filed according to the
department in which the requisition originated, keeping the numbers
consecutive, and the other under the production or job order number. On
completion of the order, the latter copy can be destroyed as it will no
longer be needed. The departmental copies may also be destroyed, say at
the end of a three months' period.

Sometimes it will be found advisable for the stores clerk to retain a
copy of the requisition, in which event the triplicate form will be
used, two copies being sent to him. He will file his copy by production
order numbers, if for material, or by departmental numbers, if for

All requisitions should provide for a record of prices and values,
these to be entered in the cost department. If this is omitted it
will be necessary for the cost clerk to enter the items and extend
cost on another blank; when included, he can post values direct from
the requisition to the permanent cost records. Place should also be
provided on the requisition for the signature of the one who receives
the material.

[Illustration: Fig. 23. Requisition for Material to be Used on a
Production Order]

A form of requisition adapted to the use of the average manufacturing
enterprise is shown in Fig. 23. This form shows the _department
number_, the _date_, the _production order number_, _quantity_,
_description_, _cost_, and _value_. At the bottom the necessary _form
of receipt_ is provided. Usually this form will be found adequate for
both material and supplies. When used for supplies, the purpose for
which they are intended is to be inserted in place of the production
order number. Special forms for supplies and repair material are used
in some plants. These should differ in color from the _material_
requisitions. A form of this character is illustrated in Fig. 24.


=23.= The installation of a stores─record system calls for the exercise
of judgment of the highest order, for the record of material and
supplies is of no less importance than the record of cash. As has
already been stated, material should be accounted for with the same
fidelity as cash; a dollar's worth of material should be regarded as a
dollar in gold.

The stores record system should be an integral part of the accounting
system of a business; it should be checked as carefully as any
account in the ledger. Only by making the stores record a part of the
accounting system can it be operated successfully.

[Illustration: Fig. 24. Special Departmental Requisition for Material]

Stores records may be divided into two classes──one recording both
quantities and values, and one recording quantities only. Frequently
both classes are used in one establishment. In the storeroom a system
is maintained which records quantities without prices; in the cost
department a record of values and quantities may be kept.

The records kept in the storeroom are primarily intended to show
quantities on hand, or rather quantities that should be on hand.
Sometimes these records show prices, but there appears to be no good
reason why this should be done. It is better to have all accounting of
values done in the accounting department.

The records under consideration are those of the storeroom. These
records must show _quantities received_ and _quantities issued_, from
which a record of the quantity on hand can be obtained. To supply
the necessary information, the records must show quantities of each
article or kind of material in stock, which necessitates a system
of units. Some articles will move much more rapidly than others;
therefore, a bound book is not practical. Either cards or loose leaves
can be used successfully, a card or sheet being used for the record of
each article.

In order that the records may be instantly available, they must be
properly classified. The classifications should follow the same lines
as the ledger accounts, which will correspond with the classifications
adopted in recording the original inventory. Records of material and
supplies should be separated, and each divided into classes. The
cards or loose leaves should be filed and indexed according to these

For example, we will suppose that one division of the material account
is hardware. On one index will be written the word _Hardware_, the
index forming a main division. Back of the index all cards or sheets
recording articles that come in the hardware classification will be
filed, these records also being properly classified and subdivided.
In the hardware stock will be found screws of several classes, as
round─head bright, round─head blued, flat─head bright, flat─head blued.
In the _S_ section, back of _Hardware_, one index will be headed
_Screws_. This division will be subdivided by indexes headed with the
names of the classes or kinds of screws. The stores record cards or
sheets will then be filed back of these subdivision indexes in the
order of sizes. A card or sheet may be used for each size, or several
sizes may be recorded on the same sheet.

=24. Verification of Stores Records.= When indexed in this manner the
stores record of any article can be quickly located, and the sectional
divisions will assist greatly in verifying the records. While the
stores records are intended merely as records of material in stock,
their accuracy must be verified by an actual inventory, just as the
cash account is verified by a count of cash on hand. However, if
thoroughly classified, it is not necessary to verify all of the stores
records at one time; they can be verified by sections, or the record
of a single article can be verified by an article inventory, without
regard to other records.

Accounts in the ledger should be arranged to correspond with the
stores classifications, that is, purchase accounts should be carried
with materials forming the main divisions of the stores records; as
_Hardware_, _Bar Steel_, _Foundry Material_, _Foundry Supplies_, and
_Factory Supplies_. When the stock of one class, as hardware, is
inventoried, the result should be recorded on the regular inventory
sheet, priced, and extended, and the total compared with the hardware
purchase account in the ledger. Any discrepancies should be adjusted at
once, but if the records are carefully kept, and an inventory of each
class is taken two or three times a year, the discrepancies should be
practically nil.

If the routine prescribed is faithfully followed, there is no
theoretical reason why stores records should not check as closely as
cash, with the possible exception of bulk stores, like fuel and ores,
where estimates are necessary. Even then, if inventories are taken
when these stores are at the lowest point, there should be little
difficulty in arriving at accurate results. However, the greatest
responsibility rests on the chief stores clerk. He must not let a
single pound of material leave the storeroom without an order, for it
is on the accuracy of his records that all of the accounts are based.
The order copies received in the cost department furnish the basis
for all material charges. Here prices are entered and extensions are
made. The chief cost clerk will transmit to the chief accountant weekly
or monthly recapitulations of all material charged out. The chief
accountant will credit his purchase accounts and debit _Manufacturing_,
_Maintenance_, _Repair_, or _Expense_ accounts as the case may be.
_Purchase_ accounts thus become _controlling_ accounts of the stores
records, and the latter takes its legitimate place as an integral part
of the accounting system.


=25.= All forms for stores records, no matter what the class of
material recorded, possess certain characteristics in common; yet the
information required about each special class is usually of such nature
that a special form is advisable. This may mean the use of several
forms in the same establishment.

When installing any system, however, it is more economical to invest
more money in printing and have forms that fit exactly, than to attempt
to make special records conform to forms prepared for other purposes.
If certain specific information is required, the form should be
designed to exhibit just that information, and if the form is properly
designed, the saving of time both in recording and consulting the
record will much more than offset the slight additional cost of special

The number of forms must not be so large as to cause confusion, but
against the opposite extreme the cost of time must be considered. It
will be found that the value of clerks' time is greater than the cost
of printing.

[Illustration: Fig. 25. Form for a Stock Record of Materials and

=26. Material and Supplies.= For material and supplies the same
form will be found satisfactory in most establishments. The form
should provide for the name of the material, the unit in which it is
purchased, the purpose for which used, the location in the storeroom,
and quantities received and delivered. Fig. 25 shows a form designed
for records of this class. In addition to the headings specified
above, spaces will be noted at the top of this card for _maximum_ and
_minimum_. These refer to the quantities of material to be carried in
stock and represent the high and low limits. These limits should be
established for each article in stock and when any article reaches the
low limit a report should be sent to the purchasing agent on the form
shown in Fig. 11, Page 14. This form provides for a record of order
numbers for all deliveries, a feature which should be incorporated in
all cases where the form is for the use of a manufacturing business. At
the extreme right is a column headed _verified_. When an inventory is
taken, the date and balance on hand is to be entered under this head.

[Illustration: Fig. 26. Stock Record Form showing Orders Placed]

A conventional form is shown in Fig. 26. The special feature of this
form is a column for a record of orders placed. Usually this column
is not required on the record of the stores clerk, but, if used, the
order numbers should be entered from the receiving clerk's copy of the
purchase order. On both of the forms illustrated several columns are
provided for _deliveries_ to one for _receipts_. This is necessary,
as deliveries are in smaller quantities and much more frequent than

Fig. 27 shows a form that includes _values_ as well as quantities. This
is not considered necessary, as a rule, for the storeroom, but where
the stores records are kept in the factory office, as is sometimes
done, it is a good plan to include values. On the reverse side of this
form a complete record of orders is kept.

Another form that includes values is shown in Fig. 28. This form is
well adapted for a record of almost any class of material or supplies.

The form illustrated by Fig. 29 is specially adapted for a record of
supplies. Under the head of _distribution_ the department to which the
supplies are issued is entered.

[Illustration: Fig. 27. Front and Reverse of Stores Card Used by a

=27. Parts and Finished Stores.= A record of parts and finished stores
is very essential in many manufacturing enterprises. The modern
tendency in machinery manufacture, for instance, is to standardize
production, making all parts interchangeable. Parts are manufactured in
large quantities, on special orders, and placed in stock until needed.

It is very necessary to know the condition of the stock of parts to
insure against overstocking, and to prevent the supply running low. A
record of parts should therefore be maintained on the same lines as
for material and supplies. Usually, a parts storeroom, with a clerk in
charge, is maintained apart from the material storeroom.

[Illustration: Fig. 28. Stores Record Form which Includes Values]

[Illustration: Fig. 29. Special Stores Card for Supplies]

The form illustrated by Fig. 30 is designed for a record of parts
and finished stores. This form provides for a record of the same
information as given for material, with the addition of the number and
size of the part. No change is needed in the form of record of receipts
and deliveries.

[Illustration: Fig. 30. Stores Record of Parts and Finished Stores]

[Illustration: Fig. 31. A Record of Parts in Stock]

Fig. 31 shows another form for parts. The special feature of this form
is the record of values, which is advisable if the records are kept in
the cost department. Parts records are more frequently kept in the cost
department than material and supplies records.

=28. Material Returned to Stock.= When a foreman receives an order
to manufacture a certain article, or part, he estimates the quantity
of material required and draws it from the storeroom. Naturally he
does not always estimate the exact quantity; he may run short or have
material left when the job is completed.

[Illustration: Fig. 32. Record of Material Returned to Stock]

Unless the material can be used immediately on another job, it should
be returned to stock, with a report to the stores department. The form
for such a report is shown in Fig. 32. An essential feature of this
form is the order number for which the material was drawn, this being
the production or shop order number.

When the stores clerk receives unused material and this report, he will
enter the quantity on the stores record under the head of _receipts_,
and forward the report to the cost department. The cost and value will
then be entered and credited on the cost records.

=29. Material Transferred.= When a foreman has left─over material which
can be used on another job, a report is necessary to insure credit to
the job for which it was drawn and a charge to the job on which it
was used. Fig. 33 is a form for this report. This shows the numbers of
the jobs for which the material was drawn and to which the material
has been transferred. After entering the correct quantities on his
stores record, he sends the report to the cost department. If it is not
considered necessary for the stores clerk to make these corrections
on his records, the report may be sent to the cost department by the

[Illustration: Fig. 33. Report of Materials Transferred]


=30.= In every business enterprise there should be kept a record that
will give a full and complete history of every machine or other article
of permanent equipment. There are many ways in which such a record will
prove valuable.

Not infrequently a new part will be needed for a machine which has been
in use for several years. There may be no mark on the machine showing
the name of the manufacturer; perhaps no one remembers from whom it
was purchased. The result is a frenzied search through books and
files──confusion──a vexing delay──all for the want of proper records.


Or, there is a fire, resulting in the loss of a machine costing
$3,000.00 that has been in use two years. The adjuster figures
depreciation at, say, 10% a year, or $600.00. There is no record
showing that it cost $400.00 additional to install the machine, or that
repairs have been put on it to maintain its efficiency. At least the
depreciation should be figured on a basis of $3,400.00, the real cost
of the machine.

A proper record would show the original cost, the amount expended for
repairs and additions, and the amount charged off for depreciation.
Such a record should be kept, but no special form is required. The
machine inventory form, Fig. 15, answers the purpose. For the more
important machinery, one of these sheets should be used for each
machine. These sheets constitute a machinery and equipment ledger,
controlled by the machinery and equipment accounts in the general or
special ledger. Thus the connection between these records and the
general accounting system is maintained.


=31.= One department of a factory that is either a source of expense
or a factor in saving money, according to the way it is conducted, is
the tool room. The tool storeroom is referred to here, rather than
the department maintained by large manufacturing enterprises for the
manufacture of machine tools.

Every manufacturer is obliged to maintain a complete stock of tools of
sufficient size to meet the requirements of his establishment. Unless
these tools are properly cared for, the investment is very liable to
creep up to a point entirely out of proportion to the requirements.

Perhaps no class of property in a manufacturing plant is so frequently
lost as small tools. When no storage place is provided, workmen
are liable to leave tools where they were last used. They are soon
scattered about the shops and, because they are not readily found, new
tools are purchased.

A special tool room is usually necessary, though in some cases the
tools can be stored and cared for in the material storeroom. In plants
manufacturing machine tools for their own use, the foreman of the tool
department can care for the small tools in connection with his regular
work. It is also the duty of this department to keep the tools in
proper condition for use.

For the storage of tools there should be provided racks and bins in
suitable sizes. All tools should be numbered and the sections of the
tool rack given corresponding numbers. For example, the stock includes
one dozen hammers of a given size and style. This tool is given number
twenty and the number is stamped on each hammer. The hammers are placed
in section number twenty of the tool rack. At the same time twelve
brass checks are stamped with the same number and hung on a hook above
the section containing the tools.

[Illustration: Fig. 34. Section of Rack for the Storage of Small Tools]

A section of such a tool rack, showing the number checks, is
illustrated in Fig. 34.

There are several methods of keeping track of tools issued to workmen.
In some plants a written receipt is required for each tool issued, but
this plan is not recommended for the reason that the workman should not
be asked to take the time to write a receipt, or to wait until it is
made out by the tool─room foreman. He should be given the tool promptly
and the system employed should not cause him to waste time.

To overcome these difficulties, the check system is used. There are
several variations in the operation of this system, but, in the opinion
of the writer, the double check system is the most practical and

[Illustration: Fig. 35. Board on which Tool Checks are Kept]

First, the tools are numbered, as described above, and a brass check
provided for each tool. Then a board, divided into squares, as shown
in Fig. 35, is prepared. In these squares the names or numbers of the
men obliged to draw tools are written. Each square contains two hooks
on one of which twelve checks bearing the man's number are hung. When
workman No. 2 receives tool No. 15, one of the No. 2 checks is taken
from the board and hung above section No. 15 in the tool rack; at the
same time one of the No. 15 tool checks is hung on the second hook in
the No. 2 square on the board.

It will be readily seen that there must be, at all times, twelve checks
in each square on the board, counting both tool and workman's checks.
Reference to the tool rack will show how many tools have been issued
and what workman has them. The advantage of this system is that it is
practically automatic. A perfect record of the movement of tools is
kept without the necessity of making entries on cards or in books.

Another method of operating the double check system is to supply
the workman with a number of tool checks, these checks bearing the
workman's number. When he wishes to withdraw a tool he presents one
of these checks, which is hung above the tool rack. One of the checks
bearing the tool number is then placed on the hook under the workman's
number on the board.

One disadvantage of this system is that the workman is more liable
to lose checks than he is to lose tools. Theoretically, the number
of checks in possession of the workman at any time, added to the
number of checks on his hook on the board, should equal the number
originally given to him. If, however, he loses a check, it usually
means a dispute, as the workmen naturally does not feel that he should
be penalized by failure to return a check on which no tool has been
issued. All things considered, the method first described is probably
the most satisfactory.

[Illustration: Fig 36. Special Stock Record of Machine Tools]

=32. Tool Records.= While the system described above furnishes a
complete check on the tools, it should be supplemented by a record
which will serve as a perpetual record of values. The tools may be
divided into two classes, namely, _machine_ tools, and _small_ tools,
each requiring a somewhat different form of record.

Fig. 36 is the form of record for machine tools, this being on either a
card or loose leaf. One card is used for each tool required. The record
shows the name of the tool, the number, size, purpose for which used,
and date made. Below this is a complete record of the cost, showing
quantity manufactured, cost of material, labor, and burden. When tools
are destroyed a record is made showing date and value, and the balance
on hand is debited in the last column.

For small tools Fig. 37 is used. This record shows much the same
information as for machine tools. The special feature of this form is
the record of quantities received from time to time, number delivered
and returned, and number destroyed. As a rule, it is unnecessary
to record deliveries on this card, though in the case of some very
expensive tools, it may be advisable to do so.

Both of the forms referred to above are filed in the same manner as
other stores─record cards. The main divisions would be by name, or by
departments, with subdivisions according to size.

[Illustration: Fig. 37. Inventory Form for Small Tools]

[Illustration: THE SHOP ORDER DEPARTMENT This Department Issues all
Manufacturing Orders and by a System of Tracers Follows the Work
through the Various Shops to Completion. Western Gas Construction Co.,
Ft. Wayne, Ind.]



=1.= The successful outcome of any project, in whatever field of
endeavor, depends on the coöperation of labor. Labor is energy applied.
The intelligence with which the energy is applied determines its
productiveness. The unskilled laborer applies energy, in the form of
his own strength, directly to the task before him. The skilled worker
uses his skill to direct the energy of nature that has been applied to
propel machines and appliances, which in turn have been created by the
skillful manipulation of inanimate properties. Thus the combination
of natural forces and the intelligent application of those forces,
under the direction of a skilled man, result in the highest degree of

In the employment of labor, there are two parties to be considered──the
employer of labor and the seller of labor. The desire of the first is
to secure the results of the labor at the lowest possible cost per unit
of production rather than at the lowest cost per individual. The desire
of the second is to secure the highest price for his labor, based on
the unit of time rather than on the unit of production.

In the final analysis, the desires of the two are found not to be
inconsistent, nor opposed to each other. The employer cares little what
labor costs per unit of time, provided the cost per unit of production
is kept down to the lowest point; the seller of labor cares not how
many units of production result from his labor provided he is paid a
satisfactory wage.

The ideal method of regulating the payment of wages is, therefore, one
which will insure to the laborer a high wage under conditions resulting
in a correspondingly high rate of production. To solve this problem,
to evolve an ideal system, has long been the study of engineers. The
studies of these men are bound to have a far─reaching effect. From
the older method of an exclusive day wage to the modern systems that
combine day wage and piece rates, is a long step. Investigations and
experiments, now going on in all directions, are carrying the movement
forward, and are destined to evolve an ideal system.


=2.= Wage systems, as applied to manufacturing industries, may be
divided into the general classifications of day wage, piece rate, and
premium systems. Besides these three, there are a number of systems,
bearing the names of their originators, which are the result of a
combination of certain features found in two or more of the three
general methods. A study of modern wage systems necessarily involves a
study of the distinguishing features of the three primary methods.

=3. Day Wage.= Of the three general plans on which labor is paid, the
oldest and best known is the day─wage plan. It is the most widely used
because best understood. The day─wage plan contemplates the payment of
a stated wage for a stated unit of time. If all men performing the same
task were equally skillful, or if the wage rate could be adjusted in
conformity with the varying degrees of productiveness found in every
body of workmen, the day─wage plan would be ideal. But neither of these
conditions exists.

Workers are liable to insist on the application of the rule of
organized labor, that all men performing similar tasks shall be paid
the same wage. Since all men are not equally skillful, this results
in certain inequalities. On the one hand, the wage rate is based on
the lowest rate of production, which is unjust to the more skillful
man, who either reduces his productiveness to the level of the least
skillful, or transfers his energies to another field of endeavor. As an
opposite extreme, the rate is based on the highest rate of production,
which is manifestly unfair to the employer.

In actual practice, then, it is necessary, from the standpoint of the
employer, to employ overseers to drive all workmen to a maximum rate of
production, which, theoretically, means the elimination of all workers
who are unable to attain the maximum. Again an injustice results, this
time to the weaker man.

=4. Piece Rate.= The first plan evolved, in the search for a plan that
would remedy the inequalities of the day─wage plan, was the piece─rate
plan. The piece─rate plan contemplates the payment of a stated wage per
unit of production, without consideration of the rate of production.

The argument was advanced that a uniform rate per unit of production
would result in an equitable wage, because based on the productive
skill of the individual. But the plan has failed in many cases to
produce the desired results, for the reason that it does not take into
consideration the factor of time.

In the establishment of a wage rate, the factor of time must be
considered, or the rate will not be equitable as between employer and
employe. The employer must furnish the shop, the tools, the power,
the heat and light. The cost of these items does not necessarily vary
in direct ratio with the increase or decrease in production. These
expenses must be absorbed by the finished product, therefore, even
under a piece─rate plan, the rate of production (the factor of time)
has an actual bearing on the rate per unit.

From the standpoint of the employer, the rate per unit should be based
on the productiveness of the individual, and should insure to the
most skillful, a wage as high as, or slightly higher than, he would
receive under the day─wage plan. This would, in theory, give to the
less skillful man a wage exactly commensurate with his skill. But as
workers become more and more skillful, and increase at the same time
their productiveness and their earning capacity above normal, there is
a tendency on the part of the employer to reduce the rate per unit to
bring the aggregate wage back to normal. The result is that the worker,
fearing a reduction in the rate, limits his production to the number of
units that will insure an average wage.

Thus the system fails in its object. It does not reduce the cost
of production to the lowest point. However, when piece rates are
intelligently applied they are found very satisfactory in certain
lines. But in all cases, the piece rate tends toward a uniform rate of
production, and, while reducing the cost of superintendence, involves
the expense of inspection. The latter, however, is not necessarily an
added expense, for, as a rule, inspection is required regardless of the
wage system in use.

=5. Premium Systems.= To obviate the difficulties found in both the
day─wage and piece─rate plans, the _premium_ or _bonus_ system was
evolved. This improved system of wages is intended to fulfill the
following conditions:

 1. A guaranteed rate per hour for each grade of work for a contract

 2. An average earning power continuously higher than usual.

 3. A lower cost per unit to the employer as wages automatically

 4. A supplemental earning power, or bonus, to the worker above the day
 wage, the bonus being based on efficiency.

The premium system is a combination of day wage and piece rate,
involving the establishment of standard times for stated tasks. It
is based on the theory that if, when a standard time has been fairly
established, the worker performs a task in less than standard time, he
is entitled to a bonus, or extra pay, for the time saved. The bonus is
based on the wage rate paid for standard time.

For what part of the time saved the workman should be paid, depends
on circumstances. It might be argued that the workman is entitled
to full pay for all of the time saved, but other factors than the
dexterity of the workman enter into the time saving. The employer
supplies additional power, there is an extra cost for wear and tear on
machinery, and an extra quality of material; all have a bearing on time
saving. The employer is, therefore, entitled to a part of the saving.

The original premium system is known as the _Halsey_ plan. There are,
however, several well─known modifications of the plan, all based on
efficiency, but each having certain distinguishing characteristics. No
more clear presentation of the essential features of the best known
premium systems has been made, than is found in a review by Mr. Carl
Bender, published in the Engineering Magazine, from which the following
is quoted:


 To mitigate to some extent the evil workings of piece rates, Mr. F.
 Halsey invented the premium plan shown in Fig. 1.

 The slant of the wage line may be at any angle from horizontal,
 straight piece rate, to coalescence with day rate line. This system
 possesses at least four valuable points:

 1. It pays day rates if a longer time is taken than standard.

 2. It is a very flexible system and can be adapted to different

 3. It lessens but does not obviate the necessity of changing rates.

 4. It lessens but does not wholly remove the inclination to limit

 It is in one respect a step backward, since it substitutes uncertainty
 for definiteness as to wage costs. Nevertheless, the Halsey system
 was an admirable step in advance. Usually the worker is given either
 one─half or one─third the time he saves. Psychologically it is much
 better than piece rate, since most workers are more inclined to lessen
 their time than to increase the number of pieces turned out. A man
 will deliberately decide that he ought not to turn out more than five
 pieces a day, but he will not feel the same desire to avoid breaking
 his own record of two hours per piece.

 Under the Halsey system, no limit is placed on a man's earning power
 per hour, and also a minimum piece rate of one─half or one─third the
 initial rate per piece is allowed, so that if a man worked on his
 own time, he would at least receive per piece one─half or one─third
 standard pay.

[Illustration: Fig. 1. Diagram of the Halsey Premium Wage System]


 A fundamental departure was made by Mr. Fred W. Taylor, in his
 differential piece─rate system, a diagram of which is shown in Fig. 2.
 Mr. Taylor does not establish an initial time by guess or by assuming
 a more rapid gait than on day work, nor does he appropriate other
 unscientifically determined times. His method is to standardize all
 conditions in the shop, to make them as perfect and smoothly acting
 as circumstances will permit, and then to determine a reasonable
 minimum time in which the job can be done. As a result, Taylor's
 standard times are very much lower and also very much more carefully
 and accurately determined than any system hitherto considered. Mr.
 Taylor scorns the suggestion that by any chance the worker could earn
 excessive wages. Any wages that an unusually efficient worker can
 earn are legitimately his own. Assuming that under the Taylor system
 a worker should do four pieces in four hours, his wages for the time
 would be $1.00, but Mr. Taylor allows an increase of 20 per cent, 25
 per cent, 30 per cent, or even more, according to the class of work,
 for ascertaining standard time. Let us assume 20 per cent increase.
 The worker then receives for four pieces in four hours, $1.20, a rate
 of $0.30 each. For less than four pieces the maximum hourly rate is
 $0.25, therefore $0.25 each. If the worker only delivers three pieces
 in four hours, his earnings are only $0.75, or $0.1875 per hour. Mr.
 Taylor's system awards, therefore, a heavy and increasing premium for
 high efficiency, a heavy penalty for low efficiency.

 The method of standard time determination is so rigorous that the
 worker cannot figure on curtailing his output. He has to hustle to
 make wages even at the low piece rate, and if he succeeds in this, a
 very little extra effort will give him a higher piece rate.

 The excellence of the system lies in the accuracy with which proper
 rates are predetermined. It is, however, somewhat inflexible and not
 so well adapted to work in which unforeseeable variations in time

[Illustration: Fig. 2. Diagram of the Taylor Differential Wage System]


Mr. Gantt, a disciple of Mr. Taylor, introduced at the Bethlehem Steel
Company a bonus plan, see Fig. 3.

As in Mr. Taylor's system, the proper time is most carefully and
accurately predetermined. If the worker reaches the proper time, he is
given a bonus of 25 per cent above normal wages for the time. If he
does still better, he is given half of what he makes, as in the Halsey
plan. If he does not reach standard time, he is paid only 75 per cent
of normal wages for the excessive time, provided bonus earned permits
the imposition of this fine. If he had bonus to his credit he would not
be fined, however much he fell below standard.

This system has shown certain psychological disadvantages in practice:

1. The men have made it a point of semi─honor, among themselves, not to
do better than standard times.

2. Although the actual fines for failing to reach standard times were
insignificant, the men claimed that they were being robbed of thousands
of dollars in this manner. Neither fall─downs nor ability to lessen
standard time are always up to the man. It is therefore unfortunate
when a favorable chance occurs to lessen time, that the worker
deliberately holds back. It is also often unjust that he should be
fined for what may not be his fault.

Actual experience with these different wage systems brings out the fact
that psychology accounts for quite as much as any fair condition, and
that a good wage system must not only be fair but must also hit the men


The most recent wage system is the Efficiency System, evolved
and perfected in theory by Mr. H. Emerson and his assistants and
practically applied by the officials in the shops of the Santa Fé

[Illustration: Fig. 3. Diagram of the Gantt Premium Wage System]

 This wage system superficially resembles the Halsey line, Fig. 4,
 but in theory and in fact differs radically from all previous wage
 systems, although it embodies much that was best in all of them. It
 retains the principle of day pay irrespective of performance. It
 retains in modified form the principle of a flat piece rate. Like the
 Halsey system, it pays more per piece for less competent work. Above
 all, it retains Mr. Taylor's and Mr. Gantt's principle of accurate and
 scientific shop organization, including standard times for every job
 and operation.

 It pays a high premium above wage or piece rate for coöperation or
 assistant foremanship on the part of the worker, and finally, as part
 of regular and daily shop practice, it revises erroneous schedules
 whether they be too low or too high, and it makes this revision
 without lessening the earning power of the worker. In addition it
 substitutes for the costly, annoying, inaccurate time recording of
 each job, a general monthly efficiency record which covers the shop as
 a whole, each department, gang, foreman, worker and job, and, based
 on accurate study and efficiency, it predetermines, before work is
 begun, the absolute cost of every operation.

 These results are facilitated by recognizing that the attainment of
 standard conditions as to all operations depends on four totally
 different elements:

 (1) The shop itself must be highly organized and efficiently operated.
     This is a duty that devolves solely on the management, and for poor
     organization and operation the worker is not responsible.

 (2) The character of the work itself, the quality of materials, etc.,
     may vary greatly on the same job at different times. Neither manager
     nor worker is wholly responsible for this variation.

[Illustration: Fig. 4. Diagram of the Emerson Efficiency Wage System]

 (3) Assuming standard shop and work conditions, the worker himself
     can do much to coöperate with the management in making the other
     conditions as well as himself effective.

 (4) Costs should be standardized for the shop on a basis of normal
     conditions and be adjusted in the counting room on the basis of the
     monthly efficiency factor.

 (a) As an incident to high shop organization and efficient operation,
     the standard time required for every job should be scientifically

 (b) To eliminate accidental and unavoidable variations in material,
     etc., the worker is allowed to sum the standard time of all his jobs,
     gaining on some, losing on others, averaging closely even.

 (c) For coöperating with the management in eliminating wastes, the
     worker is paid a 20 per cent bonus for the efficiency of 100 per cent,
     which means, that the time taken for all his jobs must be equal to
     the standard times allowed for all his jobs. If he takes 10 hours on
     a 1─hour job and 1 hour on a 10─hour job, his average remains 100 per

 (d) The same work is assumed to be done always in the same standard
     manner. Variations from standard are a general charge or credit to
     shop efficiency, not a specific variation in cost. A train passenger
     is not charged more because his train has been delayed by a snowstorm,
     or less because a fair wind and a clear track made the particular
     train run less costly than usual.

Under the efficiency system the worker is entitled to standard day
rates, even if he is doing nothing. If, however, by reason of special
individual effort or skill, he does his work faster, he is entitled,
not to a part (one─third or one─half, as in the Halsey system), but he
is entitled to be paid in full for all the time he saves. As he has not
less coöperated with the management, he is, in addition, entitled to 20
per cent bonus for all the time he works.

Therefore, if a worker whose pay is $0.25 per hour delivers 300 hours
of jobs in a month of 250 working hours, he receives:

  1. 250 hours at $0.25                 $62.50
  2.  50 hours saved, at $0.25           12.50
  3.  20 per cent on 250 hours' pay      12.50
             Total                      $87.50

If, however, the worker does not so coöperate with the management as to
make the shop operate at high efficiency, himself included, he does not
receive as much extra pay, but a lessening amount until at 67 per cent
and below he is paid day rate and no more.

The diagram shows plainly the efficiency wage line beginning at 6
hours, showing 20 per cent increase at 4 hours, standard time, and
paying 4 hours time even if the work took no time at all──a condition
that arises practically quite often, as when a worker runs two jobs at
the same time, or when he does work on his own time.

While the diagram can be applied to a 4─hour job, the worker is not
paid by the separate job, but is paid straight day wages and a bonus
for his full─pay period efficiency. For each per cent of efficiency
there is a corresponding increase in pay.

For 100 per cent efficiency the increase is 20 per cent, and for each
1 per cent increase in efficiency above an efficiency of 100 per
cent, the pay also increases 1 per cent; therefore, for 120 per cent
efficiency the pay is increased 40 per cent. Below 100 per cent the pay
table runs as follows:

  Efficiency           Additional Pay
  Per Cent                Per Cent
    67                      0.00
    74                      1.
    80                      3.27
    85                      6.17
    90                      9.91
    95                     14.53
   100                     20.

The system has other merits:

(1) It standardizes not only the work of each worker, but also of every
    foreman, every department, and of the shop as a whole.

(2) It therefore standardizes the shop cost of every job, whether it is
    done by a cheap apprentice in two hours, or a high priced mechanic in
    10 hours. The average shop or department efficiency factor equalizes
    accidental variations.

(3) It separates absolutely all questions of wage rate from questions
    of output, shop conditions, or individual excellence.

(4) It fines the management heavily if shop conditions are not
    maintained so as to realize standard times.

(5) It puts no limit on the ambition or earning power of any man.

(6) Standard times are being constantly corrected. If the standard man
    cannot average 100 per cent on his schedules, it is evident that some
    of them are too short and ought to be lengthened. If on the other hand,
    a new machine tool is introduced, new schedules are drawn up for it,
    but the worker will not, on that account, make less than he did on the
    old schedule.

It is too much to expect that any system of paying wages will
prevent an outbreak of selfish interests whether of employer or wage
earner. There will, however, be a distinct gain if the nature of the
disagreement can be made entirely distinct and plain. Clear thinking
must precede clear acting, and this description of different wage
systems may contribute towards clearer conceptions and more just

To establish a modern wage system, standard times must be determined
on a scientific basis, and the rate must not only be equitable as
between employer and employe, but, as Mr. Bender has said, "it must
hit the men right." Shop conditions must be right and every facility
given the workmen to attain standard time or better, including teaching
him how to do the work in standard time. The _speeder_ or _task
setter_ employed under the day─wage plan must be superseded by the
_instructor_, who, instead of selecting the most speedy worker and
basing standard times on his operations, first determines as closely
as possible what the time should be, and then teaches his men how to
attain that time. Where stop─watch methods foster discontent and breed
antagonism, instruction is followed by coöperation. The average man
does not object to doing a task in a stated time when he is given the
facilities for doing the work that will make that a reasonable time.
Add to this the incentive of extra pay for equaling or bettering that
time, and his coöperation is insured.


=6.= Time keeping may be divided into two classes. The first class
includes methods of recording the total time that the employe works
during a pay─roll period. The second class includes methods of
recording the results of the labor of each employe──the quantity
produced, expressed in the units adopted by the trade in which he is


Ordinarily, trading concerns require records of the first class only,
the pay of the employe being based on the time spent, rather than on
the quantity of his production. This is because of established custom
and the difficulty of measuring his production. Primarily, the pay of
the employe is based on his efficiency, but it is not always practical
to attempt to reduce the results of that efficiency to standard units.

Manufacturers require records of both classes. Not only is it necessary
to know how many hours each employe has worked, but the quantity of
production must be known.

It is true that a manufacturing business requires the services of some
employes whose productiveness is not readily expressed in standard
units, in which cases the first method only can be used. These are
the men who are necessary to the economical operation of a department
or shop, or of the plant as a whole, but whose time cannot be charged
to a particular job. Labor of this class is termed _indirect_ or

The labor of most employes in a manufacturing plant is applied directly
to the production of specific articles, or to the completion of certain
definite jobs. This makes it possible to reduce the results of their
labor to definite units. Labor of this class is termed _direct_ or

Records of production, as well as records of time, are necessary for
two reasons. First, when the piece rate or the more modern premium
system is used, employes are paid according to the number of units
produced. Second, to obtain accurate records of costs, it is necessary
to have accurate records of production.

For the purpose of determining the amount of wages due the piece
worker, time records are not needed; records of production supply the
information required. But to determine the actual labor cost per unit,
time records are needed even in the case of piece workers. Piece rates
are based on continuous production at a uniform rate. A marked falling
off in production means a perceptible increase in the cost per unit for
overhead expense. For example, we will suppose that a manufacturer has
$50,000.00 invested in machines operated by piece workers. One of the
definite items of expense to be apportioned to the product of these
machines is interest, at say five or six per cent. If production falls
to one─half of the normal quantity, because one─half of the machines
are idle, the amount of this one item of expense that must be borne
by each unit of production is doubled. Or, we may have two workers
operating identical machines on the same class of work, the production
of one being twice that of the other. The overhead expense is the
same for each employe and each machine, consequently the cost of the
finished product is affected by the factor of time. The piece worker
who fails to maintain the rate of production established as standard in
his or her trade, is not a profitable worker.

=7. Time─Keeping Systems.= There are several systems or methods of
time keeping in use. No one system is adapted for use under all
conditions. Like all other classes of records, the time─keeping system
must be selected with reference to the conditions under which it is to
be operated. The system used in a factory, where all operatives are
housed in one or more buildings, is not well adapted to the needs of a
contractor whose men may be working on jobs located at points widely

In this discussion, we will consider first the systems used to record
the total time employed. This will be followed with descriptions of
systems for obtaining records of production.

=8. Time Book and Check Systems.= Of the time─keeping systems that have
been at some time considered standard, the oldest is the time book kept
by the time─keeper. This system required the time─keeper to identify
each man at work, and to record, opposite his name in the time book,
the number of hours worked each day. Sometimes a special time─keeper
was employed, or the foreman might keep the time book for his own men,
the time books of all foremen being turned in for the purpose of making
up the pay─roll. A system so dependent on the memory of one man never
could become satisfactory.

With the object in view of doing away with the mistakes that were
continually being made in the operation of the time─book system, the
check system was introduced. This was probably the first attempt at
automatic time recording.

Under the check system, each man is assigned a number and given a
brass check on which his number is stamped. In entering the works the
men are required to pass in front of the time─keeper's office and to
hand in their checks. The time─keeper has, in his office, a large board
with hooks numbered to correspond with the check numbers. As the checks
are handed in they are hung in their proper places on this board. The
checks on the board show what men are in the works, and from them the
necessary entries are made in the time books.

When the men pass out at noon their checks are handed to them. Every
man must pass out and take his check; otherwise he will not receive
credit for the half─day's time.

The system does not prove entirely satisfactory for several reasons.
It is not exact, for no accurate record of the time a man enters is
possible. Usually the time─keeper's window is closed at starting time
and opened fifteen minutes later to take care of the late arrivals.
Thus the man who is one minute late pays the same penalty in lost time
as the man who comes in fifteen minutes after the whistle blows. As a
natural result, when a man finds that he cannot reach the works on time
he takes the full fifteen minutes.

While the handing in of a check furnishes reasonable proof that the man
has entered the works, it furnishes no proof that he is at his work.
Many a man has turned in his check in the morning, left the works by
another exit, returned a few minutes before noon, received his check
and full pay for the half day.

In some manufacturing plants where the check system is still used, this
difficulty has been overcome to a certain extent. The operation of the
system is reversed, the men receiving their checks from the time─keeper
as they enter the works. In the shops there are check boards on which
the men hang their checks. These boards are hinged and provided with
locks, the keys being carried by the foremen. Five minutes after
starting time the boards are locked, and late arrivals are required to
turn in their checks to the foreman who makes records of the time of
arrival. Once during each working period, the time─keeper makes the
rounds of the shops and takes the time records in his time book. At the
quitting hour the boards are unlocked, the men take their checks as
they pass out, and turn them in at the time─keeper's office.

=9. Time Clocks.= The modern system of time recording makes use of a
time clock or mechanical recorder. Instead of trusting to the accuracy
of a time─keeper, or depending on the workmen to keep records of their
own time, the modern recorder automatically records the time of arrival
and departure of every employe.

Mechanical time recorders, or time clocks, are of two general types,
making two classes of records. One type records the time of one employe
on a single card or sheet; the other makes a record of the time of
several employes on the same sheet. For recording the total time of
employes, both types are used, and certain advantages are claimed for

[Illustration: Fig. 5. Rochester Time Recorder, Manufactured by
International Time Recording Co.]

The records of the first type, most generally used, have a card for
each employe on which a record is made of his time for an entire week
or pay period. In operation, this system is very simple.

At each side of the clock is a card rack, as shown in Fig. 5. One of
these is an "out" rack, the other an "in" rack. At the beginning of
each week or pay period, cards are placed in the numbered pockets of
the out rack, which is nearest the entrance──one card for each man.
These cards bear the numbers or names of the men, or both if desired.

When the employe enters, he takes his card from the out rack, places it
in the slot of the clock, makes an exact record of the time of arrival
by moving a lever, and places the card in the proper numbered pocket
in the in rack. When he leaves, the operation is repeated, this time
the card being deposited in the out rack. In the meantime the recording
device in the clock has been shifted so that it records the leaving
time in the proper column on the card.

The form of record made by one of the best known clocks of this type is
shown in Fig. 6. It will be noted that the recording device prints the
letter representing the day of the week in front of each record──out
or in. Another feature is the dash under the afternoon registrations;
a glance shows whether the registration was made at, for instance, 6
o'clock in the morning or afternoon.

[Illustration: Fig. 6. Weekly Time Pay Card Used in the Rochester

This form requires an exceptionally small number of entries to figure
the time for the week. In the outside column, at the right, is entered
the time lost or the overtime for each day. At the end of the week,
the net total of this column is added to or subtracted from the total
hours representing a full week, which gives the total number of hours
actually worked.

Clocks of the second type record the time of several employes on one
sheet, the record being made for one day, or for any number of days up
to a week. Like the card machine, the record shows the in and out time,
both forenoon and afternoon.

A recorder of this type is illustrated by Fig. 7. To register the time
of arrival or departure, the employe places a key, bearing his number,
in the clock, and gives it one turn. A bell rings, indicating that the
hour and minute of the day have been printed on the record inside the

[Illustration: Fig. 7. The Bundy Time Recorder, Manufactured by
International Time Recorder Co.]

The form of record made by machines of this type is shown in Fig. 8.
The records of all employes appear in numerical order on one sheet,
with the various _ins_ and _outs_ in their proper columns. The record
is inside the clock, under lock and key, and when removed can be used
as a pay─roll sheet.

The fact that the complete record is on one sheet, is one of the
advantages claimed for this type of recorders. On the other hand, an
advantage is claimed for the card machine in the fact that the cards
can be used for other purposes, such as for cost records.

[Illustration: Fig. 8. Weekly Time Record as Made by the Dey Time

[Illustration: Fig. 9. Work Order with Time and Material Records]


=10.= All records of time on individual jobs or operations may be
termed _production time records_, since the ultimate object of
keeping such records is to determine the cost of production. To the
manufacturer, these records are fully as important as those showing the
total time worked by each employe. Without such records, a satisfactory
cost system is impossible.

When the importance of obtaining costs of production──knowing what it
costs to manufacture a given article──began to receive consideration,
systems for recording the time spent by the worker on each job were
attempted. There being no other method available, the records were
at first made on cards or slips by the employes themselves. In all
essential features the same system is still largely used; nearly all
cost systems require that the employe keep a record of the time worked
on each job.

[Illustration: Fig. 10. Daily Record of the Time of One Man]

=11. Time Record on Work Orders.= One method of keeping time on
individual jobs is to make the record on the work order. When a job is
assigned to a workman, a written order is issued to him. This order,
Fig. 9, instructs him to do certain work and gives him authority to
draw the necessary material, provided the material is not issued with
the order. He is instructed to report his time on the order, and
sometimes to report the material used.

This form can be used successfully only when one man does the entire
job. It is used principally for repair jobs.

=12. Daily Time Card.= One of the methods of obtaining production time
records is to use daily time cards. Each employe is supplied with
cards, similar in form to Fig. 10, on which he is expected to record
his time for an entire day.

[Illustration: Fig. 11. Daily Time Card for Machine Operations]

At the top, the card bears the name and number of the employe, and
the date. Below the heading, a form is arranged for a record of the
order numbers on which he is employed, a description of the work
done (usually the name of the operation), the time of starting and
finishing, and total time worked on each job.

In some classes of operations it is necessary, if accurate cost records
are to be obtained, to keep a record of performance of the machine,
as well as of the man. A form for a record of this kind, covering the
operation for a day, is illustrated by Fig. 11. This form includes the
number of the machine and a record of the number of pieces produced.
Such a record is used for machine operations when a large number of
similar pieces are operated on by a single machine. The time record is
made when one order number is finished and a new one started. The form
shown provides for an extension of rates and amounts, the extensions
being made in the cost department.

[Illustration: Fig. 12. Coupon Time Card for a Day's Operations]

Fig. 12 is a card for recording a day's operations, arranged on
somewhat different lines. This card is a series of perforated coupons,
one for each job on which the employe works. When a job is finished,
the record is made, the coupon detached and turned in. At the close
of the day the top of the card, with all unused coupons attached, is
turned in.

All of these forms for recording the time of an employe for an
entire day are handed to the foreman, who turns them in to the cost
department. Here, the time cards are compared with the clock records to
find if all of the time for which an employe is paid has been accounted
for. The time records for individual jobs are then transferred to the
cost records. For the latter purpose, the coupons can be distributed
by order numbers. This makes it convenient to retain all time coupons
until the job is finished, when the amounts can be transferred to the
cost records with a considerable saving of labor in the cost department.

There is one serious objection to any form of time card designed
for a day's record. Too much depends upon the accuracy and clerical
ability of the employe. The average factory or shop operative has had
no experience in keeping records. He does not appreciate the importance
of the time records he is expected to keep, and, naturally, becomes
careless. Knowing that a record is expected, his card will show full
time, but the distribution of that time to separate jobs is not
accurate. Frequently, he waits until the close of the day and makes
as close a guess as possible as to the time worked on each job. His
failure to keep accurate records is not due to unwillingness, but to
his lack of training in such work.

[Illustration: Fig. 13. Job Card with Time Chart]

Exceptions are found, as a matter of course, and in some industries the
general character of the operatives employed is such as to practically
insure intelligent record keeping. As a rule, however, it is unwise to
expect the factory employe to keep accurate records.

=13. Job Time Cards.= A method of time keeping which is an advance over
the daily time card, is the use of a separate card for each job. With
this method, accuracy of the records can be practically insured and the
employe relieved of much of the clerical labor.

To attain satisfactory results, it is necessary to operate this system
along somewhat different lines than that described for the daily time
card system. Instead of issuing cards for the entire day, the workman
should be given a new card with each new job on which he works, and
not until he has completed the job last worked on. The time must be
recorded and the card turned in to the foreman on completion of each

It is the duty of the foreman to keep his men supplied with work, and
to have at all times a job ahead. The workmen, knowing that a record of
his time on each job is kept and compared with the clock record, will
naturally insist on having a new job card when each old one is turned
in. If no job is ready, it will be necessary for the foreman to issue
an _idle_ or _non─productive_ card──a condition which he will strive
to avoid──all such time becoming a direct expense charge against his

[Illustration: Fig. 14. Job Card Showing Names of Operations]

To relieve the employe of clerical labor, a card, similar in form to
Fig. 13, is used with quite satisfactory results. The special feature
of this card is the provision made for obtaining a record of time.
Below the heading there is a form representing the time of day, each
hour being divided into ten minute periods, and the whole divided
between forenoon and afternoon.

When a new job is started, the workman makes the record by checking
the time in the proper space. On completion of the job, he makes a
similar check mark in the space that indicates the finishing time. The
exact time is computed in the cost department. To illustrate: Suppose
a job is started at 7 A. M. and is done in 6½ hours. The time will
be checked at 7 A. M. and again, if an hour is allowed for lunch, at
2:30 P. M. This really shows 7½ hours elapsed time, but in the cost
department, the lunch hour will be allowed for, and the computed time
will be correct.

Another form of job card, intended for use where jobs require more than
one day, is shown in Fig. 14. With this card, it is intended that the
starting and finishing time shall be entered in the ordinary way, and
the name of the operation checked.

[Illustration: Fig. 15. Day Time Register for Production Time Records,
Manufactured by International Time Recording Co.]

=14. Mechanical Time Recorders.= For the same reasons that they
are best for making records of total time, for pay─roll purposes,
mechanical time recorders are best for obtaining production time
records. Whether the responsibility of making the record rests on the
workman or a clerk, it is always better to have the actual recording
done automatically whenever it is possible to do so.

While the time recorders used for keeping total time are also used
for obtaining production time records, there are certain advantages
in using recorders of slightly different types. Manufacturers have
made great progress and are now supplying machines which answer every

One type of recorder designed for production time records is shown in
Fig. 15. This outfit includes, in addition to the recorder, a rack
for jobs ahead and jobs started, a rack for finished jobs, and a
distribution rack. The first rack contains pockets of the right size to
hold time cards or tickets. These pockets are numbered to correspond
with the men's numbers, two pockets being provided for each man, one
for jobs ahead and one for jobs started. The rack for finished jobs is
divided into compartments bearing the men's numbers, with slots through
which the cards are inserted. The distribution rack is divided into
compartments numbered for the different jobs.

[Illustration: Fig. 16. Individual Job Card Used with the Day Time

The recorder and card racks are placed near the foreman's desk, which
should be at a central point in the department. The foreman prepares
cards for the different employes and places a card for the next job in
the _jobs ahead_ pocket. The workman, when starting to work, takes the
card for the next job, records the starting time, and places the card
in the _jobs started_ pocket. When the job is finished he again records
the time, on the same card, and places the card in the compartment
bearing his number in the _finished jobs_ rack. At night, if he has an
unfinished job, he records the time, the same as for a finished job,
and either turns in the card to the foreman or places it in a box kept
for suspended jobs. The foreman then makes out new cards and places
them in the _jobs ahead_ rack, while the suspended card is placed in
the _finished jobs_ rack.

Every morning all cards of the previous day are taken from the
_finished jobs_ rack, the time recorded on each man's cards is
computed and compared with the record of the total time recorder, and
the cards distributed by job numbers in the distribution rack. This
checks the job time with the pay─roll time, and permits of leaving
the cards in the distribution rack until the entire job is finished.
The cards are then taken to the cost department and the time records
distributed on the cost sheet.

[Illustration: Fig. 17. Job Time Sheet Used with the Day Time Register]

One form of card used with this type of recorder is shown in Fig. 16.
One card is used for each job on which a man works. It will be noted
that the time is recorded in decimals. Instead of the usual 12 hours,
the recording wheel is divided into 24─hour periods, or if desired,
into 23 hours, automatically eliminating the noon hour. The 23─hour
wheel prints 12 at noon and again at one o'clock, 13 at two o'clock,
etc. At 3:30 P. M., for instance, the clock would record 14.50, meaning
14½ hours. On the card illustrated, the record shows the job to have
been started at 8.08 and finished at 11.40, the elapsed time being 3.32

[Illustration: Fig. 18. The Calculagraph, Manufactured by the
Calculagraph Company]

A clock of similar type accommodates a sheet of any size, and provides
for as many separate time records on the same sheet as may be desired.
A sheet may record the time of a single employe for an entire day and
show the exact time worked on each job. Or, in some industries, the
card may be made for a job and arranged to accumulate the time of all
employes working on the job. Fig. 17 shows how several time sheets of
this class can be bound together, making a daily time and pay sheet
for each employe. From this sheet the time is distributed to the cost

Still another type of time recorder, which offers certain distinct
advantages, is shown in Fig. 18. This machine is used to obtain a time
record for each employe on each separate job or operation.

The distinctive feature of this machine is that it records the elapsed
time. When a man commences work on a new job, he places his card in the
machine and by moving a lever registers the starting time. When the job
is finished, he again places the card in the machine, this time moving
a second lever, and registers the exact time that he has worked on the
job. The advantage is apparent. With an ordinary time stamp printing
the starting and finishing time, it is necessary for a clerk to
mentally compute the elapsed time. With this machine the elapsed time
is mechanically computed and printed, saving the time of the clerks and
doing away with all possibility of clerical errors.


Fig. 19 illustrates the form of record made by this machine. The record
shows that workman No. 38 commenced work on job No. 530 at 9:45 A. M.,
that he was employed on this job 2─8/10 hours, and that the operation
was milling.

[Illustration: Fig. 19. Time Record Made by the Calculagraph]

The machine is made to register either hours and minutes, or hours and
tenths of hours. For cost─keeping purposes the latter is preferred for
the reason that it is much easier to figure time at a given rate in

A form of card, without the record, is shown in Fig. 20. The card can
be of any size desired, the only requirement being a blank space for
the time record in the upper left─hand corner.

As with other recorders, one of these machines should be located at a
central point in each department. It is advisable to provide a card
rack with compartments bearing the employe's numbers, and to place
cards for jobs ahead in these compartments. The cards for the day are
first sorted by employe's numbers to verify the clock record, and then
by job numbers for the use of the cost department.

[Illustration: Fig. 20. Time Card Used with the Calculagraph]

Another elapsed time recorder, which was placed on the market after the
above was put in type, but before this book went to press, is shown in
Fig. 21, the form of record being shown in Fig. 22.

The device is operated electrically, the impulses being furnished by a
master clock. This may be located anywhere in the building, preferably
in the office, as it will be less affected by vibration and dust. To
the master clock is also fitted the 24─hour elimination or cut─out
wheel described later. This clock transmits electric impulses each
minute all through the building to the various elapsed time mechanisms.
Thus all the machines are exactly the same time and cards may be
registered in on one machine and out on any other and correct results

[Illustration: Fig. 21. Elapsed Time Recorder with Master Clock.
Manufactured by International Time Recording Co.]

The mechanism is about nine inches square and is enclosed in a dust
proof iron case. It may be placed on a work bench, on a pedestal, or
it may be sunk flush with the top of the bench or desk. The flat cover
has two openings or slots for the insertion of the cards. One opening
is marked "in" for the first record of a job, the other "out" for
registering when the job is completed. There is also an aperture in the
cover through which may be seen a series of indicating wheels showing
exactly the time of day. There is only one handle to be operated and,
therefore, no confusion can occur in the mind of the operator as to
which handle to pull.

[Illustration: Fig. 22. Time Card Used with the International Elapsed
Time Recorder]

The cards used in the machine may be of any length desired but can only
be of one width, 4¼ inches. In registering in, the card is placed in
the front or starting slot, and the lever pulled over. This prints the
starting time at the top of the card in the space to the left. At the
same time four small holes are punched in the card which individualize
the record. After a job is completed the card is placed in the rear or
stopping slot, the lever pulled over once more, and the stopping time
and actual elapsed time are both printed on the card by one pull of the
handle, thus enabling anyone to compare the two records and prove the
accuracy of the machine for every record.

One of the salient features connected with this device is its ability
to compute only the actual time worked in the factory irrespective of
the times of registration. That is to say, in a factory working ten
hours a day from seven to twelve and one to six the elapsed time will
only be computed during these hours. Any registrations made before
seven o'clock will not begin to count elapsed time until that hour,
and the computation of elapsed time automatically stops at noon to
be resumed at exactly one o'clock, and then continues until quitting
time at night, when again it stops automatically. The clock movement,
however, does not stop, but always shows the correct time exactly the
same as the master clock, and is entirely unaffected by the elimination
of the non─working hours in figuring the elapsed time. The machine can
also be set to record overtime at night if so desired.

In case work on a given job is not completed on the day it is begun, it
is not necessary to ring out on the elapsed time machine until the job
is completed as the machine computes up to 100 hours. A job beginning
on Monday and running through the week until Saturday night, when it is
finished, may be registered on one card, or even for a longer period up
to 100 hours.

The elimination or cut─out wheel referred to as being a part of the
master clock, is responsible for this wonderful piece of work. The
wheel makes one revolution in twenty─four hours and is graduated
in fifteen minute divisions for the purpose of setting the contact
breakers. The contact breakers are bits of hard rubber which are
fastened around the rim of the wheel, and may be moved about at the
will of the custodian of the apparatus by simply loosening the set
screw. These blocks are set on the starting and stopping time and when
they pass the contact breakers the electrical circuit is broken, and
the computing device started or stopped as the case may be.

=15. Cumulative Time Records.= In some factories and shops, the work
is of such nature that economy results if the work order and the time
record follows the job through all of the operations. For example,
hosiery and underwear go through the factory in dozen lots; in a shoe
factory a lot of shoes is kept together until every operation is
finished; in a harness factory, a bridle goes through all operations
on one work order; in a machine shop, one or more rough castings may
pass through several operations in the process of converting them into
finished parts.

[Illustration: Fig. 23. Calculagraph Time Card with Coupons]

When these conditions exist, it is practical to attach a time card to
the work, and to accumulate the time of all employes for the entire
job. At the same time, individual time records are obtained.

A form to be used with the mechanical time recorder, Fig. 18, is shown
in Fig. 23. This form consists of the usual work order to which is
attached a series of coupons, perforated for easy removal. Each coupon
is of the right size to accommodate the time record, and particulars
as to the order number, operation number, man's number, and number of

[Illustration: Fig. 24. Cumulative Job Time Card]

[Illustration: Fig. 25. Operations Tag Used in an Underwear Mill]

The man who has the first operation enters his number and records his
starting time on the first coupon. When the operation is finished, the
time employed is recorded, the coupon is detached, and the job goes
forward to the next operator. If the operation is not finished at the
close of the day, the time record is made and the next coupon used by
the same operator.

Each day, all of the detached coupons are sent to the cost department,
where they serve several purposes. They are first sorted by employes'
numbers, to compare the time reported with the clock record; then
sorted by job numbers, to obtain time records for each job. From the
coupons, all necessary information is obtained for a record of jobs in
process, showing just where each job is at all times.

Another form for a cumulative, as well as an individual time record,
is shown in Fig. 24. This card is for use where no time recorders are
provided. Each employe records his time, and, when the last operation
is finished, the card goes to the cost department. If desired, this
card might be made with detachable coupons for the different operations.


=16.= Where piece─rate or premium wage systems are in effect, is
it necessary to have accurate records of production, since the pay
of the worker is governed by the number of units of production.
It has already been stated, that to obtain the exact cost per unit
of production, time records must be kept on piece work. It is not,
however, absolutely necessary that the time be recorded for each
separate job or unit of production. The necessary requirement is that
the production records shall be so kept that they can be checked as to
time──that the time required for a given number of units of production
can be obtained, or that the units of production during a stated time
can be definitely known.

[Illustration: Fig. 26. Weekly Time Records for Piece Workers]

[Illustration: Fig. 27. Production Record of a Gang of Piece Workers]

Piece rates are applied to many distinct classes of work, each of
which necessitates a slightly different system of records. One of the
industries in which piece rates are largely used, is the manufacture of
garments of different classes. In this industry, each garment or lot
of garments passes through several operations, each operation being
performed by a different operator. Since practically all operations are
on a piece─rate basis, it is necessary to obtain a record of the name
or number of each operator.

[Illustration: Fig. 28. Individual Time Record Card Used with the

[Illustration: Fig. 29. Daily Record of Piece Work]

A form for a record of operations in an underwear mill is shown in Fig.
25. This is in the form of a shipping tag with particulars of the order
at the top, followed by a list of the operations. As fast as the goods
are cut, they are tied in bundles of one dozen garments. The tag is
then attached, the cutters' names or numbers are entered on the lines
opposite their operations, and the bundle is delivered to a storeroom
located conveniently to the machines.

[Illustration: Fig. 30. Record of Unfinished Piece Work]

[Illustration: Fig. 31. Production Record for Determining Piece Rates]

In the mill where this particular system is in operation, each
operator delivers her work to the storeroom and receives more work as
needed──always writing her name on the tag. When the work is received
in the storeroom, a clerk records the last operation on the operator's
time card, Fig. 26. One of these cards is used for each operator and
accommodates the record of work for an entire week. Provision is made
in the column at the left for a record of the kind of work, while
the record of dozens finished each day is shown in the proper daily
columns. At the end of the week, when extensions have been made, this
card shows the amount of wages due, the different kinds of work done,
and the quantities finished. In connection with this, the usual clock
record of total time is kept, and a comparison of the piece work and
clock records will show whether or not the operator is maintaining
standard time on the different classes of work.

[Illustration: Fig. 32. Sheet for a Record of Total Time]

In the manufacture of certain classes of cans, some of the operations
are paid for on a piece─rate basis; but payment is made on the basis of
the production of a crew. The operation of crimping tin ends on certain
cans, requires a crimper and several helpers, the latter preparing the
cans for the operation. For this operation, the pay of all members
of the crew is based on the number of cans finished; that is, if the
number finished by a crew consisting of one crimper and four helpers
is 2,000, the crimper will be paid for that number, while the helpers
will each be paid for 500. The form used for a record of production on
this operation is shown in Fig. 27. This is the assembled record, the
individual time records being made mechanically on a card, Fig. 28.

[Illustration: Fig. 33. Combined Piece Work and Time Record for
Pay─Roll Purposes]

On the operation above referred to, the speed of the helpers is limited
to the speed of the machine, but if three helpers instead of four can
do the work, the pay of each will be increased correspondingly. In the
operations handled by crews, there is nothing to limit production. The
result is that each member of the crew is obliged to maintain the pace
set by the most speedy member, which reduces the cost of production and
enables all members of the crew to earn a higher average wage.

A form of piece─work record, used in a factory where employes are
expected to keep their own time, is shown in Fig. 29. This ticket is
filled in by the employe, _O. K.'d_ by the foreman after inspection of
the work, and forwarded to the cost department. All unfinished piece
work is reported on the form shown in Fig. 30. This report enables
the cost department to determine the actual time of all piece─work

Before piece rates can be established for new work, it is necessary to
ascertain the average time required for the different operations. This
necessitates a very accurate record of production of employes working
on day wage rates, and the record must represent the average rate of
production of all employes, rather than the rate maintained by a few
of the most skillful. A form used in one factory for such a record
is shown in Fig. 31. When new work is started, one of these cards is
filled in for each employe assigned to the work, and a record kept of
each operation. When the records have been kept for a sufficient length
of time to obtain an average, the records of all employes for the same
operation are combined and, on the average thus obtained, the piece
rates are established.


=17.= The time records of all employes, no matter how kept, must be
assembled for the purpose of making up the pay─roll. Special forms of
time sheets or pay─roll records are designed to meet the requirements
of different classes of business. Several such forms are shown in other
papers in this series; others are illustrated herein.

A conventional form of time sheet is shown in Fig. 32. The names are
grouped on this sheet by departments, and opposite each man's name is
his number. The daily time records are kept for a period of one week,
then totaled, and the amount of wages extended in the last column.

Fig. 33 shows a form of time sheet intended for a tabulation of both
the clock record and job time. The bringing together of the total time
records (as shown by the clock) and the production time records (as
shown by the job time cards) is of very great importance in connection
with any system of cost accounting. One must be checked against the
other, for unless all of the time for which the employe is paid is
accounted for in the cost records, cost figures will be incorrect.

If the two records do not agree, even though the employe is paid for
the time shown by his clock record, the discrepancy should be adjusted.
Theoretically, every minute of a man's time should be accounted for by
his time cards and, when conditions permit, he should be paid only for
the time so accounted for. This rule should not be so rigidly enforced,
however, as to encourage a man in padding the time on individual jobs
to reconcile the total for the day with his clock record; it is far
better to have a few minutes unaccounted for. When a foreman fails to
have work ready, he should give the workman an idle or indirect labor
card, but the man should be impressed with the fact that accurate
records are kept of his time on every job, and that all lost time must
be either reported on an indirect labor card or left unreported.

The cost of time shown on indirect labor cards, and of all time
unaccounted for, should be charged to the department under some such
caption as _Department Waste_, never to the specific jobs on which the
man has worked. Time wasted between jobs or on account of a breakdown
or other unusual occurrence does not affect the legitimate time in
which a particular job should be done. It is rather a legitimate charge
against the efficiency of the department, and the aggregate of all such
inefficiency charges should be applied as an added burden to all of the
jobs in the department during the month.

Costs obtained, after adding this inefficiency burden, may be
considered the actual costs for the month, but cannot be safely used
as standard. Standard costs are the costs obtained under perfect
conditions──when the department, shop, or plant is running full time
at full capacity; when all of the time of every employe is accounted
for by his job time cards; when there is no wasted time or unusual
expense. While standard costs may not be attained──probably never will
be──this should be the goal, to reach which, managers, engineers,
superintendents, foremen, and workmen should strive constantly. As a
matter of record, therefore, to show what obstacles must be overcome
before the ideal is reached, the inefficiency burden should be added as
a separate item after all other items of cost have been computed.

As an example of the effect of the application of this principle
of considering efficiency in figuring costs, we will consider an
imaginary case. We will suppose that, in a certain month, the
pay─roll for direct or productive labor in our shop is $4,000; that
40 completed machines──identical in every respect──are produced; that
every minute of the time of every productive employe is accounted
for by his productive job cards. This gives a labor cost of $100 per
machine. During the next month the same men are employed at the same
cost──$4,000──but owing to an unusual breakdown, 2½% of the time of
these men is wasted; they are idle while the breakdown is repaired, and
but 39 machines are produced.

If the $4,000 wages paid is charged as direct or productive labor it
gives a cost of $102.56 each──an increase in cost with nothing in the
figures that shows the cause. If, however, an inefficiency charge of
$100 (2½% of $4,000) or $2.56 per machine is added as a separate
item, it is seen at once that here is an unusual item of expense. The
amount ($2.56 per machine) is included in the final costs, but in the
right place; there is no cause for confusion on account of an apparent,
but not real, increase in the productive labor cost. If the cost of
$100 per machine obtained during the preceding month is standard
for productive labor, it still is the attainable standard; the fact
of an unusual expense has in no way affected the legitimate cost of
productive labor.

Another great advantage in presenting the labor cost statistics in this
manner is that inefficiencies are shown in an understandable form.
The fact that indirect labor is increased, say 2%, might occasion no
comment; but if an inefficiency charge of even 1% is shown, it calls
for immediate investigation.

The establishment of standard or efficiency labor costs means
predetermined costs. This is a radical departure from established
custom; on its face, contrary to recognized accounting practice;
in results, wonderfully efficient. To determine standards in men,
material, and machines is a function of the engineer; the recording
of facts──the actual cost──is the function of the comptroller or
accountant. The two must work together. Properly prepared accounts,
showing actual costs with the items that make them segregated, show the
engineer how far short of possible standards the plant is running──the
extent of the inefficiency.

[Illustration: Fig. 34. Record Card for Applicants for Employment]


=18.= In connection with the different time records designed to record
hours of service and units of production, there should be a personal
record of employes; and the more intimately personal it can be made,
the more valuable will the record become.


Napoleon, it has been claimed, could call by name every man in his
armies, but, however great value may have been placed on such a memory
feat, the manager of the present─day great business organization, who
can call by name each of his employes, is an exception.

[Illustration: Fig. 35. Card for Record of Applicants]

[Illustration: Fig. 36. Card for Record of Employes]

It is not necessary that he should do so, for, as business is now
specialized and departmentized, he needs to know only the results
of the labor of those employes. By this is not meant that he should
not take an interest in the personality of his organization; on the
contrary, he should be very much interested, but he can be relieved
from burdening his mind with details by means of simple records.

Somewhere in the office there should be as complete a personal
record of each employe as is possible to obtain. This record should
include applicants, employes, and past employes, and it should be
the duty of some person or department to maintain the record. In the
smaller establishments, employes' records should be in charge of
the chief accountant, office manager, or superintendent; in larger
establishments, the employment department will keep these records.

[Illustration: Fig. 37. Card Showing Complete Record of an Employe]

=19. Application Card.= Fig. 34 shows a simple form of application card
to be filled out for every applicant who is not hired immediately,
but whose application receives favorable consideration. This card is
headed with the name of the position applied for, or the trade of the
applicant. Following this is the name and address, and such information
about the applicant as may be considered of special value.

These cards are filed in a regulation card index drawer and indexed
under the trade or position applied for. The index cards are headed
with the names of the trades employed, the departments, or such other
designations as may be best suited to the business. For instance, one
index might be headed _Machinists_. Back of this index the cards of all
applicants for positions as machinists will be filed in alphabetical

A form of application card which provides for more detailed information
along certain lines is shown in Fig. 35. While this card is headed with
the name of the employe, it is filed under the trade, as described for
Fig. 34.

The value of these application records is apparent. When a man is
needed, reference to this file will show who has applied and assist in
getting a man quickly.

=20. Employe's Card.= One form of employe's card is illustrated by
Fig. 36. This card is filed as soon as a man is engaged. At the head
of the card is the name of the employe, the department to which he is
assigned, and his clock number. Following this is the address and other
essential information. Space is also provided for a record of changes
in wages, including both dates and rates. At the bottom of the card,
space is left for notes on the record of the employe, which can be
continued on the back of the card. The final record on this card is the
date the employe quits, or is discharged, with reasons.

[Illustration: Fig. 38. Card Record of a Past Employe]

Another form of employe's card is shown in Fig. 37. The special feature
of this card is that, for each increase in wages, the reason and name
of the person granting the increase is noted.

The cards of present employes are filed alphabetically by name.
However, in very large establishments, it is advisable to subdivide
them by departments and arrange the cards of all employes in the
department in alphabetical order. It is seldom necessary to arrange
the cards by trades for the reason that the names are, as a rule, so
classified on the pay─roll records.

The employe's record proves valuable in many ways. If, for any reason,
an employe is away from his work, and it is desired to communicate with
him, the address is quickly found; in case of an accident, resulting
in injury to the employe, the address is very convenient. Again,
when a man is wanted for a position a little above that occupied by
the average employe, it is best, if possible, to select a man from
the present employes. Whether the position be that of a gang boss,
a foreman, or the head of a department, a condensed record of past
performance, supplementing the personal observations of his superiors,
will be found of considerable assistance in selecting the right man.
Many other advantages might be named, but those given should be
sufficient to demonstrate the advisability of maintaining these records.

=21. Past Employe's Card.= In some respects, a record of past employes
is as important as the record of applicants and present employes. When
more men are needed, it is natural to suppose that past employes,
whose services were satisfactory, will be specially desirable. On the
contrary, a past employe who has been discharged, or whose work was
unsatisfactory, is unlikely to be desirable.

Any record that will show who the past employes are, why they left,
and their past record, will therefore be of value. Such a record
is provided by the card illustrated in Fig. 38. When an employe
leaves, for any reason, one of these cards is filled in and filed
alphabetically. At the same time, the employe's card is transferred
to another section of the file, and indexed under the name of the
department, or the trade or class of employment.

These cards furnish a very complete record of employes, past, present,
and future. If the number is small, all can be filed in one drawer,
with separate indexes to segregate them into classes. Or a large
cabinet, with one or more drawers for each class of records, may be
required, but, in any event, the records are complete.


=22.= One of the principles that must be kept in mind when installing a
system of any description is that provision must be made for recording
every detail of the work intended to be cared for by the system. While
this holds true in respect to the systems in every other department of
a business, it is of special importance in the manufacturing branch.
Accurate costs are out of the question unless every detail of the
operations of the plant is properly recorded.

Experience has shown but one method that will insure accurate
records, and that method is to manufacture all goods on definite
orders and to charge all work not applied to a specific manufacturing
order, to expense or operating accounts. The receipt of an order to
manufacture before starting the work, is of the same importance to the
superintendent as that the commercial department shall receive an order
from the customer before shipping goods.

Few managers will accept verbal orders for the manufacture of expensive
goods, without asking for a confirmation in writing. When those
orders are transmitted to the manufacturing department, it is just as
important that they shall be in writing.

Manufacturing orders are of two classes: general orders to the
superintendent to manufacture a certain quantity of goods, and specific
orders to shop foremen to do some part of the work. For convenience,
these orders will be referred to in this discussion as _Production_
orders and _Shop_ orders.

=23. Production Orders.= The production order is the written
instructions to the superintendent to manufacture certain goods. It
is his authority to secure the necessary material, to employ the
required number of men, and to convert that material and labor into the
finished product. The production order may call for the manufacture of
the quantity of goods of a certain type required to fill one or more
customers' orders; the manufacture of a certain quantity of goods to be
placed in stock, from which to fill future orders; the conversion of a
definite quantity of raw material into finished products; or even the
manufacture of an indefinite quantity of raw material into an equally
indefinite quantity of the finished product, but within a definite
period of time.

Usually the production orders of one factory will be confined to
one class, though there are some exceptions. In the first class, we
find shops manufacturing special machinery, jobbing foundries, and
mills manufacturing underwear and hosiery. In the latter business the
goods are sold in advance, from samples, and only the quantities or
particular styles required to fill orders are manufactured.

The second class includes furniture factories, typewriter factories,
the manufacture of tools, and numberless similar industries in which a
stock of standard goods is manufactured for future sale.

An example of the third class is found in a harness factory. In this
business, a certain number of sides of leather are issued to the
cutting room to be cut. Since the leather is not uniform in weight
or texture, it is not possible to cut an entire side of leather into
pieces of the same size, or the same parts of a harness──as lines or
traces. The cutter must use his best judgment, so cutting the leather
that it will produce the largest possible volume of usable stock, with
the least waste. The definite factor is the side of leather which is to
be converted into an indefinite quantity of finished, or semi─finished

The last class is illustrated in the manufacture of salt. The
brine──raw material──is pumped from the wells into storage tanks,
from which it is drawn into evaporating pans or grainers. An order
may be issued to make what is known as _common fine salt_ in three of
these evaporators. Evaporating processes are influenced by atmospheric
conditions──the same heat will evaporate the brine much more rapidly
one day than another. Also, the brine is of different degrees of
strength──the same quantity does not always contain the same amount of
salt. The only definite factor is time──an indefinite quantity of brine
is converted, in a given time, into an indefinite quantity of salt and,
it might be added, of an indefinite quality.

When all these conditions are considered, together with the fact
that each manufacturer has his individual methods of conducting the
business──methods probably different from those of his competitors in
the same line──it will be seen that the variety of forms of production
orders is almost without number. But the important thing is to have an
order of some kind──to provide a record.

If there is one essential feature to be incorporated in the production
order, it can be expressed in two words──definite instructions. The
order should be made perfectly clear, leaving no room for doubt, as to
what is desired. When No. 3 dining─room chairs are wanted, the order
should state the fact very clearly, and not read _chairs_, leaving the
superintendent to guess the style and size.

[Illustration: Fig. 39. Production Order to Superintendent]

[Illustration: Fig. 40. Production Order Which is an Exact Copy of the
Customer's Order]

The form of the production order need not be complicated; indeed, a
simple form will serve the purpose much better, an illustration of
which is shown in Fig. 39. The heading of this order shows the number
and date, with instructions to the superintendent to carry out the
work as specified. The body of the order is blank, providing space for
entering such details as may be necessary. The blank at the bottom,
which is filled in by the superintendent's clerk, shows the date
received, date started, the shop order number, and the date finished.

[Illustration: Fig. 41. Sub─production or Shop Order]

This form is suitable for almost any kind of business or class of
order. The production order should always be made in duplicate, a copy
to be kept in the office. The office copy will be used to follow up the
manufacturing order.

In many lines of business, goods are manufactured only as required
to fill customers' orders. The order to manufacture should, in such
cases, be an exact copy of the customer's order as entered. With the
modern method of entering all orders in manifold──with a copy for each
record required──one blank should be included for the factory, this
becoming the production order. A form of this kind is shown in Fig. 40.
This is an exact copy of the order as entered, the instructions in the
heading taking the place of the name and address of the manufacturer.
The particulars include the number, date received, and date to be
shipped. The body of the order contains the necessary instructions; in
the column at the extreme left──quantity ordered, quantity shipped,
size, and description. This is one of a set of blanks that include the
invoice, office copy, cost department copy, and copy for the shipping

=24. Shop Orders.= The shop order is the written instruction of the
superintendent to the foreman to do certain work or to manufacture
certain articles. The order may call for the manufacture of a certain
article complete, or it may be for parts to be later assembled into
a complete article. Shop orders are as varied in form as production

[Illustration: Fig. 42. Shop Order Showing Total Work Cards]

When a superintendent desires to start work on a stated production
order, he lays out the work and issues the necessary shop orders to the
foremen of the different departments in which the work is to be done.
A shop order is issued for each shop──usually these are exact copies.
If work on an order requires work to be done in four shops, the four
copies are made on the typewriter, at one writing, by means of carbon

Fig. 41 shows a convenient form of shop order. This form includes the
shop order number, piece number, drawing number, material, date to be
completed, date of order, production order number on which the shop
order applies, and the date completed. The body of the order is left
blank for a description of the work and the necessary instructions.
Explicit instructions must be given on every shop order──the order
should leave nothing for granted.

[Illustration: Fig. 43. Shop Order with Name of Shop]

[Illustration: Fig. 44. Shop Order Showing Progress of the Work]

The special feature of the shop order shown in Fig. 42 is the space for
_card number_ and _total cards_. When an order is made out, as many
copies are made as there are shops or departments through which the
work must pass. The number of the copies of the order is entered under
the heading _total cards_──that is, if the work is to pass through
four shops, the figure 4 is entered in the space provided for total
cards. The copies are numbered in the order in which the work will be
done──that is, the order for the shop that does the first work is given
No. 1, the second shop No. 2, etc.

There are two special advantages in having the shop orders numbered.
Each foreman knows, when he receives his order, how many operations
are ahead of his own and how many follow, and can lay out his work
accordingly. It does not always follow, however, that because one
foreman receives order No. 3, two other operations must be completed
before his own can be started. Each shop order may call for the
manufacture of a different part, to be sent to the assembly shop, but
if one of these parts is in stock, no order is issued. The foreman
receiving order No. 2, when his number naturally would be 3, knows that
one of the parts is in stock and that his operation must be hurried

The employes in the cost department find the numbering system
invaluable, for it enables them to tell how many operations there are
on a job; also operations which have been completed. This information
is of considerable assistance in tracing orders through the shop.

The shop order shown in Fig. 43 answers the same purpose as the form
shown in Fig. 42. Instead of the system of numbering the order copies,
the plan of inserting the names of all shops is followed. Following the
name of each shop is the name of the operation to be performed. This
also enables the shop foreman to so lay out his work that the order can
be handled promptly when it reaches his shop.

=25. Work Orders.= The work order is the written instruction of the
foreman to the workman to do certain work. As a rule, this order
is made on the production time card, as shown in preceding pages.
Sometimes, however, it is unnecessary to give more explicit directions
than can be written on a small card, which makes it advisable to issue
a special order.

In certain classes of work, also, it is advisable to use one work order
for a job which is to pass through the hands of several men. Such a
work order is shown in Fig. 44. This order shows the numbers of the
men and machines to which the work is to go. Another class of work
for which special orders should be issued is outside repair work──as
plumbing, steam fitting, electrical repairs, etc.

=26. Standing Orders.= Manufacturing is fast developing into a system
of producing standard parts to be assembled into complete machines
and appliances. Every part that goes into a machine is made from a
standard pattern and is interchangeable with the same part in every
other machine of the same style made in the same shop. It is no longer
necessary to design each machine, and each part required to fill an
order──the parts are manufactured in large quantities and carried in
stock till needed. An order from a customer may require the manufacture
of one special part, the balance consisting of parts to be assembled.

The manufacture of parts as standard units is not an accounting
problem, but the accounting department and the manufacturing
departments must coöperate in maintaining proper records of the
manufacture of those parts. The manufacture of one lot of standard
units involves the same operations whenever the same unit is made.
Adopting this principle to accounting, it is advisable to establish
standards in respect to orders. Whenever the same standard part is
needed, the order should be for the same quantity; this, of course,
after a standard quantity has been established. When units and
quantities have been standardized, order numbers should be made
standard──whenever the same work is to be done the _same order number_
should be used. If this plan is followed, orders are soon recognized
by number──and the order number informs the foreman as to the work

Series of order numbers should be assigned for different classes of
work. Numbers 1 to 100 might represent regular plant maintenance and
repair orders; numbers 101 to 200, plant construction and special
repair orders; numbers 201 to 400, the manufacture of special tools;
numbers 401 to 1000, the manufacture of parts; numbers 1001 to 1500,
assembling or production orders for complete machines. Shop orders can
be distinguished by a second series of numbers starting at, say 5000.

Illustrating the above, the superintendent of a typewriter factory
might receive order number 1007, meaning that he is to assemble
1000 No. 7 typewriters. His assembling order to the foreman would
bear the same number. After the parts have been drawn from the parts
storeroom, it may be found that the stock of certain parts is running
low. Production orders are issued for parts, No. 417 being the number
for frames for No. 7 machine. The shop orders may bear the numbers
5060─_a_, 5060─_b_, and 5060─_c_, _a_ being the order for the foundry,
_b_, the order for the machine shop, and _c_, the order for the
finishing department.

[Illustration: Fig. 45. Manufacturing Order Register, Showing Location
of Work in the Shop]

As to expense orders and construction orders, it is very necessary that
the work to be charged against each order number be clearly specified.
When the expenditure involved exceeds a certain amount, or where the
work is of a special nature, a special order should be required.
Explicit instructions for charging all expense items should be given to
each foreman, preferably in printed form──or in typewritten form when
the number of foremen is small. Many concerns issue printed instruction
books containing the order numbers and specifications, with any rules
that may be in force governing the conduct of employes, for general
distribution among employes.


=27.= An essential record in any system of cost or factory accounting,
is a record of manufacturing orders. A system of records shouldbe
maintained, which will show the exact number and nature of the orders
issued to the shop or factory, and from which it will be possible to
locate every order──to determine in what stage each order is, and to
estimate closely the date of completion.

[Illustration: Fig. 46. Front and Reverse of Card Showing Total
Production and Progress of Orders.]

Such records are equal in importance to records of material, both
raw and partly finished, in store at all times. Without them, it is
impossible to obtain authentic information about work in process.
Orders are certain to be side─tracked, and it is extremely difficult to
estimate, with any degree of accuracy, delivery dates for either new or
old orders.

The records should be so complete that it will be literally possible
to run the business from the office──without calling foremen from
the shops, who must return and investigate the condition of an order
before an intelligent answer can be given. The manager who can
conduct his business from the office is following modern ideas; he is
far─seeing──not lucky──for this condition is the result of carefully
made plans to insure records that will show him exactly what he wants
to know.

Along the line of running the business from the office, Mr. F. E.
Webner, in an article in the _Engineering Magazine_, cites an apt
illustration. Two very large corporations with a common line of
product were concerned. Each of these in turn was asked verbally by an
executive officer of a concern which is a large user of the product,
as to what delivery could be made on a stated quantity of goods. One
concern used the long─distance telephone to a number of its plants;
the other concern consulted records within its office and was able to
give a decisive reply within half an hour, and to know just which of
its works was best able to turn out the goods. The first concern had a
number of superintendents on edge looking up data and could not give a
positive answer short of two days.

As in every other department of a business, the expense of maintaining
an adequate system of order records in the manufacturing departments
is infinitesimal, when compared with the results obtained. A single
contract lost for the lack of needed information may mean the loss of a
valuable customer, the profit on whose business would pay the cost of
an adequate system many times over.

=28. Manufacturing Order Register.= The form of the manufacturing
order register necessarily depends on the nature of the business, the
product, and the number of operations or departments through which an
order must pass. It need not be complicated──simple forms always are to
be preferred──the main thing is that all orders be so recorded as to be
readily located.

[Illustration: Fig. 47. Daily Report of the Transfer Clerk]

[Illustration: Fig. 48. Foreman's Daily Report of Shop Production]

A simple and convenient form for a register of manufacturing orders
is shown in Fig. 45. This should be in loose leaf, a sheet being used
for each style or size of machine, part or piece manufactured. If, for
instance, a typewriter is made in five styles, five sheets would be
used──one for each style. Separate sheets would also be used for each
part──as many sheets for each as there are sizes.

The sheets should be indexed under the names of the parts and those in
each division arranged in the order of sizes. Supposing type bars to be
made in ten sizes──numbers 191 to 200──the sheets would be filed in the
order of these numbers. Should the industry be one in which orders are
issued to assemble parts into complete machines, the sheets on which
assembling orders are recorded should be filed with a separate index,
but may be kept in the same binder. It is also advisable to use sheets
of a different color for these orders.

The heading of this form, Fig. 45, shows the name of the part, the
machine on which it is used, the drawing number, pattern number, and
style or part number. Orders to manufacture are entered in the columns
at the left of the body of the form, giving the date, order number,
quantity ordered, and total ordered to date──that is, if 500 parts are
ordered on the 10th and 300 on the 25th, the sum of the two, 800, would
be entered in the total column. Following the order record columns are
columns for the departments, the form illustrated being designed for
a furniture business. Under the heading for each department, a daily
record is made of the quantity received, quantity delivered to the next
department or to stock, and balance in the department, the latter being
in an uncompleted state. This form can be adapted to almost any class
of manufacture by a proper arrangement of departmental columns.

In most all industries, it is practical to keep a continuous record of
all manufacturing orders; sometimes it is best to keep a record for
each order. A form of this class, designed for the use of a machine
shop, is shown in Fig. 46. This form shows the progress of a single
order through all of the departments. A card is used in this case,
both sides being required to accommodate the number of operations, and
they are indexed by order numbers.

=29. Tracing the Order.= The system of tracing orders through the
shop or factory is very important and should be as nearly automatic
in operation as possible. There may be many orders which need not
necessarily be traced, but a system that will automatically keep
the office informed on the progress of _all_ orders, will pay for
itself in the time saved in tracing a single order without proper
records. To attempt to find the exact condition of work in progress
without a tracing and recording system, is not alone expensive, but
unsatisfactory in results; the degree of accuracy is measured by the
ability of foreman to make accurate estimates. Practically, foremen
should be best able to estimate the time required to complete a job,
but their estimates will be found to vary greatly on similar jobs; time
standards are more accurately determined by a comparison of the records
of past performances.

When practical──and it has been found practical in many industries──a
transfer office should be maintained in the works. This office should
be in charge of a transfer clerk, who will record all transfers of work
in progress from one department to another. Theoretically, all work
should pass the transfer office. In the manufacture of small parts,
this can be done without loss of time, provided the transfer office is
centrally located. When heavy work is the rule, it is not practical to
carry out this plan in detail, but such transfers should be conducted
under the supervision of the transfer clerk.

The transfer clerk should maintain records of orders in progress, which
will be duplicates of the office records, reporting all transfers
to the office on the form shown in Fig. 47. This is a simple report
form, giving order numbers, part numbers, quantities, and names of the
departments between which transfers are made.

When no transfer clerk is employed, it is necessary to obtain reports,
in the same form, from the different foremen. This report should
provide for an acknowledgment of the receipt of work, as well as a
record of deliveries. The form shown in Fig. 48 gives a double check,
since the quantities received must agree with the report of deliveries
from the department from which the work was received.

From these reports, the order records are made in the office. In
addition to their value in maintaining a record of orders, the tracers
and reports are used to advantage in compiling an inventory of work in




=1.= In order to obtain a thorough understanding of a subject, and
to gain a clear insight into the various questions involved, so that
one may understand not only its underlying principle, but also its
operation in detail, it is quite essential to know first, _why_ a thing
is done, and second, _how_ to do it. While a general knowledge of a
subject is always desirable, and to be commended, it is often found
insufficient when put to the test. Special subjects require special
consideration and study, especially when the how─to─do─it is involved.

On the subject under consideration this is particularly true, for it
seems to be a common confession among those handling factory accounts,
that while they know in a general way how their expense accounts should
be treated, they seem to be in a maze when it comes to actually doing
it. The "knowing how" is the best asset of a good accountant; and
in these days when the subject of costs is of vital interest to the
manufacturer, the up─to─date accountant has the opportunity to show
his value. To make the necessary repairs to a touring car broken down
on the country road may take but one dollar's worth of the repairer's
actual time, but the "knowing how" may be worth ten dollars to him when
rendering his bill, and usually is.

While it is realized that there are differences of opinion among
accountants on some of the questions considered in the presentation
of this subject, it is the intent of this article to present what is
generally conceded by our leading accounting authorities as the best
practice in a well─organized, up─to─date, industrial plant, and to
so present the subject to the prospective student that he may fully
understand and master the "why" and the "how" of this important
question in factory accounting.

That the subject may be carefully considered in all its various
phases, it will for convenience be developed under the following
general divisions in the order in which they are naturally suggested:

  (1) Basis of Expense Distribution.
  (2) Methods of Expense Distribution.
  (3) Percentage Method Exemplified.


=2. True Cost──What Is It?= Without trespassing on the general subject
of cost accounts, it is quite essential to clearly establish at the
very outset what constitutes _true cost_. It would be difficult to
conceive of a manufacturer to─day who would simply take the value of
wages paid and material used for a cost price, and to this amount add
the usual percentage of profit he desires to make on his output, and
sell at that price. It would be folly to attempt business on any such
basis. No business can be conducted without expense, and yet, in the
case just cited, the manufacturer has simply ignored it. Suppose the
expense of conducting his business exceeds the percentage he added
for profit, what then? He soon finds he has made a serious error in
figuring his cost, and the item omitted is the cause of his business
losses. His selling price was based on less than the true cost of his
product and it is noted he has made no provision, in making up his cost
price, for covering the expense of operating his factory, his offices,
and general expense, including insurance and taxes. It is apparent
then that this matter of _expense_ has a very important bearing on the
cost, in fact is a part of it, and must be carefully considered in
making up the cost records. The factor of expense is frequently found
to be greater than the direct labor cost itself, and a successful
manufacturer must know how much expense his costs should absorb and how
to figure it. The sales from his product must more than pay for the
direct cost to manufacture and all the expenses of his factory besides,
and if his sales are not sufficient to pay for both there is no profit.
This expense, then, is an indirect charge to the cost of production,
and must be included in it before the selling price can be established.
Many a manufacturer has been ruined by not properly handling his
manufacturing expense, and the necessity for its careful consideration
cannot be emphasized too strongly.

Mr. Clinton E. Woods, one of our leading authorities in factory
organization and accounting, very clearly states that expense and
"overhead" charges must be absorbed into the cost of production as much
as labor and material, by which operation expense is really converted
into an asset.

True cost includes first, _direct labor_; second, _material_; and
third, _expense_. The last item will admit of further subdivision and
originates from two different sources: First, the expense of operating
the work─shop or factory itself; and second, the general expense of
offices and administration.

The cost of production, therefore, resolves itself into the following

  Direct labor            $
  Factory expense
    Factory cost
  General expense
    Manufacturing cost

=3. Selling Expense.= _Selling expense_, oftentimes spoken of as
_commercial expense_, has no bearing on cost price. The correctness
of this position is easily shown. Two manufacturers, competitors in
the same line of production, both operating up─to─date plants with the
finest equipment, may produce at the same cost. The expense necessary
to market the product from one factory may be so excessive as to cause
one concern to lose business to their competitors who can sell their
output at less expense, while the actual cost to manufacture may be
identical in both shops. Again, while one manufacturer, who can produce
at a low cost but carries a heavy selling expense, may conduct his
business at a loss, his next door rival in trade may not be able to
manufacture as economically but can sell his product with less expense,
and thereby carry on a profitable business. In the two instances cited,
the key to the losses of one manufacturer and to the profits of the
other is in the expense of selling, and not in the cost of production.

In a large plant with an elaborate, well─organized, and expensive
sales division, where the dividing line between the commercial and
production expense is clear cut, these two expense accounts should be
kept entirely separate; the commercial being charged off to _Loss_
and _Gain_ direct, while the latter only should be merged into
manufacturing cost.

In a small plant, where the selling division is conducted through the
general office at an expense so small as not to affect the cost of
administration over what would be necessary for manufacturing purposes
only, or where there is difficulty in separating the selling from the
manufacturing expense, the two are often combined as general expense
and pro─rated as one account into production costs.

Theoretically, selling expense is not a charge to production, but the
dividing line between this view and the practical one in most cases
is a very fine one, and in the interest of simplification instead of
elaboration, the commercial will be treated in this presentation of the
subject as a part of the general expense, and will be considered in
detail later.

=4. Expense Based on Cost Price or Selling Price.= Having shown that
expense is of necessity an item which must enter into true cost, the
question at once arises as to what it is related. Is the amount of
expense to be borne by any article of production based on its cost or
its selling price? While it is noted that some accountants claim the
latter should be the basis for calculation, the consensus of opinion
seems decidedly in favor of the cost price as the correct one, and
there seems to be good argument for the stand thus taken:

(a) Inasmuch as the selling price cannot be established until the
cost price has been ascertained, which is to include the expense, it
is apparent that the expense must be calculated from data already in
hand; either the direct labor or material cost. The selling price is
established after, and contingent on, the cost price, not the reverse.

(b) Again, the selling price may vary according to the demands of
trade; different prices to different classes of customers, as well as
the wholesale and retail prices for the same article. In either case,
the cost price is the same and is not influenced one way or the other
by the selling price. The selling price may fluctuate while the cost
price remains positive and stationary.

(c) While the selling price is theoretically based on cost, it is often
fixed by the trade, or regulated to meet competition regardless of
cost, and the expense accounts are found to continue about the same
each month whether the selling price is high or low.

(d) In times of depression, or when business is slack, it is common
practice to "mark down" the selling price and increase the amount of
sales at a smaller percentage of profit.

(e) It is difficult to see wherein there would be any difference in the
expense of manufacturing an article which sells at $110.00 over what it
would be were the price but $100.00, yet there would be if the selling
price were used as a basis.

Other reasons will suggest themselves, but these just referred to are
quite sufficient to show that the selling price is too erratic and that
expense will be found more reliable when figured at cost price, which
method has, therefore, been adopted as the best practice.

=5. Expense Based on Cost of Labor or Material.= Having decided that
expense should be reduced in some manner from the direct cost price
rather than the selling price, it is remembered that we still have two
items of cost to choose from: The labor cost and that of the material.
There are those who maintain that the material cost is the correct
starting point for calculations, but there are few manufacturers, if
any, who do this.

An attempt has been made to use the combined total of labor cost and
material, but this method is hardly worthy of serious consideration.
The best practice points almost without argument to the labor cost as
the true basis of expense; this is not only the logical conclusion but
common sense:

(a) It is easy to see that the elements which go to make up the expense
of operating a factory──foremen, sub─foremen, supervision, shop clerks,
toolkeepers and grinders, helpers, the up─keep of tools and machines,
lighting, etc.──are all closely related and largely dependent upon
the number of men employed. Reduce the number employed and it will be
seen at once that some of the above mentioned items of expense can
be cut; less supervision is required and the wear and tear on tools
and machinery is also reduced. It is difficult to see wherein any
difference in cost of the material used would of itself cause any
increase or decrease in the factory expense or even be influenced by
it. It is quite contingent on the labor.

(b) That the cost of the material is not a reliable basis for
calculating expense can be quite satisfactorily demonstrated. If the
cost of an article is, say, labor $25.00, material $50.00, with expense
to be figured at 50% on material, or $25.00, it is seen at once that
the manufacturing cost would be:

  Labor             $25.00
  Material           50.00
  Expense            25.00
  Cost             $100.00

Suppose this article were duplicated under the same identical
conditions and cost, using only this time material that cost $60.00.
It is a fair proposition that the total cost would be but $10.00 more
than in the first instance, or $110.00. But if the percentage is added
on the material as before, it is found that the expense this time is
$30.00, which would make the cost appear thus:

  Labor             $25.00
  Material           60.00
  Expense            30.00
  Cost             $115.00

It is now noted that the cost figures $15.00 more than in the first
instance, while we are quite ready to admit it should be but $10.00,
the only difference being in the cost of the material.

=6. Conclusions.= Having established the fact that the expense is a
legitimate charge to the cost of production, we are now quite safe
in laying down for our foundation the proposition that expense is
contingent on, and should be figured from, the direct labor value of
the cost price.


=7.= Time is continually bringing improvements; old methods once
thought practical and satisfactory are replaced by more efficient
ones to meet the exacting conditions of to─day. Examine a _Practical
Bookkeeping─Manufacturer's Edition_ of thirty or forty years ago
and you will probably find nothing on this subject of _expense
distribution_, while to─day it is one of the most important and most
discussed of any in factory accounting in general, and cost accounting
in particular. Since that time different methods of handling expense
have been devised, some with more or less merit. It will be the intent
of this section to consider at some length three of the most frequently
used of these methods, endeavoring to find one which will, in the most
equitable manner, distribute into production the operating expense of a
factory with the least amount of detail and unnecessary figuring on the
part of the accountant; and at the same time prove satisfactory from
the manufacturer's standpoint.

=8. The Man─Hour Rate Method.= This method, once quite popular, is now
but little used, and it is doubtful if it can be found in operation
in many up─to─date plants at the present time. The name of the method
suggests its intent, which was to distribute factory expense over the
various production job orders according to the amount of time spent by
the workmen at an hourly rate. This rate is easily calculated, and was
established by dividing the total expense for any period by the total
number of hours spent on productive work for the same period, reducing
the rate of distribution to so much per hour. If 100 hours of labor
were spent on a productive job, the cost of the wages paid the workman
for this time was not considered, the expense to be borne by the job
being figured at the hourly rate for the 100 hours. It will be seen
that this is hardly an equitable arrangement, and to rectify a serious
defect in the method, some adjustment must be made:

(a) The inability to fix a standard for the efficiency of the labor
lays the man─hour rate open to criticism. Could this be done, this
method would in many cases prove a very equitable way of distributing
expense. It will, however, be seen at once that as it is, a skilled
workman carries no more expense than an apprentice boy, and if both
work on a productive job a full week, the expense in either case is the
same regardless of the wages paid. This is hardly a fair proposition.
Either the apprentice's time must be accepted as standard and the
skilled workman considered twice as efficient in work─hours, or _vice
versâ_. To do this would lead to endless complications, yet the
quantity and quality of the output between these two classes of labor
should be considered and adjusted in some way so that the injustice
done the manufacturing cost may be corrected. But this is not an easy
matter to regulate, and means extra work on the part of the cost
clerks in recording the time spent on job work and adjusting these
inequalities in the labor.

(b) The man─hour rate requires that the hours worked be carefully
recorded and totaled, as well as the cost. Many concerns with heavy
pay─rolls to be apportioned over a large number of job orders, ignore
the footing of the long columns of hours and fractions, and use only
the totals of labor cost, which are of course necessary for entry in
the commercial books. It is obvious that in doing this an immense
amount of clerical labor is saved. The man─hour method requires that
both hours and labor cost should be recorded and totaled──a double
operation and duplication of work, which, unless it can be simplified,
should be avoided, as it means time and unnecessary expense.

=9. Machine─Hour Rate Method.= This machine─rate plan of distributing
expense was designed to meet the needs of a shop where the product is
largely the result of a machine or tool operation, rather than the
labor of the mechanic himself. It somewhat resembles the man─hour plan
in that the rate of distributing expense is reduced to an hourly rate
for the time the machine is working on the job instead of the time of
the operator. Each machine is intended to have its own rate.

The method of arriving at the machine rate is easily understood, and
reduces itself to the item of depreciation on the original cost price
of the machine with its shafting, belting, tools, and installation cost
figured at, say, 5%, the power to operate machine at an estimated cost
per horse─power, ordinary repairs, divided by the number of hours the
machine is estimated to be in operation for the same period; this will
give the hourly rate of cost to operate. Some mechanical engineers
advocate including in the above cost, interest on the investment at
6%, also insurance and taxes; and by others, the value of the floor
space occupied by the machine is also included; but in all these latter
points referred to, engineers greatly differ in opinion, and it is
generally decided by each manufacturer for himself according to his own

On the question of the value of machine rates there is probably more
argument by mechanical engineers and accountants than on any question
in factory accounting; in fact, engineers themselves are very far
apart in their opinions and do not seem to agree among themselves.
Accountants generally are inclined to take a somewhat different view of
the situation from our mechanical friends. While it is admitted there
is good argument for both positions, it is to be remembered that we are
considering the question of machine rates as a means of distributing
the expense account, and it seems to be the prevailing opinion among
accountants that as such it is found wanting. While, theoretically,
it is undoubtedly the correct solution of the problem, it is more
often found in practice to be a case of a "distribution that does not
distribute," and for this reason is not used by the very class of
factories and machine works for which it was designed and intended to

Let us consider in detail a few of the objections that may be raised to
the machine─rate method:

(a) It will be noticed there are other expenses in the shop than
that of operating the machines and not covered at all by the machine
expense. Machine rates are absolutely worthless for bench labor and
the assembling room, for these two must also share in carrying the
shop burden. Not to do so would be manifestly unfair. It is therefore
necessary that a second distribution must be made entirely different in
its calculation, to handle this undistributed expense not covered by
the machine rates, which means two different operations for the same

This necessitates two different time records to be kept, one card
for each machine showing jobs worked on and hours idle, and another
time card for the workman. Is is easy to appreciate that this double
operation greatly increases the clerical work in the shop, besides two
sets of entries by the cost clerks, and more detail for all concerned.
If a method can be found which requires but one time record to be kept,
this double process can be done away with and the duplication of work

(b) The principal factor in the calculation of the machine rate, in
fact, the real key to a successful calculation, is in establishing a
standard of work─hours for each machine. It is noted that the higher
the standard, the lower will be the rate, and the lower the hours
operated, the higher will be the rate; in other words, when the
machine is idle in excess of the standard, the rate changes. In some
shops where the output is a stable product, always in demand, and the
machine in continuous operation, a good estimate may be made, but in
most shops a machine is frequently idle on account of "no work" or
"laid up" for repairs the same as is its operator. The practice in most
shops is such that it is extremely difficult to estimate ahead what the
work─hours of a machine will be, and it resolves itself generally into
an intelligent guess with two estimators far apart in their estimates,
yet a satisfactory distribution requires a standard which will work out
in figures close to the actual facts.

Who can successfully estimate ahead for any time the activity of each
machine in a large factory? Our factory engineers are at wide variance
on this point. One authority says "full time," 300 days a year, is the
proper basis for calculation. It would seem as if this were rather an
unusual position to take; it apparently being his belief that the time
idle would be offset by the time the machine was operated overtime, or
else he expected the machinery once put in motion to neither shut down,
nor break down. Either appears to be rather a dangerous assumption on
which to base a careful calculation for rate of distribution.

Another engineer says 80% of a full day will be found to be the
maximum, and further adds: "It will doubtless fall much below that
figure." One naturally asks "How much lower?" There is quite a large
field of figures to choose from between an 80% activity and a dead
standstill for the machine.

It is quite unnecessary to attempt to demonstrate at length that the
work─hour standard may be a very elastic figure, and it is often
found that after distribution has been made, the results are very
unsatisfactory and the machine rates used have proved "way off."

(c) Again, having settled on the work─hour standard, other adjustments
appear necessary to equitably handle the machine rate question. For
instance, two machines may be of the same book valuation and in cost
of operation practically alike, yet one may be far more efficient than
the other and possibly turn out two or three times as much work. This
condition is constantly found in different shops, and whether or not
the two machines should carry the same rate, and, if not, how this
inequality shall be adjusted, forms a very interesting question for

(d) It is noted that the essentials in the calculation of machine rates
are all based on estimates which may or may not prove correct; that
positive book figures are lacking; and that the calculations are made
on assumptions. One of the best professional opinions noted is that
expressed by one of our leading accountants, who, commenting on the
question of machine rates, observes that "it begins with estimating and
is estimating all the way through." This appears to be rather severe
criticism, yet one has but to give the subject careful consideration to
note that it quite correctly sums up the situation in a few words.

As previously stated, the machine─rate method is without doubt
theoretically correct, but, until the subject has been more thoroughly
elucidated and worked out in all its details to fit shop conditions and
furnish a satisfactory means of distributing expense, it is doubtful if
it will be used to any great extent. This method certainly requires an
elaboration of system and detail, with questionable results, and with
many serious objections apparent; it seems pertinent, therefore, to ask
the question "Is it worth while; cannot something better be devised?"

=10. The Percent Method.= A third plan of distribution, commonly
referred to as the _percentage method_, differs from the two already
outlined, in which the time employed was the basis of operation, in
that the rate of distribution is a percentage on the direct labor cost
of the product, which is, of course, commensurate with the amount of
time expended. In the first division of our subject, it was shown that
expense figured on direct labor would prove the most reliable.

This method is based on the principle that the production of each
department of a plant should shoulder its own expense, and also a share
of the general expense. In other words, the cost of the output from the
_Blacksmith Department_, for instance, would be the total productive
labor of the department, plus the material used, plus the operating
expense of the department, plus its share of the general expense of
the whole plant. It is only necessary, then, to establish the relation
between the productive labor and the expense, and express the same in
a percentage. It is immaterial how many departments or processes there
may be in the factory; this relation should be found in each case,
based on its own productive labor and expense, each department having
its own percentage ascertained from its own actual conditions; no
estimating about it. The expense, then, is figured on the labor cost.
If, in the _Blacksmith Department_ already referred to, it is found
that the expense at which the department is operated is one─fourth
of its total productive pay─roll for the same period, it is at once
apparent that if to the labor cost of every productive job, 25% is
added for shop expense, the total of these expense items added will
equal the total expense of the department. In other words, the shop
expense is split up and added to each job in proportion to the labor
expended on it.

The general expense is handled the same way. If the total general
expense is found to be one─third of the total productive labor in
the plant, it is likewise apparent that, if to the labor of every
productive job, 33⅓% is added to cover general expense, the sum
total of these percentage items added will equal the total general
expense of the plant.

Following, then, the formula outlined at the opening of our discussion
under the heading of _True Cost_, the cost of a job done in the
_Blacksmith Department_, on which the direct labor cost was $100.00,
would appear on our records as follows:

  Direct labor               $100.00
  Material                     50.00
  Factory expense at 25%       25.00
    Factory cost              175.00
  General expense 33⅓%         33.33
    Manufacturing cost       $208.33

This is the _percentage method_. While it is quite natural in anything
of value and merit to look for its imperfections, this method is
criticised by some accountants who point to flaws in its logic and
method of computation; nevertheless, it stands to─day as the best
solution of the vexed question of expense distribution that has yet
been devised, for it not only has the approval of our best technical
authorities, but that of the practical accountant as well. It commends
itself to the intelligent judgment of the manufacturer, who is quick to
realize its superiority, and it can be recommended for many reasons:

(a) It is based on actual figures, easily extracted from the regular
books of account, and which are a true statement of fact; no guess─work
or estimating about it. There is no better way to figure what is to be,
than to use results of what can be conclusively demonstrated already
has been.

(b) It can be used in any manufacturing plant, or in all the
departments of the same plant, thereby insuring uniformity of method,
which is always desired. No argument is necessary to convince that two
methods in the same factory are undesirable when one can be found that
is satisfactory.

(c) It accomplishes its purpose──it distributes. If it is found
that factory conditions are changing, the percentages used may also
be changed so as to increase the amount of expense distributed, or
diminish it, as necessary.

(d) It requires less work for the cost accountant. The man─hour plan
requires the hours worked to be recorded and footed in addition to
the labor cost. The machine─rate plan requires not only two different
calculations, as already shown, but also necessitates the adding of
all the hours worked. The percentage plan requires only the labor cost
in money value, and renders the recording and adding of long columns
of hours entirely unnecessary, which, as can readily be seen, is an
immense saving of labor. In a large plant with an elaborate system of
job orders to be handled, the value of the percentage method, in doing
away with this double calculation, will be appreciated immediately.


(e) Figuring by percentages can be done rapidly, and in many instances
it is but a mental calculation and almost instantaneous. Were hours
recorded, the frequent use of fractions would render the process of
figuring expense less rapid.

(f) It is an equitable means of distribution, for it is based on the
direct labor cost, which is not only the most reliable element of cost
to use as a basis, but which is one of the principal factors by which
the amount of expense is influenced.

(g) It has the endorsement of our best factory accountants and
auditors, and it is noted that where "systems" are being installed by
factory organizers to─day, the percentage method is continually being
adopted as the most satisfactory, for it brings the best results with
the least machinery to operate.


=11.= Before proceeding to show in detail the method to be pursued in
arriving at the various percentages to be used in distributing expense
by the _percentage method_, it may be well at the outset to clearly
understand what constitutes _productive labor_ and _expense_, or
_non─productive labor_, for it is on the former that all calculations
are based.

=12. Productive Labor.= The wages paid to the workmen for labor spent
on productive work which is offered by the manufacturer for sale,
and from which the business derives its regular revenue, is properly
classed as _productive labor_. In other words, the amount of productive
labor is commensurate with the productive output.

It is frequently asked whether labor spent on plant extensions or new
equipment, when made for one's own use, may be considered productive
labor and should carry its share of the expense in its distribution.
Most assuredly, yes. If this same work were performed to be sold again
in trade it would be considered productive labor and the expense would
be added. The reverse is also true; if it were purchased from another
manufacturer he would treat it as productive labor, and include expense
in his cost and selling price, and the purchaser would have to pay
for it, and would carry same in his ledger, in his plant or equipment
accounts, and on his balance sheet as an asset. The only difference,
if any, is in making new equipment himself, in which case it goes on
his books at the cost price to him, thereby saving the manufacturer's
profit he would have to pay if he purchased it. Is it, then, any less
productive labor because a manufacturer prefers to make his plant
extensions or new machinery, himself, instead of buying? It does not
appear so; it certainly is productive labor.

=13. Non─Productive Labor.= All other labor, not distinctly productive
as just outlined, must be classed as non─productive. This includes
_clerks_ and _offices_, _foremen_, _assistants_, _watchmen_, _repairs_
and _renewals_, _small tools_, etc., and all the many expense men
not working on product but necessary to keep the plant in repair and
operation. Non─productive labor is a question of keeping the factory
organization and management up to concert pitch, and is not regulated
by the quantity of production.

Inter─department work in a plant often raises an interesting question.
Shall labor expended by one department on repairs for another
department receive credit for same as productive labor? The foreman
of the department often claims that the repairs his men are doing
for another department are just as much production, so far as he is
concerned, as though his men were building a machine for sale, and
should shoulder part of his expense. In a certain sense, all labor is
productive, and from a selfish point of view, the foreman's argument
is a fair one. But from the broader view of the manufacturer, all
such inter─department repairs, or similar work, are a part of the
operating expense of the plant, and are necessary for the up─keep of
the equipment; they are not made for sale, as is a production order,
and must be carried as expense──non─productive labor.

=14. Expense and Production Cost Ledgers.= Without digressing from
our general subject, it may not be out of place at this point to
call attention to a most convenient method of keeping cost records.
Inasmuch as the cost of production must absorb the expense costs of
manufacturing, it will be found advantageous to keep these two classes
of accounts in separate binders, putting all the non─productive labor
cost records in one binder, calling it _Expense Ledger No. 1_, and all
the productive labor in _Production Ledger No. 2_. When the expense
distribution is to be figured, it will be noted that all the entries
will be made in _Ledger No. 2_, while _Ledger No. 1_ furnishes the
amount and details of expense to be distributed.

=15. Period for Comparisons.= Having shown that our percentages of
distribution are based on the relationship of total expenses to total
of productive labor, the first step in our calculation is to draw off
from our ledgers a statement of each for the same period as a basis for

[Illustration: Fig. 1. Private Ledger Labor Account]

Inasmuch as there is generally found to be some item of extraordinary
expense that appears each month, comparisons made on conditions
shown by one month's operations are apt to be found abnormal, while
a comparison made on results of operations extending over six months
or more will give an average nearer the true condition of the plant's
activities than one made on results shown by a shorter period.

=16. Pay─Rolls Dissected.= For our first statement, let us examine the
pay─rolls and find out what portion may be classed as non─productive
labor and what as productive labor, both by departments and in totals,
our examination of same to cover a period of six months as just

For the sake of illustration, let us take a plant with a weekly
pay─roll of about $10,000. Ordinarily there will be four pay─rolls each
month, but in order to provide for thirteen rolls quarterly, it will be
necessary every third month to have the labor account cover five weeks
instead of four. Turning to our _Private Ledger_, we find our _labor
account_ appears as shown in Fig. 1.

It is now seen at a glance that the total pay─roll for six months is
$266,155.00. It is now necessary to know the split─up of the above
figures into productive and non─productive labor by departments, and
this is easily obtained. By reverting to the pay─sheets, can be found
the total pay─rolls for each department during the above period, and
from _Ledger No. 1_ can be found the portion of these same rolls that
were classed as non─productive labor, and the balance will be found
entered in _Production Ledger No. 2_, the sum total of which will in
each case balance with the totals in the _Private Ledger_. Every dollar
of labor is accounted for in either one or the other of the two cost
ledgers. Having done this, the labor statement resolves itself into
something like the following:

  Jan. 1 to June 30, 1908
                    ║ Non─Productive ║  Productive  ║   Total
                    ║      Labor     ║     Labor    ║  Pay─Roll
  Dept. A─Offices   ║   $9,828│00    ║         │    ║ $ 9,828│00
        B─Store     ║    2,180│00    ║         │    ║   2,180│00
        C─Power     ║    4,524│00    ║         │    ║   4,524│00
        D─Yard      ║    9,316│00    ║         │    ║   9,316│00
        E           ║    9,971│00    ║  104,409│00  ║ 114,380│00
        F           ║    7,082│00    ║   31,429│00  ║  38,511│00
        G           ║    1,749│00    ║    5,528│00  ║   7,277│00
        H           ║    2,488│00    ║   10,659│00  ║  13,147│00
        I           ║         │      ║         │    ║        │
        J           ║         │      ║         │    ║        │
        K           ║         │      ║         │    ║        │
        Etc.        ║         │      ║         │    ║        │
        Totals      ║   58,021│79    ║  208,133│21  ║ 266,155│00
                    ║       21│8%    ║       78│2%  ║        │

The above figures are all that are needed so far as the labor end of
the comparison is concerned. In fact, the non─productive labor is not
necessary and is shown here merely as a matter of interest, as are also
the proportionate percentages of each division to the total pay─roll,
for it will be remembered that the productive labor is the figure used
in all costs on which the expense is calculated.

=17. Departmental Expenses.= Against the amount of productive labor
for each department shown in the statement just made, place the
total expenses for the same departments. This is readily found
by again referring to the _Private Ledger_, where the amount of
_Operating Expense, Department E_, for the same months the pay─rolls
were tabulated, appears as in Fig. 2. The expenses of all the other
departments should be similarly treated.

[Illustration: Fig. 2. Private Ledger Operating Expense Account]

=18. General Expense.= The general expense of a plant, for the sake of
convenience as well as information, is kept usually in considerable
detail, different ledger accounts being opened to carry the various
subdivisions of expense. The use of a _General Expense Account_ in the
ledger is not recommended, for its very name has the earmarks of a
general dumping ground for all miscellaneous items, and is often found
a convenient place to hide expense, trusting it will there be lost
sight of and thereby escape observation.

The combined total of these various expense accounts is the total
general expense, a part of which each productive job is to carry.
As they now appear in the ledger as separate accounts, _Executive_,
_Office_, _Store_, _Power_, _Yard_, _Taxes_, _Insurance_, _Printing_
and _Stationery_, _Telephone_ and _Telegraph_, _Postage_, etc., it will
be seen that each account is in itself but a part of the amount to be
distributed, and, to better show this combined total, these individual
accounts should be closed out monthly and brought together in another
account, called _General Expense Distribution_. This is done by journal

       Dr.                                         Cr.
   $10,293│28 ║  General Expense Distribution  ║         │
          │   ║     Executive Salaries         ║         │
          │   ║     Insurance                  ║         │
          │   ║     Taxes                      ║         │
          │   ║     Depreciation               ║         │
          │   ║     Freight                    ║         │
          │   ║     Express                    ║         │
          │   ║     Cartage                    ║         │
          │   ║     Printing and Stationery    ║         │
          │   ║     Telephone and Telegraph    ║         │
          │   ║     Traveling Expense          ║         │
          │   ║     Postage                    ║         │
          │   ║     Legal                      ║         │
          │   ║     Water                      ║         │
          │   ║     Advertising                ║         │
          │   ║     Etc.                       ║         │
          │   ║     Operating Expense Dept. A  ║         │
          │   ║                "            B  ║         │
          │   ║                "            C  ║         │
          │   ║                "            D  ║         │
          │   ║                                ║  ───────┼──
          │   ║                                ║  $10,293│28

These accounts are now balanced out and combined in total in the
_Distribution Account_. The _Distribution Account_ is now examined to
ascertain the total general expense for the same six months previously
used, and the _Private Ledger_ shows it to be $67,840.00, Fig. 3.

=19. Power.= While the cost of operating the power─house is
unquestionably a legitimate charge to the operating expense of each
department according to quantity used, it is noted that, by the journal
entry just made, the cost of same is closed into _General Expense

In a plant operating a central power station with electrically driven
machinery, the power used in each shop can be metered and accurately
known, in which case, each shop can be charged with the amount actually
used. To do this requires considerable extra expense, and although it
is done in many works, most plants do not consider the expense worth
the results, and are inclined to treat all power as general expense
rather than departmental.

In a plant driven by shafting and belting, the power consumed cannot
be registered or recorded, and the power required only estimated from
tests made as often as desired. Although there may be a heavy draft
on the power─house at certain times, when all the machinery is in
operation, there are frequently times when but few machines are running
and the power required is down, although there is no way of recording

It is, therefore, extremely difficult to arrive at the actual power
used during a month, and for this reason most plants do not attempt
its calculation, and are quite ready to charge its cost off as a whole
to general expense. To departmentalize it, means extra expense with no
benefit gained──except to engineering science.

[Illustration: Fig. 3. Expense Distribution Account in Private Ledger]

=20. Productive Labor and Expense Compared.= Having now dissected the
pay─rolls and drawn off the departmental and general expense accounts,
it is but a matter of bringing these two statements together to produce
the final results. It will be remembered that all that is necessary to
know is the rate between the two, therefore place them side by side,
item for item, as already shown:

                 ║  Productive ║             ║  % Expense to
                 ║    Labor    ║   Expense   ║   Prod. Labor
  General        ║         │   ║  $67,840│00 ║        │  32.6
  Department E   ║ $104,409│00 ║   22,731│00 ║  21.8  │
      "      F   ║   31,429│00 ║    5,419│00 ║  17.3  │
      "      G   ║    5,528│00 ║    2,465│00 ║  44.6  │
      "      H   ║   10,659│00 ║    3,174│00 ║  29.8  │
      "      I   ║         │   ║         │   ║        │
      "      J   ║         │   ║         │   ║        │
             Etc.║         │   ║         │   ║        │  26.5
      Total      ║ $208,133│21 ║ $122,985│00 ║        │  59.1

The percentage columns shown give us what may be considered a very
close figure as to what are the actual factory conditions of operating
expense and productive labor, and the relationship of the former to
the latter. These results are all the more reliable because they are
based on actual figures taken from the books of the company, thereby
eliminating all estimating and the basing of important calculations on
guesses and assumptions, which later generally prove to be far from the
real facts in the case. The above results, gathered from six months'
operation of the plant, are a fair statement of what the same expenses
will be found to be in the long run, although if it is desired to go
into the matter still deeper, the same tabulation may be made covering
a year, with practically the same results.

What do the above figures show?

(a) That the total operating expenses of the plant are 59.1% of its
productive labor, of which amount, 32.6%, is necessary to cover the
general expenses, and 26.5%, the average for all shop operations.

(b) That the expense of operating the different productive departments
vary according to conditions. That while _Department E's_ expense is
found to be 21.8% of its productive labor, that for _Department F_ is
found to be but 17.3%; each department having its own rate based on its
own actual figures.

(c) Since, as already shown, each department must shoulder its
own expense and its share of the general expense, it is seen from
results just shown that for every dollar spent on productive work in
_Department E_, 21.8 cents must be added to cover its own operating
expense, and 32.6 cents as its share of the general plant expense, and
that every dollar spent on production here cost $1.544. This has been
covered in detail under heading, _True Cost_.

=21. How to Use Percentages.= Let us continue the use of the same
figures. It is apparent that, if to the cost of each productive order
worked on in _Department E_ during the period of six months just
considered──all of which is shown in detail in _Production Ledger No.
2_, the sum total of whose labor cost is $104,409.00──21.8% is added,
the amount thus added will be $22,731.00 (the actual figure is a trifle
more), which is just the amount of _Department E_'s expense shown in
the _Private Ledger_ and found in detail in _Expense Ledger No. 1_.

Again, if to the cost of each productive order worked on by any and
all departments in the plant during this same period──the sum total
of whose labor cost is found to be $208,133.21 and which is shown
in detail by the individual cost sheets in _Production Ledger No.
2_──32.6% is added, the amount thus added will be $67,840.00 (actual
figure is a few dollars more), which is just the amount of total
expense shown by the _Distribution Account_ in the _Private Ledger_.

It is now a simple proposition. Having found our average ratio of
expense to productive labor for each department, and also for general
expense covering a period of six months' operations, we can begin to
distribute the expenses of succeeding months on the same basis with the
same results.

In closing up the _Production Ledger_ at the end of each month
preparatory to drawing off a monthly summary of all the totals therein
to obtain the total cost of production for the month for entry through
the journal into the _Private Ledger_, it is simply necessary to enter
on each cost─sheet, in columns provided for that particular purpose,
two items of expense, one for department expense and one for general
expense. In the case of _Department E_, just cited, the expense for the
department is to be calculated at 21.8%, and the general expense item
at 32.6%.

=22. Even Percentages May Be Used.= In a large plant with an elaborate
system of manufacturing job orders worked on daily with perhaps
hundreds of cost─sheets on which an expense calculation must be made,
the use of percentages with three figures may require more time in
figuring than desirable, in which case an even percentage may be used.
Instead of 21.8 for _Department E_ use 22, and for general expense,
instead of 32.6 use 33. This means that under usual conditions,
more expense would be added to production than shown by the expense
accounts, and the _Private Ledger_ would show whether there had been
an over─distribution or an under─distribution in each department's
account after the distribution had been made. Turning to _Private
Ledger Account, Department E_, while it is shown that, for January,
the expense that should have been distributed, if done exactly, would
have been $3,697.33 (had the productive labor for the same month been,
say, $17,095.45), the amount added to production by using 22% would
have been $3,761.00, an over─distribution of $63.67. To adjust this
overdraft in figuring the next month, use 21%, the idea being to
have the ledger accounts as nearly balanced out as possible. Should
the general expense rate prove more than sufficient when 33% is used,
reduce it or increase it to meet the fluctuations of the expense, with
the thought always in mind to keep all balances as small as possible,
and to make as nearly a perfect distribution as figures will permit.

It is suggested that where these percentages come close to 16⅔,
20, 25, 33⅓, etc., that these figures may be used to advantage.
By so doing the expense calculations can be figured mentally and
very rapidly, and generally without interfering with a satisfactory
distribution. If, however, the overlap each month increases, these
should be modified to bring closer results.

=23. Journal Entry for Distribution.= While it is not the intention in
the consideration of this subject of _Expense Distribution_ to depart
therefrom into the general field of cost accounts and cost records, it
is assumed that on whatever form of cost─sheet used, provision will be
made for the proper recording of the three elements of cost: labor,
material, and expense, the latter in two items. Inasmuch as only totals
should be carried into the _Private Ledger_, it is only necessary
for drawing off the amounts on the individual sheets in _Production
Ledger No. 2_ to provide summary sheets with sufficient money columns
to accommodate, among other credits, all items for each department's
expense and also for general expense. This, when done and totaled,
will give the total cost of production for the month, made up of the
following items:

 (a) Labor──amount of which should check total of productive labor
     shown by the dissection of the monthly pay─roll.

 (b) Material──amount of which represents withdrawals from stores
     during month.

 (c) Departmental Expense──each separate, representing the amount of
     expense actually distributed and thrown into production.

 (d) General Expense──representing the total amount actually
     distributed and absorbed by production.

This done, our journal entry will be:

     Debit Production.
     (This may be subdivided
     into as many accounts as

                            Credit Labor.


                                           Expense Dept.    E
                                                 "          F
                                                 "          G
                                                 "          H
                                                 "          I
                                             Gen'l Exp. Distribution.

=24. Expense Ledger.= The totals from the _Expense Ledger_ should also
be drawn off in a similar manner, and the same items will appear as
those shown in the _Production Ledger_, except that no expense will
be added, for it will be remembered that the entries in the _Expense
Ledger_ constitute the very items which are transferred to the
_Production Ledger_ through the percentage added.

The journal entry for this ledger will be:

  Debit Expense Dept. A
          "           B
          "           C
          "           D
          "           E
          "           Etc.

                          Credit Labor.


=25. Results of Distribution.= Having posted the journal, turn
again to the _Private Ledger_ and note what has taken place. It is
found that the two items of labor posted have just balanced out the
_Labor Account_, and every dollar of pay─roll has been accounted for
somewhere, either into expense or into production. It it also found
that all the debits in the shop─expense accounts have originated
in _Expense Ledger No. 1_, and the credits have originated in the
_Production Ledger_. The various subdivisions of general expense have
been consolidated in one _Distribution Account_, which has also been
disposed of through the _Production Ledger_. What once appeared as
an expense cost has now been wiped out, absorbed by production and
converted into an asset, just as Mr. Clinton E. Woods, previously
quoted, states it should be. A glance at the trial balance reveals
scarcely a trace of expense, the small undistributed balances only

=26. Undistributed Balances.= Under any method of distributing
expense on a _pro─rata_ basis, it is apparent there will be small
balances left, representing either an over─distribution or an
under─distribution, as already explained. These may be treated
in either one of two ways. If the product manufactured has been
practically completed during the year, and but little carried over into
the next year to be finished, these balances can be charged off and
become a part of the _Loss and Gain_ account for the year in which they
were created, and the new year begun with a "clean score."

If the product, however, consists of large contract work but partially
finished when the year closes, the work on same continuing for some
time into the new year, these balances may be also carried over to be
worked out in succeeding monthly distributions as the work continues.
When this latter method is chosen, of course it will be necessary that
these balances be taken into consideration when preparing the _Balance

=27. In Conclusion.= While it is realized that the _Percentage Method_
is not perfect in all its details, yet it is quite generally admitted
to be the best means that has yet been devised for distributing
expenses. A manufacturer using it may be assured that his costs thus
figured are correctly shown, from the fact that this method is used
and recommended by our highest technical authorities in accounting.
From the practical side, it appeals to the manufacturer who is more
interested in successful manufacturing than he is in the science of
accounts, by the simplicity of the method and economy with which it
is operated. The same amount of time spent in planning economies and
devising means for cheapening the cost of production that is often
spent in lengthy attempts at fine figuring, which, when finished, prove
unsatisfactory, will be productive of far better results. Any method
which eliminates the unnecessary and simplifies the essentials cannot
help but prove attractive both to the successful manufacturer and the
progressive accountant.


=28.= To properly analyze detailed records, and to be able to extract
therefrom the essentials and eliminate all items of minor importance,
so that the exact situation and final conclusions can be expressed
briefly and in an attractive manner, is an art in itself. A bookkeeper
may be ever so well posted in up─to─date methods, and his books may
show great care, and be models in appearance, yet when it comes to
preparing an intelligent statement of any feature of the company's
business, he may be sadly deficient. It does not necessarily follow
that because he can do the one thing well, he can make a success of the
other. Even as the pleasure naturally to be derived from a carefully
prepared dinner may be completely wrecked by poor service, so can
the intent of what would otherwise be an interesting tabulation of
statistics be made meaningless by the presentation of a jumbled and
carelessly arranged lot of figures.

It is as necessary to clearly show _on paper_ the results of the
factory operations as it is that they should be correctly recorded on
the company's books. While the two operations are entirely distinct and
separate, they are closely allied, and every progressive accountant
should be interested in both.

The object of a statement is to convey to the reader certain
information in an intelligent manner; if it does not do this, it might
as well not have been written. This leads us at once to the question:
"What constitutes a good statement?"

=29. Lengthy Statements Undesirable.= That we may have "too much of a
good thing," and that even those things worthwhile may be overdone,
is true in the matter of statements. The general tendency seems to be
to elaborate rather than simplify, and to crowd into the tabulation
a lot of figures representing details which are almost always passed
over without examination, or are even hardly looked at. If the same
amount of time is spent in studying such a statement that is spent in
its preparation, it would not be altogether without value, but the fact
remains that it seldom is thus considered.

The size of a company's statement is oftentimes all out of proportion
to the size of the business; some of the smaller industries present
reports of their operations so voluminous in size as to rival that of
the United States Steel Corporation, or that prepared by the actuary of
one of the mammoth insurance companies.

It should be remembered that a busy manager is more interested in
economical management than in wholesale bookkeeping, and has but little
use for a formidable array of figures, except in so far as they show
general results. Such a statement, when presented to him, is usually
tossed aside to be examined later, while if it were condensed and
served up to him in a more attractive form, it would probably be
eagerly examined and studied with interest. A multitude of figures is
more apt to confuse than to enlighten the situation, is a waste of an
accountant's time, and, being a source of displeasure to the employer,
thereby defeats the very object for which it was made.

Detailed records should always be kept, and in such shape as to be
immediately available when called for, but it is hardly necessary to
incorporate them in a tabulation intended to show results. It will be
well, in submitting figures to the manager, to always bear in mind an
imaginary notice over his desk: "This is my busy day; be brief." It
is safe to say that a good statement should contain as few figures as
possible to intelligently show the desired result.

=30. Tabulate the Essentials.= The data for a good statement should be
well chosen. A manufacturer wants results. He is in business for profit
making, and wants to know the true condition of his shop operation and
the expense, in a concise presentation of facts, and has but little
use for comparisons beyond those necessary for showing him the result
of his management. He is not often found to be a philanthropist, eager
to load down his expense account so that his clerical assistants may
use his time to pursue their studies in the science of accounting. He
wants to know what his costs of production and the expense of operation
are, and where they may be cut, and it is as much to an accountant's
interest to show him this in a clear and self─explanatory statement as
it is by an elaborate and dazzling array of statistics to show his own
ability in handling figures.

A manufacturer will doubtless obtain just as much solid comfort and
real pleasure in knowing that special tools recently made have enabled
him to clip a few cents off the cost of one of the units of his
product, and that economics in his shops have reduced his operating
expenses 2% or 3%, as to be furnished the startling information that
his _Printing and Stationery_ account is .7148% of his _General
Expense_, his _Insurance_, 6.2714%, _Postage_, .5218%, _Telephone_ and
_Telegraph_, .6538%, and so on down the list.

The illustration used is not an imaginary one either. Statements are
occasionally seen wherein all the individual items of expense are
thus figured and the percentages carried out four decimal places. Of
what conceivable use can such figures be? The only imaginable excuse
seems to be that the accountant hoped to lower these percentages
in the next period──possibly the third and fourth figures in the
decimal──by bringing pressure to bear on the telephone company and on
the insurance underwriters sufficient to get the rates reduced, and by
telling the mail boy he must use less postage stamps. Rather a peculiar
method of cutting expenses, and it is quite safe to say that the same
effort applied in other directions would be productive of far more
satisfactory results. A good statement, then, should be clear, concise,
and complete.

=31. What the Statement Should Show.= The two elements in a factory,
in which the management is directly interested, are the _productive
output_ and the _operating expense_. The former should be pushed to
the utmost limit, while the latter should be trimmed at every point
possible; and it is readily seen that the point of greatest efficiency
is reached when the plant is producing at its full capacity. A
factory with a complete organization is operated at a heavy expense
when running at but 50% of its full capacity. These two elements,
output and operating expense, are so closely related that a change in
one immediately affects the other, and the relationship between the
two, which is expressed in a percentage, is either raised or lowered
according to the character of the change.

 (a) If the operating expense remains stationary and the production
 increases, or

 (b) If the operating expense is lowered and the production remains
 unchanged, or

 (c) If the output increases at a greater rate than the expense
 increases, or

 (d) If the output decreases at a lower rate than does the expense,
 then the percentage which expresses the ratio of expense to production
 is lowered, which means increased operating efficiency and a decrease
 in the cost of production.

On the other hand:

 (a) If the operating expense remains stationary and the production
 decreases, or

 (b) If the operating expenses are on the increase while the production
 remains unchanged, or

 (c) If the operating expenses increase faster than the production
 increases, or

 (d) If the operating expense decreases at a less rate than does the
 productive output, then these tell─tale percentages automatically
 increase also, which the manager is quick to note, and mean a
 falling─off in the economy with which the plant is being operated, for
 increased expense means increased cost of production.

This means, then, in order to be in complete control of his plant, a
manager must have production costs and operating expense well in hand,
for these two factors are the keys to successful management. It is up
to the accountant to show the manager, in figures, the facts as to
the true conditions in the shops, and the statement presented to him
monthly must be sufficiently explicit to show him at short notice what
the expense of operating each department of his plant has been, and
what the items were that made it up.

=32. Comparative Figures.= It is quite unnecessary to demonstrate
the value of comparative statements, for this is generally admitted
without argument. They portray at once whether what now is, shows an
improvement or a falling short over what has been; in fact the degree
of success or failure in any line is gauged by comparison with results
previously attained.

A statement showing operating conditions with those of a previous
period cannot help being interesting as well as instructive; in fact
it is from this source that a manager obtains the information which
enables him to size up the changing conditions in his plant, and in
case of loss in efficiency, shows him where the remedy should be

If a comparison or test is made between the operating expense and
productive output, covering a period of, say, six months or a year for
each department or process in the plant, as well as for the general
expense, the resulting percentages show what the factory conditions
will average in the long run. Any departure or deviation from this
average in any succeeding month, as shown by the operating statement,
serves to indicate to the manager what he may expect as the results of
the present period when actual figures are in hand and actual results
known. If a falling off in efficiency is noted, opportunity is offered
to make economies before it is too late, and for the balance of the
period to make a better showing. While it is true that an extraordinary
expense, such as a breakdown of machinery, may cause an unfavorable
showing for a particular month, it is quite essential that this
long run average should be closely followed, in order to show that
the previous efficiency has again been maintained, or better still,
improved upon.


A comparative statement shows at once any radical departure from normal
conditions and accepted standards, and is, in reality, the manager's
barometer of factory operating. The discovery that his operating
expenses are increasing without a corresponding increase in the output,
means that the storm signals are immediately raised, and there are
likely to be squalls ahead in the department responsible for the
increase, with an explanation in order from its foreman. The operating
statement, then, should show up excessive operating expense, what it
is, where it is, and what caused it.

=33. Source of Data Used.= Having now in mind what characteristics
should be embodied in the tabulation, proceed to gather the necessary
data for the statements.

Continue the original plan and make the _Operating Expense Statement_
consistent with the _Percentage Method_, and extract the data for same
from the cost records and books of account in a factory where this
method is used.

=34. Expense Manufacturing Departments.= First prepare the shop
operating expense statement for the manufacturing departments. If the
cost records have been kept in two binders──one for operating expense
in _Expense Ledger No. 1_, and the other for production in _Production
Ledger No. 2_──the procedure is simple. The _Private Ledger_ account
for each department shows the total expense for each month posted in
total, with all the details shown in _Expense Ledger No. 1_, to which
now refer.

Inasmuch as everything is charged to some job number, both labor and
material, it is simply a matter of drawing off the job totals, which
will check the department total expense as shown in the _Private
Ledger_. A convenient grouping of job numbers will be found of great
assistance; say

                  _Jobs 1─99.  Standing expense orders._
                    _100─999.  Special expense orders._

Generally, _Job 1_ is used to cover miscellaneous expense costs not
covered by other job numbers, and includes _foremen_, _sub─foremen_,
_clerks_, _tool─room men_, _helpers_, _watchman_, _small repairs_,
etc., both labor and material. In the matter of repairs, it will be
noted that such charges originate from two different sources: those
done by the department for itself, and those done for the department
by another department, and frequently spoken of as _inter─department_
work. By providing two cost─sheets for labor items on _Job 1_, one for
direct labor charges, and the other for inter─department labor, the
two items may be easily kept separate.

The material on _Job 1_ should also be kept in the same manner. The
reason for this is apparent, as it shows up at once how much a foreman
is charging to his department himself, and how much is being charged to
him by other foremen on inter─department work.

_Jobs 2, 3, 4_, and so on down the list, can cover the various
subdivisions of shop expense, such as new small tools, repairs to
tools, repairs to machinery, and as many detailed items as may be
considered desirable. If expensive repairs are to be made to one of
the large machines, it is desirable to keep a separate cost of same
by assigning a special job number for the work, say _Job 100_, rather
than throw the cost into one of the standing orders, where it is lost.
In fact, a limit of cost should be placed on all new tool─costs, or
repairs chargeable to standing orders, so that these jobs may not be
used as a dumping ground for extensive repairs, which a foreman may be
inclined to conceal from the manager's notice, and for which a special
permit should be given by the manager, and job number assigned, before
such repairs are begun.

The productive labor of the department will be found in _Production
Ledger No. 2_, the total of which, if added to the total of the
non─productive labor found in _Expense Ledger No. 1_, will equal the
total department pay─roll.

The resulting percentage of expense to productive labor expresses
the ratio existing between the two, and is used as the basis for
distributing the same expense over the various items of production.
The question of distributing expense is only referred to here, having
been discussed at length elsewhere. Inasmuch as it will be seen that
this percentage will fluctuate somewhat each month, it will be well to
show on our statement, the same percentage for the previous month for
comparative purposes. The extent of the monthly fluctuation is the key
to the situation, for these percentages sum up in one figure the actual
results of shop management, toward the lowering of which the best
energies of the manager are always directed.

For the sake of illustration, take a plant with a weekly pay─roll of
about $10,000.00. Having drawn up a form in which the features already
discussed have been provided for, extract from the _Expense Ledger_
some imaginary figures. The expense accounts of the different producing
departments in the plant will appear as shown in Fig. 4.

[Illustration: Fig. 4. Statement of Departmental Operating Expense]

After studying the same a moment, what will the manager of the plant
discover? Among other things he will see at once:

 (a) The total expense of operating each department in the works, with
 the principal items which go to make it up.

 (b) That the total productive labor was 79.9% of the total monthly
 pay─roll while the non─productive was 20.1%; that the former has been
 apportioned over the various departments and every dollar of same
 accounted for.

 (c) The ratio of expense to productive labor for each department
 reduced to a percentage, the average of which for all the productive
 departments is 25.7%.

 (d) From the comparative figures, that the August percentage showed
 an improvement in operating expenses in most of the productive
 departments over those for July and that they are a trifle lower than
 the average for the first six months of the year.

 (e) That the operating percentage for _Department F_ has jumped up
 4.7%, which means that something is wrong in that department, and must
 be investigated.

 (f) That for every dollar spent for productive labor, he must add 56.8
 cents to cover operating expenses, of which amount, 25.7 cents covers
 the expense of operating the shops and 31.1 cents covers the general
 expense of the plant.

The item of _General Expense_ = 31.1% is not derived from any figures
that appear in this statement, but is taken from the tabulation
covering _General Operating Expense_ presented later. It is desirable
to have this appear here, as well as the _Department_ average
percentage, in order to show the total operating expense (56.8%) on the
labor, bringing total plant results on one sheet.

=35. General Expense Statement.= This statement serves as the companion
sheet to the one just shown for _Departmental Expense_, every operating
expense appearing on either one of these two statements. It is drawn
off in just the same manner as the _Departmental_ statement, the
total of the various expense accounts in the _Private Ledger_ and the
details of the four expense departments shown in _Expense Ledger No. 1_
checking the total _General Expense Distribution_ account shown in the
_Private Ledger_. It will be seen at once that the _General Expenses_
of the plant may be reduced to the following general divisions:

 Special Ledger Accounts:

    Executive, Insurance, Taxes, Depreciation, Freight, Express, Cartage,
    Printing and Stationery, Telephone and Telegraph, Traveling, Postage,
    Legal, etc.

  Department A──Offices:     Clerks and supplies.
  Department B──Storehouse:  Clerks, laborers, and supplies.
  Department C──Power House: Engineers, firemen, coal, etc.
  Department D──Yard:        Laborers, teams, and supplies.
  Unclassified Expense:      Not included in above.

The _General Expense Distribution_ account referred to originates by
closing monthly all the various ledger accounts listed above into one
account. This brings all these scattered expense accounts together in
one total, necessary not only for the purpose of distribution, but for
convenience in ascertaining and handling general expense. The details
can be readily taken from the individual accounts before thus closed,
while _Departments A_, _B_, _C_, and _D_ are carried in detail in
the _Expense Ledger_. The total _General Expense_ shown then by the
statement will check the total shown by the _Distribution_ account in
the _Private Ledger_.

The form Fig. 5, will be found a very convenient and satisfactory
exhibit. Detailed explanation is quite unnecessary; the tabulation
explains itself and needs no assistance. The general conclusion arrived
at is that the plant's general expense is found for the month of August
to be 31.1% of the productive labor; in other words 31.1 cents must be
added to every dollar of productive labor to cover its proportion of
the general and administration expense of the plant. The same figures
are also shown for comparative purposes for the previous month, and
also for the first six months of the year; the manager can see at once
exactly how the plant is running.

The same summary figures are placed at the bottom of this statement as
were shown on the departmental statement, that each may show the final
results of the other.

=36. Statements for Foremen.= It is often asked whether or not it is
a good plan to furnish the foremen of the various departments any
cost figures. In a good many shops, it is the rule to _tell them
nothing_ and to keep them in entire ignorance of their expense costs,
the feeling being that in case of an unsatisfactory showing they will
be inclined to _doctor_ their expense returns by diverting them into
production in order to make a more favorable showing.

While it is undoubtedly true that a foreman is frequently tempted to
resort to such measures──not a very far─sighted policy to be sure, for
it is bound to be shown up later──it would seem advisable to furnish
him a copy of his operating expenses not only for his information but
as an incentive to practice economies on his own initiative without
waiting for a _call_ from the manager. Most foremen are quick to see
that it is for their own interests to do this and to make the best
possible showing for their department. It also creates a good─natured
rivalry among the various foremen, which tends towards good results in
which both foremen and management share.

[Illustration: Fig. 5. Tabulation of General Operating Expense]

[Illustration: Fig. 6. Statement of Departmental Expense Made to

[Illustration: Fig. 7. Graphic Chart Showing Fluctuations in Labor

[Illustration: Fig. 8. Graphic Chart Showing Fluctuations in Operating

The statement furnished the foreman is simply a copy of the expense of
his department as shown on the _Departmental Expense Statement_, and
may be made up substantially as shown on the form herewith presented,
Fig. 6.

=37. Charts.= While the value of chart records is generally admitted,
there will probably be no one in the plant who will appreciate
this form of presenting figures more than the manager, who, from
his mechanical training, will at once grasp the situation as thus
presented. The general trend of operations for the whole period is
immediately revealed at a mere glance, without any systematic study of
the figures involved, and any unusual condition is detected at once.

To show the possibilities of thus arranging comparative statements,
two charts, Figs. 7 and 8, are presented, on which are plotted the
same results appearing on the tabulated statements already shown, or
previously used for the purpose of illustration on Pages 31 and 34.

On one chart is shown the total pay─rolls with split─up of same into
productive and non─productive labor, with the percentage of each on the
total; the other shows the total expense, also subdivided into shop
and general expense, with the resulting percentages of same on the
productive labor as shown on the first chart.

=38. In Conclusion.= While there is no end to the number of statements
that can be prepared and that can be elaborated almost indefinitely,
it is well to continually bear in mind that the statement which best
serves its purpose is the one which conveys the most information in
the fewest figures; is not overloaded with unnecessary detail; whose
tabulated data is well chosen, and whose make─up is sufficiently
attractive to cause it to be read and studied, and not thrown into the
waste basket.


=39.= Any system of cost records is deficient that does not provide
for the tabulation of all items entering into the cost of individual
units or jobs, in such form as will permit of the computation of the
total of such costs for comparison with records of total manufacturing
expenditures. Three elements enter into the cost of the finished
product──_material_, _labor_, and _expense_.

Under the head of material is included the cost of materials of all
kinds of which the product is made.

Labor is of two classes, _direct_ and _indirect_. Direct labor is
that which is applied directly to the manufacture of a given article;
indirect labor is that which, while necessary to the operation of a
shop or factory, is not applied to specific jobs or the production
of individual units. In a manufacturing industry operating a machine
shop, the labor of machine operators would be classed as _direct_,
while the labor of porters, oilers, and general workers employed in the
shop would be classed as _indirect_. The superintendent of the plant,
shop foreman, factory clerks, engineers, firemen, and general workers
also belong in the indirect classification. For accounting purposes,
indirect labor is divided into two classes──shop indirect and general
indirect. Shop foremen and general workers employed exclusively in the
operation of a single shop are properly classified as _shop indirect_,
and their wages are charged against the operation of the shop. The
superintendent, factory clerks, and general workers necessary to the
operation of the plant, whose time cannot be charged against the
operation of any one shop or department, are classified as _general

Expense includes all items entering into the cost of the product or
the operation of the plant, that are not included in the charge for
material and labor. Expense, like labor, is properly divided into _shop
expense_ and _general expense_. General expense includes the cost
of all supplies and miscellaneous items of expense incurred in the
operation of the plant, which cannot be charged to individual shops.
Such items as heat, light, building maintenance, taxes, insurance, and
depreciation belong in the classification of general expense.

Any classification of expense items that is not made with reference
to a specific plant, must be general; items that in one plant must be
classed as general expense, are applied in others as shop expense. The
item of power costs furnishes an example. In a plant equipped according
to modern engineering ideas, with electrical transmission of power and
each machine equipped with its own motor, an exact distribution of
power costs to individual shops is a simple problem. The total cost
of power for a month is divided among the several shops in proportion
to the amount used by each, as shown by meters. Even the hourly cost
of power for each machine can then be determined. With a shaft─and
belt─driven plant the problem of distributing power costs is less
simple. When power costs can be distributed accurately to departments,
however, it should be done; otherwise such departments as the drafting
room will be charged for power when none is used.


=40.= For the purpose of making the necessary summaries, complete
details of all items of cost for each operation must be collected. This
data supplies the foundation for all tabulations of cost statistics.

The first step necessary to insure a record of the cost of manufacture
of a given article is the entering of a production order, followed
by the necessary shop orders, and the orders of the foremen to the
workers. The details of these orders are fully described in another

When a foreman receives a shop order, his first duty is to ascertain
what material will be needed. He then orders this material from the
storeroom, using a requisition as described in the discussion of
systems for the stores department.

On receipt of the material the quantity is checked against the
foreman's copy of the requisition, which is then sent to the cost
department. In the storeroom, the necessary entries are made on the
stores records, after which the requisition is sent to the cost

When the foreman is ready to assign the work, he issues work orders to
his men. As explained in the discussion of labor records, the usual
form for work orders is a time─card. On completion of each job, the men
deposit the time─cards in the rack provided for that purpose. These are
later sent to the cost department.

In actual practice, it is usually best to have all requisitions and
time─cards collected once during each day by a messenger from the
cost department. Sometimes, the cards are also filled out in the cost
department and delivered to the foreman with his shop order, leaving
him to enter only the man's number. When this plan is followed, the
cost clerk must be familiar with all of the operations required, and
must keep the foreman supplied with work orders to keep the shop
employed for at least a day ahead.

The receipt of the requisitions and time─cards supplies the cost
department with the necessary data for material and direct labor
charges to individual jobs. Data for similar charges on account of
repairs is secured in the same way.

The character of the records compiled from this data determines the
real value of the entire system of cost accounting. If, as is so often
the case, the compiling extends no farther than a mere tabulation of
costs of individual jobs, it does not reach its full value as a part
of the accounting records. Like single─entry bookkeeping, such records
are no more than mere memoranda. The full value is reached only when
the records of the cost department are made a part of the general
accounting system of the business; where controlling accounts absorb
all individual items of cost.

=41. Material Costs.= The compilation of material costs from the
requisitions should exhibit the total cost of all material used in the
plant and the total cost of material used on each job.

The records intended to exhibit the cost of _all_ material issued to
the factory should be divided according to classes, following the same
classifications as used for material purchase accounts in the general
ledger. This is very important as the information secured from such
classifications is needed to form the connecting link between the cost
and general accounting systems.

The value of the accounting records is greatly enhanced if, in the
general ledger, a purchase account is kept for each class of material
and supplies. If but one kind of material is used, only one material
purchase account is needed, but in a furniture business, for instance,
separate accounts should be kept for purchases of lumber and hardware;
in a harness manufacturing business, accounts should be kept for
harness leather, patent leather, saddle leather, and hardware. The
proper classification for any special business will readily suggest
itself, but the material should be classified according to its most
natural divisions.

The stores records also should be divided according to the same
classifications, so that the records of material included in any one
purchase account can be checked, without reference to the records
of other classes. In the storeroom of a harness business, a card or
sheet would be used for the record of each item in the hardware stock,
while all of these individual records would be filed under the general
classification, _hardware_.

This method provides three records, each closely related to the others.
In the general ledger, there is a _hardware purchase_ account; in
the storeroom, a detailed record of the hardware stock; in the cost
department, a record of all hardware issued to the factory. When the
cost department record is brought into the _hardware purchase_ account,
by a credit through the journal, the balance of this account should
show the value of the hardware stock and should agree with the records
of the stores department.

The compilation of supplies costs should be made along similar
lines, and the same care should be used in the classifications. Fuel
purchases, for instance, should be kept in a separate account, while
general factory supplies──as oil, belting, waste, etc.──may be kept
in one account or subdivided, depending on the size and nature of the

=42. Material Cost Reports.= The material records of the cost
department relating to totals issued should be made in the form of
reports, as they will be required in the general accounting office.
These reports need not show order numbers, but should show whether used
on production, construction, or repair work. The supplies record should
show by what department the supplies are used.

Fig. 9 shows a form for a report of material costs. In the heading is
given the class of material, being the caption of the purchase account
in the general ledger, and the month for which the report is made. The
body of the report provides for a daily record of amounts charged to
production, repairs, and construction, with an extra column for any
special classification that may be needed at any time.

This form is in duplicate, the original being printed on light weight
paper to insure perfect carbon copies. A loose─leaf form is most
satisfactory because both copies, with carbon paper between, can be
kept in a binder and the entries made each day.

[Illustration: Fig. 9. Monthly Statement of Material Issued]

Duplicate sheets are used for each material classification. Each day,
the amounts are extended on all requisitions. The requisitions are
then sorted according to material classifications, those applying to
production, repair, and construction orders being kept separate. Those
of each subdivision are footed, preferably on an adding machine, and
the total is then entered on the report.

For sorting requisitions, a box or rack, with compartments for the
divisions in each class, is most convenient. Such a rack is shown in
Fig. 10.

Reports of supplies issued to the factory are handled in the same
manner as materials. The form used for this purpose and shown in Fig.
11, is similar to the material report form, the only difference being
that amounts are distributed to the several departments.

At the end of each month, the report forms for material and supplies
are footed, the original is sent to the general accounting office, and
the duplicate is left in the binder in the cost department. When the
cost accounting is handled in the general accounting office, it is not
necessary to make these reports in duplicate; this is necessary only
when the offices are separated.

[Illustration: Fig. 10. Rack Used for Sorting Requisitions]

=43. Labor Costs.= From the time─cards or work orders, labor costs are
compiled both for separate jobs and to show totals by departments and
for the entire plant. The compilation showing totals is made for the
purpose of checking the pay─roll──to prove that all labor paid for has
been charged to factory operations in some form.

The time─cards should first be sorted according to departments, then
re─sorted to separate the direct production, indirect production,
repair, and construction labor of each department or shop. The
cards representing the different classes should be footed on an
adding machine, and the department totals compared with the pay─roll
records. Daily comparisons should be the positive rule in order that
discrepancies may be adjusted while the matter is fresh. On no account
should the adjustment of discrepancies be omitted──labor reports from
the factory _must_ agree with the pay─roll. Cards showing the class of
work done must be turned in for _every_ man.

The tabulation of labor costs is really made for the purpose of
distribution; that labor charges may be distributed to the proper
accounts. The nature of the tabulation will, therefore, depend
largely on the class of business for which it is to be used. In some
lines, costs must be distributed by both departments and classes of
labor; in others, by classes of labor only; sometimes, by classes
of product──though this will usually be covered in the departmental

A form intended for the distribution of labor costs in a single
department is shown in Fig. 12. This form is in loose leaf and is filed
in a binder, the sheets being arranged in numerical or alphabetical
order representing the departments. If the cost and general accounting
departments are separated, this form should be in duplicate; otherwise,
one copy is sufficient.

In the body of the form, distribution columns are provided for the
different classes of labor──direct, indirect, repair, and construction,
with a column for any special classification that may be needed.

[Illustration: Fig. 11. Monthly Statement of Supplies Issued]

After comparison with the pay─roll record, the total labor costs are
entered daily on this form. At the end of the month, the sheets are
footed and originals sent to the general accounting office.

=44. Job Costs.= When they have served their purpose in compiling total
material and labor costs, the material requisitions and time─cards are
sorted by job numbers, direct and indirect, repair and construction
cards being kept separate. Where operation costs are desired, the
time─cards for direct labor on each order or job number are re─sorted
by operation numbers. Totals of material costs for each job, and totals
of direct labor costs for each operation and job are obtained, these
amounts being the basis on which charges to jobs for the day are made.

[Illustration: Fig. 12. Departmental Labor Distribution Sheet]

The totals of each class, obtained from requisitions and time─cards,
must agree with the totals of corresponding classifications on the
monthly tabulation of material and labor costs, as in Figs. 9 and 12.
Totals of material and direct labor for jobs and operations are next
entered on job or operation records, or both. As a rule, it is best to
arrange job records so that material and labor costs can be entered
daily, no matter how much time is required to finish the job.

Fig. 13 shows a form designed for the assembling of material and labor
costs for a single shop or department. For the labor distribution,
as many columns as necessary are provided for the record of costs by
operations. In the material column, the kind of material is entered
and the amount extended. When the manufacture requires operations
in several shops, one of these forms is used for each shop on each
production order──that is, a form for each separate shop order. When
the job is finished, the costs for all shops are assembled on one form
to obtain the total cost of the job.

[Illustration: Fig. 13. Recapitulation of Departmental Labor and
Material Costs]

The total material and direct labor costs are brought down on this
form, but indirect labor and shop expense are added as a percentage, as
has been described in the discussion of expense distribution. General
indirect labor and general expense is added to the combined total of
all shop costs. In this connection it may be well to emphasize the
importance of distributing every expense possible to individual shops,
leaving only those items that cannot be so distributed to be added
as general expense. For the ostensible purpose of reducing labor, it
is the practice of some accountants to throw all expense items into
one class, adding the whole as general expense. This is not to be
commended, as it results in an unequal distribution. In one shop, the
ratio of indirect labor, or of the cost of supplies, to direct labor,
may be much higher than in another; the expense for oil, belt lace,
waste, etc., is heavy in the machine shop──nothing in the assembling
shop. Adding all expense under one head, means that the same per cent
is added to direct labor costs in all shops to cover these items;
plainly, an unfair charge.

[Illustration: Fig. 14. Boston Ledger Form Adopted for a Continuous
Cost Record]

A further reason for distributing expense to shops is, that costs
of separate operations are more accurately figured. To reach their
greatest value, cost records should reduce costs to the smallest
possible unit. Every detail should be shown, and these records should
be available for comparison.

Fig. 14 shows how the Boston ledger may be used for a continuous cost
record. The regular form is used, five lines being set aside for each
job. The first line is for the job number, following which, material,
direct labor, indirect labor, and expense are entered. Under each date,
the first column contains particulars of previous costs, the second,
the costs added for the day, and the third column contains the totals
to date. It is not necessary to use the column for previous costs
except the first day for which the page is used; daily costs can be
added to totals for the previous day.

Several jobs can be recorded on one page and the record can continue
until a job is finished. Additions can be made daily, weekly, or even
monthly. This form is used to excellent advantage for contracts that
cover a long period.

When a large number of small jobs are going through the factory at all
times, the labor of the cost department can be reduced and, as a rule,
satisfactory results secured, if tabulations of job costs are made when
the job is finished. This should not be allowed to interfere with the
daily tabulation of total costs, but when requisitions and time─cards
have been re─sorted by job numbers, they may be filed by these numbers,
in a job rack──new cards being added from day to day until the job is
finished. Tabulations can then be made of material costs, showing the
quantity and cost of each kind used, and of the labor costs, showing
costs by operations or by order numbers.

Each business requires its special form for job cost records. The form
must provide for the information of greatest importance to the business
in which it is used. The forms shown herein are submitted as examples
for their suggestive value.

[Illustration: Fig. 15. Recapitulation of Costs for a Single Job]

Fig. 15 shows a form adapted to many lines. This form is intended for
a record of the cost of parts, but could be used for assembled machine
costs. Provision is made for detailed labor costs by man, numbers,
and kind of work. It will be noted that, after obtaining the actual
manufacturing cost──material, labor, and factory burden──profits
are added. In our opinion, profits have no place in cost records.
To establish a selling price, it is legitimate to add a factory or
manufacturing profit before adding a percentage to cover sales expense
and a selling profit, but the addition of these percentages has no
bearing on the actual manufacturing cost.

Fig. 16 is a representative form for a machine shop. All operations
and materials are listed by name, totals only being recorded. Factory
expense is added to the labor cost, while a percentage to cover loss
and waste is added to material costs. This form is subject to the
criticism that all expense is added as one item──no provision is made
for segregating the expense of each shop.

The form shown in Fig. 17 is adapted to a small shop, or for repair
jobs. This is the most simple form that could be devised; columns are
provided for all essential information, and all items are to be written

[Illustration: Fig. 16. Cost Summary for Use of a Machine Shop]

=45. Comparative Cost Records.= The chief value of cost statistics
lies in the opportunity offered for comparison. The fact that the last
lot of part No. 10 cost $1.17 each, does not, of itself, indicate that
the cost is either low or excessive; but if our records show that two
previous lots have cost $1.20 and $1.21 each, the comparison reveals
the fact that the cost is low.

Valuable as this comparison is, it would be still more valuable if it
showed _why_ the cost is less. Suppose labor and material costs are
segregated. Comparison shows that the reduction of three cents is
made up of one cent material and two cents labor. Now if the quantity
and cost of each kind of material used, and the time and cost of each
operation are segregated, an analysis will show the exact operations
on which the saving has been made. It will be found, perhaps, that the
cost of operation No. 10 was actually decreased three cents, but that
the cost of No. 16 increased one cent. Why these variations? Was some
unusually favorable condition responsible for the saving on No. 10, or
can the new cost be maintained? Can the cost of No. 16 be brought back
to the former figure?──these are the questions to be answered by the
production engineer. The records of the accountant supply him with the
means of comparison──point out both saving and waste. Profiting by the
information, the engineer devises ways of approaching more closely to
maximum standards of efficiency.

[Illustration: Fig. 17. Cost Summary for Small Shops and Repair Jobs]

Comparative records should, therefore, provide for a comparison of
every item entering into manufacturing cost. Comparisons should be
based on standard units; if two jobs are to be compared, they must
be identical or the comparison is of no particular value. The modern
method of manufacturing standard parts makes comparison of practical
value. Savings and wastes are more readily located in the manufacture
of parts, than in building a complete machine.

[Illustration: Fig. 18. A Comparison of Labor Costs]

[Illustration: Fig. 19. A Comparative Record of Material Costs]

Excellent examples of comparative records are shown in Figs. 18 and
19. Fig. 18 provides a detailed comparative record of labor costs, the
costs of seven jobs being recorded on each sheet. This shows, for each
operation, the number of pieces, hours, amount, average labor cost, and
average time consumed. If on three orders, 2,000, 3,000 and 5,000 parts
are made, this record will show the total cost of each order, the cost
of each part, and by comparison, the relative cost when manufactured in
different quantities.

[Illustration: Fig. 20. Monthly Comparison of Costs of Standing or
Expense Orders]

To provide for an analysis of material costs, the form shown in Fig. 19
is used. This is similar to the form shown in Fig. 18, the difference
being that it shows detailed costs of each separate kind of material.
Fig. 19 is printed on the reverse of Fig. 18. The form is loose leaf
and the sheets are filed in a binder in the order of part numbers.

Fig. 20 is a card form used for a monthly comparison of costs of
standing orders or expense orders, with labor and material costs
separated. The form provides for a comparison of monthly costs covering
a period of four years──a very valuable record. As an illustration of
the manner of using this form, it will be supposed that machine shop
repairs are made on order No. 460. Both material and labor are included
in the cost of repairs. One of these cards would be used for this order
and, at the end of each month, the totals of material and labor used on
machine─shop repairs would be entered. The total would be extended in
the third column.


=46.= A distinct class of manufacture, which involves certain special
problems in cost accounting, is the business in which the process is
continuous. For convenience, we refer to such factories as _continuous
process factories_. Any factory in which a definite quantity of raw
material is converted into a finished product, the quantity of the
product not being definitely determined in advance, is classed as a
continuous process factory. Examples are flour mills, sugar and salt
refineries, nail mills, button and pin factories, and yarn mills.

The problem in factories of this class is to find the total cost of
production and the total number of units of production; the former
divided by the latter will give the cost per unit.

The cost of production includes the cost of material, labor, and
expense. It is necessary, therefore, to keep an accurate record of
material and supplies issued to the factory, just as is done in
factories manufacturing goods on special orders. Labor costs should be
recorded by departments, and the distribution of expense should be by
departments, as far as possible. Forms similar to those shown in the
preceding pages can be used.

=47. By─Products.= A special problem found in certain industries
is to provide for an accounting of salvage, which is either sold
in its natural state or manufactured into other products──known as
_by─products_. For example, the operation of the cutting room of a
harness factory is a continuous process──sides of leather are cut to
produce the largest possible quantity of stock that can be used in the
manufacture of harness. The pieces produced vary in size, and it is
necessary to figure the cost of cut stock by weight. After this stock
has been produced, there remains a certain quantity of scrap leather.
This scrap leather is not worth what it originally cost in the sides
of leather, but has a certain market value. It should, therefore, be
weighed and the value credited against the gross charge for leather to
the cutting room.

Now, some manufacturers, instead of selling this scrap as it comes
from the cutting tables, convert the best of it into such by─products
as heels and washers, selling the residue as scrap. Here is an added
manufacturing process──a new department, operated because the price
obtained for the by─product makes it profitable. The natural thing
to do is to keep accurate cost records for this department, charging
the material at scrap prices and take credit for the profits. But
some accountants contend that the value of the by─product──less cost
of production──should be credited against the material charge to the
principal product. Provided the volume and value of the by─product is
small, there is no serious objection to this plan, but it is not a safe
rule to follow.

In some industries, the value of the by─products is greater than
that of the so─called principal product. The large soap factories
make glycerine and other by─products of greater value than the soap
products. So profitable is this branch of the business that the scrap
or residue from the manufacture of soap, is bought from smaller
factories, to be used in the manufacture of these by─products. The
by─products from the manufacture of gas produces a revenue, in the case
of a large gas company, more than sufficient to pay the entire cost of
operating the plant. Under these conditions, it is readily seen that
the manufacture and sale of by─products should be treated as a distinct
branch of the business; otherwise it might easily be shown that the
principal product is without cost.


=48.= Methods of recording the cost of material and labor used, and of
tabulating these costs for individual jobs, have been discussed in the
preceding pages. To complete the cost department records, there should
be a record of total production──a record showing the cost of all
finished jobs. This information has an important bearing on the general
accounting system.

The form of the report of production will naturally vary in different
lines of business, though the information needed follows the same lines
in all cases. The essential feature is an exact record covering every
article manufactured in the factory; and every order for parts must be
considered as an order for finished product.

[Illustration: Fig. 21. Monthly Recapitulation of Job Costs]

Sometimes daily reports of finished orders will be required by the
main office, especially when the factory is located at a distance. As
a rule, however, a report covering a period of a week or a month will
serve the purpose.

A form that is adapted for most industries, and for daily, weekly, or
monthly reports, is shown in Fig. 21. In the heading of this form,
provision is made for the name of the department. When it is desired to
keep separate records of two or more classes of goods made in the same
factory, it is necessary to make a report of each class. The class is
usually indicated by the name of the department; when it is not, the
name of the class should be substituted. The body of the form records
the date started, order number, date finished, quantity, and cost in

The making of this report requires very little additional labor in the
cost department. Each day, when costs are tabulated on the finished
job cost cards, the details are entered on the report, each job being
placed in its proper class. At the end of the week or month, the total
column is footed and the report is sent to the general accounting
office. If the office and factory are widely separated, the report
should be made in duplicate, and a copy retained in the cost department.


=49.= Certain controlling accounts are required in the general ledger
to complete the connection between the cost and general accounting
system──to bind the two together. These controlling accounts, which
absorb all of the elements of cost from month to month, furnish the
means of proving the accuracy of cost figures; they change the cost
system from single entry to double entry.

Two controlling accounts are necessary──_Manufacturing_ and _Expense
Distribution_. The former finally absorbs the latter and is, therefore,
the principal controlling account.

One manufacturing account may represent the entire product of the
plant, or there may be several accounts representing different classes
of goods, or departments of the business. In machinery manufacture,
the foundry is frequently treated as a separate business; in the
manufacture of knit underwear, the yarn and knitting mills are
operated as separate plants; in a harness factory, separate accounts
are kept of the manufacture of harness, collars, and saddles. Each of
these divisions, whether departments or kinds of goods, calls for a
manufacturing account.

Expense distribution is subdivided in every business having more than
one department or shop. The subdivisions of this account are _General
Expense Distribution_ and _Shop Expense Distribution_, an account with
the latter being kept for each shop.

The sources of charges to manufacturing accounts are reports of
material issued to the factory on production orders, Fig. 9, reports
of direct and indirect labor employed on production, Fig. 12, and the
expense distribution accounts. Credits to manufacturing accounts are
derived from reports of finished jobs, as in Fig. 21.

The sources of charges to expense distribution accounts are: reports of
material issued to the factory to be used for repairs, Fig. 9, reports
of supplies issued, Fig. 11, reports of labor employed on repair
jobs, Fig. 12, and the different accounts covering expense items that
must be apportioned. A credit to expense distribution account, with
a corresponding charge to manufacturing account, closes this account

=50. Controlling Account Entries.= The accuracy of the entries to
controlling accounts in the general books is of the utmost importance.
Upon them depends the proof of accuracy of the cost figures of the cost
department on individual jobs.

Material and labor costs are accurately determined. The value of
material drawn for all purposes, as shown by the report in Fig. 9, is
credited to material purchase accounts, and these accounts are checked
against the storeroom records. Reports of supplies drawn are handled in
the same manner. The labor report, Fig. 12, covers all labor charges
and must agree with the pay─roll for the period covered.

In the distribution of expense, however, there are many opportunities
for error. While the total expense to be charged against the factory
for a given period is accurately determined, the amount is not known
until the end of the period. This is represented by the amounts charged
to the different expense distribution accounts. In the meantime, to
determine the cost of individual jobs, it is necessary to apportion
expense on a percentage basis, as explained in the discussion of that
subject. Since that ratio for the current period is unknown, it is
necessary to assume that the actual ratio for the preceding period
still is correct; therefore, that ratio is used in figuring the cost
of all jobs. It is only when the expense distribution for the current
period is made on the general books and the true ratio determined,
that discrepancies, if any, are discovered. Unless the distribution is
accurate, the resulting ratio will be incorrect.


Formerly, it was the custom to base the expense ratio on the actual
figure for the preceding year, which meant that changes in expense
ratio were not taken into account for an entire year. As a result, the
total manufacturing cost shown by the books at the end of the year,
did not agree with the costs as figured in the cost department; it was
usually much higher.

By operating the controlling accounts, making accurate distributions
of expense, the period can be limited to one month. Discrepancies
are then quickly discovered and the necessary adjustment made in the
expense ratio used. If it is found, at the end of the month that the
true ratio of expense is higher or lower than for the preceding month,
the percentage to be used for the next month is raised or lowered
accordingly. With a careful distribution of the expense items each
month, the variations in the ratio should be very slight.

The objection is sometimes made that a monthly distribution of expense
is inequitable──that certain expenses may be abnormally high in some
months and below the average in others. But with proper controlling
accounts, this objection ceases to be serious. Certain expenses are
paid in one month that should be distributed over an entire year──as
taxes, insurance, and repairs. The amounts charged to the expense
distribution accounts each month, are only the amounts that should be
apportioned to that month. Taking taxes as an example, one─twelfth of
the entire amount should be charged each month.

As an example of adjusting entries for controlling accounts, journal
pages are illustrated, in Fig. 21, containing entries made at the
end of the month──with explanations. It will be noted that the last
entry is a charge to _manufactured goods_ account, and a credit to
_manufacturing_ account of the total cost of finished goods, as shown
in the report, Fig. 20.

This account, _manufactured goods_, occupies the same position as a
purchase account. It represents the cost of finished goods to the
commercial division of the business. To this cost must be added an
amount sufficient to cover selling expense and provide a profit, as is
done when goods are purchased for resale. Selling expense should not
be included in the cost department's figures; nothing should be added
to the actual cost of manufacture, unless it is desired to add a small
amount to provide a factory profit.

[Illustration: Fig. 22. Journal Showing Adjusting Entries]

[Illustration: Fig. 23. Journal Showing Adjusting Entries]

_Manufacturing_ account has been charged for the cost of
manufacture──material, labor, and expense──and credited with the cost
of finished goods. This does not close the account, however, because
all jobs started have not been finished, as there still is work in
process. The _balance_ of the manufacturing account, then, represents
the cost of this work and should agree with an actual inventory of work
in process.

No attempt has been made to describe a cost system for a particular
business──principles only have been considered in this discussion.
Proper application of these principles, however, will result in a
practical system for any manufacturing business. The exact manner of
applying these principles──the detail──depends on the nature of the
business; the results desired are the same in all lines. Physical
conditions, nature of the product, the policy of the management, the
manner in which the business is conducted──all of these factors must
be studied and given due consideration in outlining the system. Then
the most simple system that will produce results is best, but in the
effort to make the system simple, _necessary_ details should not be
overlooked. It must be remembered that in a comparison of details of
cost, increases are more quickly located than if the comparison refers
to finished work.

FE AT TOPEKA Showing Arrangement of Racks and Shelving for Holding
Materials, and Longitudinal Disposition of the Bins Enabling the
Foreman, from His Office at the End, to Command a View of the Whole
Floor. Courtesy of the Engineering Magazine.]



=Manufacturing Conditions and Developments.= Millions of dollars are
annually spent in building new factories. Other millions are spent in
equipping them with the best machinery that trained and experienced men
have been able to devise. Still more millions of money are annually
paid to the officials who manage and the employees who man these
enormous manufacturing plants.

Why? Why could not these expert employees labor in their own homes or
their individual shops, and produce the manufactured goods without all
these enormous expenses? What are the necessities which impel men to
spend these vast sums of money in erecting, equipping, and operating
these immense plants?

Casually considering the question, the _factory_ or _manufacturing
plant_ does not seem to be a real necessity. A large force of employees
working under a single management does not seem to be the most
economical method of producing the desired goods. Certainly every man
is free to choose his own particular line of work; and there are many
persons who, seeing a large force of employees giving their entire life
work to the enrichment of successful manufacturers, while the employees
themselves work long hours at hard and laborious tasks and fare so
poorly that they are seldom enabled to save any considerable portion of
their wages, not infrequently ending an industrious life in poverty and
want, are led to believe that the factory is not a necessity or even
a benefit to mankind, but rather a means for reducing the individual
worker to a condition of grinding servitude, voluntary perhaps, but
often the result of dire necessity.

These people, considering all the hardships in the life of factory
employees, are likely to hold and often to express the opinion that
the highest welfare of the human race really demands a return to the
simpler life of early days, when a much larger proportion of the people
lived upon farms, producing their own provisions, raising the flax and
the wool wherewith they clothed themselves, quite independently of the
wealthy classes, whether bankers, capitalists, or manufacturers, the
factory as we know it to─day having hardly begun its marvelous era of

Let us consider for a moment how all this has come about. In the
earlier years of the independence of this country, the chief dependence
was upon the results of agricultural work. In due time the development
of the resources of the country has placed manufacturers at the front,
so that in very recent years the value of manufactured products has
become nearly double that of agricultural.

These results, like many others of a less notable character, commenced
from very small beginnings; and it has been by inborn mechanical
ability, remarkable ingenuity, patient development, and tireless
energy, that mechanical undertakings have been developed from meager
initial facilities, until, in the vast manufacturing enterprises of the
present day, the American mechanic in nearly all lines leads the world
in originality and practical achievement.

=Early New England Mechanics.= When the early settlers of New England
labored under the restrictive and harassing laws of the Mother
Country, and under their administration were goaded and exasperated
beyond endurance in many ways, not the least of which was that of
being obliged to purchase many manufactured articles from England at
extortionate prices──or, if purchased from other countries, still
paying taxes to England for the privilege──they rebelled. Determining
to buy no more foreign goods, they set out, at first in most clumsy and
primitive fashion, to make for themselves such articles as were really
necessaries, and, in noble self─denial, to live without those which
they could not make for themselves. They doubtless little realized,
however, that they were thereby laying the foundations of the greatest
manufacturing country in the world. By the principles thus inaugurated,
they instituted the first industrial _boycott_ in the history of
the country──the one that has had more important and far─reaching
influences than anything of the kind before or since.

=Industrial Freedom.= While the departure of the Pilgrims for this
country, and the making of their homes on the "stern and rock─bound
coast" of New England, were for the purpose of seeking religious
freedom, it is also true that freedom soon meant very much more than
this to them; and with a larger conception of their opportunities
and possibilities, some of which were in reality forced upon them
by adverse circumstances, there came to them the inspiration of
_industrial_ as well as _religious freedom_. The world has seen and
has given them due credit for the determined and heroic manner in
which they went about their self─appointed task; and they have amply
demonstrated to posterity their appreciation of and grasp upon the
possibilities and conditions, and the breadth and nobility of character
which they exhibited in working out the many perplexing problems that
confronted them.

=Development of American Industrial Enterprises.= American
manufacturing came into being with these small beginnings and crude
efforts to fashion those common objects of household necessity and
daily use, which, although crude and clumsy, yet answered the purpose
until supplanted later by those of more improved form and workmanship.
These primitive successes led to greater endeavors, and developed into
still broader usefulness, when the time came that necessities had been
provided for and luxuries were now demanded by the higher plane of
living to which the people had in due time advanced.

Thus the crude beginnings and rude surroundings among which the early
American mechanic performed his work, were in his own house. Soon he
outgrew these primitive facilities, and built small shops, frequently
in the garden or back yard of his home. These gradually enlarged.
The development of the business demanded increased facilities, and
buildings were erected quite independent of the home surroundings,
and two or more men were associated as manufacturers. These plants
developed and enlarged, and in due course of time became the machine
shops and the factories, which have since multiplied many hundreds
of times, not only in number and in value, but in influence and
importance, until to─day our country stands the foremost manufacturing
nation of the world. This is true, not only as to the volume and value
of her manufactured productions, but also as to their great range and
diversity of kind and usefulness. One by one the American mechanic
has taken up the various classes of work formerly monopolized by this
country or that, failing perhaps at first, but always progressing
and developing, until, by native ingenuity and unflagging energy,
all obstacles have been overcome, all difficulties put aside, new
industries have come into being, and other "victories" of peace "no
less than those of war" have been added to the laurels of the American
mechanic and of his ever─ready and ever─confident partner, the American
manufacturer and capitalist. It is to this combination, each confident
of and faithful to the abilities and honor of the other, and each
acting his part in his own sphere of usefulness, that the immense
success of American manufacturing is due.

The factories of to─day are the logical results of a natural growth
and development of the various branches of business for which they
were originally built and organized. As the buildings increased in
numbers and dimensions, the methods of construction, the equipment, and
the systems by which they were managed, developed methods of greater
economy and efficiency.

=Tools of the Early Mechanic.= The early mechanic had few tools and
appliances wherewith to perform his work; and these were crude and
primitive, consisting principally of a limited number of hand─tools
brought from the Old Country, and occasionally a hand─lathe of modern
dimensions and operated by foot─power. But with their few tools and
meager facilities, and animated by the condition that "necessity is
the mother of invention," these old─time mechanics proceeded with
practical common sense and ingenuity to design and construct better
tools and machines──which have continually developed, until we have the
splendid array of manufacturing machinery seen on every hand to─day.
As machinery developed, larger and larger amounts of money had to be
expended; and the banker had to be called upon to provide it. Thus the
capitalist became the partner of the manufacturer, the one furnishing
the mechanical ability and inventive genius for the actual designing
and building of machinery and manufactured goods, while the other
contributed the money to carry on the work, and the business ability
necessary to market the product.

=Relations of Capital and Labor.= In brief, this is the condition
to─day. But, says the carping critic, "there are often hundreds
of struggling and hard─working employees where there is one rich
manufacturer." This may be partly true, although it is a fact
beyond dispute that the American mechanic is the best paid workman
in the world. It is true that there are hundreds of workmen to one
capitalist. Why? The Creator has so ordained that there shall be many
of moderate ability, and but few possessing the unusual ability and
talent to lead them. So it has ever been since the days of Moses, and
so it probably will ever continue to be. Doestick's regiment composed
entirely of colonels was a manifest absurdity, and so intended as an
illustration of a well─known and natural condition that should be
realized by every reasonable and thoughtful man who considers these

Considering carefully the great scheme of manufacturing, and the
immense industrial problem of supplying the wants of the people of
this great country and providing for the vast volume of trade that
goes abroad, by the modern manufacturing plants equipped with all that
is latest and best in machinery for every conceivable purpose, it
should not be forgotten that, as the very basis and foundation of the
whole, stands the modern _machine tool_, and that it is principally
to the great and important development of this that we owe primarily
our industrial growth and prosperity as a manufacturing nation. To the
machine tool may easily be traced the gradual but continued upward
tendency of the mechanic and his methods, from the hard physical toil
and small pay of the early days, to the immeasurably lighter exertion
and increased compensation made possible by the highly developed
condition of the automatic machines of the present day. It has been
an oft─repeated victory of "mind over matter," wherein _brains_ have
won where _hands_ made but little advance; _ideas_ have developed
wonderful mechanisms that have revolutionized the earlier methods of
manufacturing and raised the standard of mechanical excellence beyond
what was thought possible years ago, and at the same time reduced the
cost to a fraction of its former amount.

Here, again, the capitalist furnished the means whereby the practical
realization of the ingenious designs of the mechanic's fertile brain
became possible, and the successful combination of capital and labor
brought success to both.

=Combinations of Capital.= But here comes our critical labor agitator
again with the comment: "It is all very well to talk about the amicable
relations of capital and labor, and how each ought to help the other,
but how about the great combinations of capital that we ordinarily
call "trusts"? To give a correct and intelligent, as well as a fair
and truthful answer to this question, we must know the _conditions_
under which the combination is formed, the _plan_ upon which it is
organized, and the _object_ of its formation. As these are not given,
we must assume the conditions of some well─known combination. Let it be
the United States Steel Corporation. One of the foremost men in this
combination has defined his position on the subject, and in so doing
has outlined the policy of the corporation, by saying:

 "Any combination of capital which operates, _first_, to prevent
 competition; _second_, to increase the price of the product; and
 _third_, to reduce the wages of the workmen, is working under a trio
 of wrong principles that sooner or later will bring about disaster."

Let us see how the actual operation of this combination of capital
really works out in practice.

 _First_──The Steel Corporation has never sought to prevent
 competition. Steel mills, large and small, have operated when, where,
 and how they pleased, with no interference from the Steel Corporation.

 _Second_──The price of steel has not been increased; on the contrary,
 it has been greatly reduced under its management. Thirty years ago a
 very indifferent quality of machine steel cost from 8 to 12 cents per
 pound. To─day ordinary machine steel of a much better quality than
 that mentioned above can be had for 2 cents a pound or less.

 _Third_──The wages of workmen have not only not been reduced, but have
 actually been doubled since the labor troubles in the steel mills
 known as the "Homestead Strike" (1892). The Steel Corporation has
 gone much further than to double the wages of the steel workers. They
 have made it possible for the workmen to become partners in the great
 work of the corporation, by obligating themselves to sell to their
 workmen a certain amount each year of stock in the corporation, so
 that the men who labor in the mills may also become part owners and
 participate in the dividends resulting from their work on exactly the
 same percentage as the capitalist himself does.

 Our critic comes back to the charge by saying that "the Steel
 Corporation has bought up many steel plants in various parts of the
 country, and added them to its already enormous properties." Quite
 true. And for what purpose? Let us see what they do with these plants.
 How do they manage this part of the business? What is their plan of
 working? The conditions were these: Before the advent of the United
 States Steel Corporation, there were many isolated steel manufacturing
 plants, each being equipped for the making of a number of kinds of
 steel products──for instance, steel railroad rails, structural steel,
 merchant bar steel, steel boiler─plates, steel tank─plates, and so
 on. The equipment necessary for producing these different forms of
 steel was very expensive; and inasmuch as a considerable portion of
 this equipment for some particular kind of product would necessarily
 be idle on account of the fluctuations of trade, the expense burden
 was abnormally high on account of this idle equipment. How has this
 condition been handled by the Steel Corporation? This has been the
 plan: Suppose they have purchased five plants, each making the
 five classes of product indicated above, and working under the
 disadvantages of a variety of products. These plants are examined,
 and inventories made of their equipments. It is then decided which
 mill is best adapted for making each one of the five classes of
 products. Then there is a redistribution of the equipment of the
 plants, placing in the plant selected for it all that in the several
 plants is adapted to a certain product; removing all the machinery
 from this plant that is not adapted to the particular product to be
 turned out, to be distributed among the other plants according to the
 particular class of products for which each one is designed. Thus
 each plant is equipped to turn out the single class of product which
 is most appropriate for it, by drawing upon the other plants for such
 machinery as they have which may supplement its own in this line.

 By this plan, each plant makes but one class of product. Having the
 best machinery from all the plants for this purpose, and concentrating
 its energies on a single class, it is enabled not only to turn out a
 better product, but to turn it out much more economically than before.
 As the workmen become more expert on their single line of product,
 they work more efficiently and consequently earn higher wages.
 All these conditions, producing an economical output, enable the
 manufacturers to reduce the selling price.

 The conditions of economy brought about in the management of the
 manufacturing operations and in marketing the product, are very
 marked when a large number of plants operate under one general head.
 Again, with the immense amount of capital at the disposal of such a
 corporation, it is enabled to secure the services of the best experts,
 and the most valuable processes in existence.

 There are many other advantages, not only to the corporation and its
 employees, but to the users of its products, and so to the general
 public, when a combination of capital is _honestly made and honestly

=Betterment of Industrial Conditions.= What has been said of the Steel
Corporation as to favoring of employees, has been duplicated in various
ways by different manufacturers all over the country. Factory sites
have been beautified by landscape gardening, and trees and shrubbery
have made the surroundings of working men and women pleasant and
attractive. Land has been purchased, and workingmen's homes built
and rented to them at fair rates. Factory dining rooms are provided;
reading rooms, libraries, gymnasiums, clubs, and social organizations
are inaugurated; emergency hospitals or "first aid" rooms are arranged,
with all or nearly all these services free except that provided in
dining rooms, which is furnished at actual cost. More recently, a firm
in Connecticut announces that it will furnish free medical attendance
to all its employees and their families.

Schools have been established for apprentices, wherein they receive
such technical instruction as may be necessary to their success in
the trade they are learning──and this, not only without expense to
themselves or to their parents, but they are paid by the hour for time
spent in their school work, the same as for their time in the shop.

To foster a practical interest in the work of the shops, many concerns
have what is called the _Suggestion System_, whereby the employees may
make written suggestions of any improvements which they desire as to
shop methods and routine, the design and construction of the product,
and many kindred subjects, the best suggestions made each month
receiving prizes.

All of these matters emphasize the fact that the mutual interests of
the capitalist who manufactures and sells, and of the employee by the
efforts of whose hand and brain the products are being turned out, are
each year being recognized and in a very large majority of cases are
being acted upon in good faith.

=Methods of Modern Manufacturing.= In former times, machines were
built one at a time or in very small lots. Parts were made and fitted
to the particular machine to which they belonged; and while the same
general form and dimensions were practically maintained, there was no
attempt made to render the several parts so exact as to fit upon any
other machine than the one for which they were intended. Systems of
gauges had not been developed, and the planer was yet a comparatively
new tool; much work was still done by hand, the hammer, the cold
chisel, and the file being the chief reliance of a large majority of
machinists. This was the state of the machine shop and its methods
nearly up to the year 1800.

=Interchangeable Manufacturing.= The use of milling cutters and the
commencement of practically interchangeable manufacturing, came into
machine shop practice at nearly the same time. It has been said that
"but for the milling machine, there would have been no such thing as
interchangeable manufacturing." It might be said with quite as much
truth, that if the system of interchangeable manufacturing had not been
conceived, there would have been little need for the milling machine.
Each, to a great extent, depended very much upon the development of the
other──and upon a third factor, the conception and development of the
method of handling work (particularly small parts) in jigs and fixtures.

Milling cutters were made in America by one of the early machinists, a
Frenchman named Vaucanson, who died in 1782. A sample of these had a
hexagonal instead of a round hole, and the pitch of the teeth was very
fine, so that the cutter resembled a saw rather than those at present
in use. It is said that a man by the name of Bodmer, in Manchester,
England, had made a milling machine in 1824.

It is altogether probable that Eli Whitney, the inventor of the cotton
gin, had built and used milling machines previous to this date, as
the following item of mechanical history would seem to indicate. In
January, 1798, Eli Whitney received from the United States Government
an order to furnish ten thousand muskets, of which four thousand were
to be delivered in one year, and the balance in two years. Mr. Whitney
went at the undertaking in a very thorough and systematic manner.
He first developed a water power; then erected suitable buildings;
considered and developed ways and means for a larger and better product
than had previously been realized; designed and built machinery to
effect it; and trained workmen to a degree of skill necessary to
success in their new employment.

The difficulties which Mr. Whitney encountered and the obstacles
which he had to overcome, were so much greater than he anticipated
that it was really eight years instead of two before he had succeeded
in completing the government order for the ten thousand muskets.
However, the progress which he had made in this new enterprise, and the
character of the product which he turned out and delivered, were so
satisfactory to the government officials that Congress treated him with
the greatest courtesy and consideration.

His shops were situated in the city of New Haven, Conn., and soon
became the Mecca of government officials, manufacturers, traveling
notables, and foreigners, who had heard of this wonderful American
mechanic and came to see his work for themselves──to find that the
system, the machines, and the tools which he had perfected were well
worth the journey. His innovations in the manufacture of arms formed as
great an epoch in mechanical history as had his invention of the cotton

Jigs and fixtures were among his equipment; and it is altogether
probable that milling machines were also in use, since he must have had
practical knowledge of the utility of the milling cutter at this time,
as it is generally assumed that the first practical use of the milling
machine was in the making of parts of muskets.

The buildings which Mr. Whitney erected for his use were substantial
stone structures, and stand in a part of the city called in his
honor "Whitneyville." They form a part of the extensive plant of the
Winchester Repeating Arms Company.

At this point and at this early day, therefore, was inaugurated the
modern system of interchangeable manufacturing──or the manufacturing,
in large numbers, of duplicate parts, within such a limited degree
of variation as to admit of their ready interchangeability with
one another. The system was not one that would be confined to the
manufacture of arms, but was adaptable to the production of all kinds
of small and moderate─sized machinery, and was the initial effort
which in due time revolutionized the then existing shop methods, and
which has since built up the American system of manufacturing to the
proud distinction of being superior to anything of the kind in other
manufacturing countries.

In the operations of modern manufacturing, the principal object sought
is to turn out the product economically and accurately. To produce
these results economically, the parts must be produced very rapidly.
To produce them rapidly, not only must there be a very complete and
efficient equipment of machines, attachments, tools, jigs, fixtures,
and gauges or measuring devices, but there must also be a very complete
system of shop methods by which the operation of this equipment is
carried on.

It has been well said that "the man in whose brain the manufacturing
system was born was he who first took a piece of scrap iron and drilled
two holes in it, to guide a drill in making another piece with two
holes in it the same distance apart as in the first piece." The men
who now fill our drafting rooms and tool rooms, and who devise and
construct tools for the production of interchangeable metal parts,
are his descendants. They have made possible the manufacture of the
breech─loading gun, the typewriter, the cheap sewing machine, the cash
register, the machine─made watch, the automobile, as well as a thousand
and one other mechanical articles, machines, and devices which form an
integral part of our twentieth─century civilization.

To render these systems efficient and economical for these purposes,
the work must be _repetition or duplicate work_. That is, there must
be very large numbers of each of the different parts; and to carry out
the scheme of operation for the division and subdivision of work; a
single operation on a large number of parts is performed; then the work
is handled again, perhaps in another machine, and another operation
is performed; and so on until the part is complete. Thus a piece of
comparatively simple form may require a large number of separate and
distinct operations to complete it. But, as each single operation is
performed by one operator, he may give his undivided attention to the
accuracy of that operation; hence very accurate work can be produced.


In the development of these systems, the work has continually grown
more and more complex, as have also the requirements as to the
buildings in which manufacturing work is performed, and as to the
equipment necessary to perform it. Conditions have been continually
changing; greater speed as well as greater accuracy in all machine
operations has been demanded; and a largely increased output per
employee has been required. So great and urgent has been this demand
that the employee of to─day will turn out from three to ten times the
volume of product of a given kind that he did only a few years ago.
Undoubtedly this result has been brought about in great measure by the
great improvement in machines, tools, and fixtures. Much is also due
to the use of tools composed of high─speed steel; still more, to the
employment of improved systems for handling work.

But all of these do not fully explain the enormous increase in product
per employee. This has been brought about by various methods of shop
management. One of these is the specialization of operations and
the division and subdivision of departments, whereby each operator
has a certain well─defined and very limited number of operations to
perform. These operations he performs over and over, hundreds and
sometimes thousands of times daily, until he becomes so accustomed to
each movement that the operations are performed not only with great
rapidity but also with great accuracy. Still another factor in the
question of individual output, is the efforts that have been made
through systems of premiums, bonus, and similar methods of reward for
individual effort when the output reaches or exceeds a certain fixed
limit. These rewards are not confined to the operatives, but are often
extended to the foremen, assistant foremen, gang bosses, and others
of the "non─productive" force who have indirectly contributed to the
efficiency of individuals and hence to departmental efficiency.

In the succeeding articles, these matters will be taken up and treated
in detail, giving the actual practice as now prevailing in some of the
best organized manufacturing plants.


=Modern Meaning of Shop Management.= The present understanding of the
term _Shop Management_ is quite different from the sense in which it
was used years ago. Formerly the management of the shop was vested
in a _superintendent_ whose duties consisted in purchasing material,
inspecting it when it was received, turning it over to the foreman,
and in a general way looking after the work as it was being performed.
In addition to these duties, he frequently handled the selling of the
product, the collection of accounts, and the proper provision for
meeting the pay─roll on pay─days. He also had a general supervision
over the grounds and buildings and their care and maintenance, as well
as the provision for power, lighting, and heating. By this arrangement
of duties, it will be seen that comparatively little time was devoted
to actual shop operations, and much time to different lines of duties
that might more economically and often quite as efficiently be
performed by assistants at a much lower rate of pay.

In the modern methods of shop management, all these things are changed.
The specialization of workmanship, the division of duties, the limiting
of responsibilities──each restricted within narrow limits by sharply
defined regulations──have reduced the variety of operations of the
workman, and of responsibilities and duties of the men who direct
manufacturing work.

We find the purchasing of material and supplies in charge of a
_Purchasing Agent_. We find these purchases checked by a _Receiving
Clerk_, turned over to a _Storekeeper_, and subject to examination by
a regular _Inspector_. They are then put into the storeroom, whence
they are drawn as needed for the different departments, the foremen of
which sign definite orders for such kinds, quantities, and qualities
as may be needed, specifying the purposes for which they are to be
used or the particular orders to which they are to be charged. When
issued, they are receipted for by the person receiving them. All
this is conducted with the same regard for business rules as if the
foreman were making a purchase on his own account and paying for the
goods. We find the selling of the product in the hands of an expert
_Sales Manager_, often assisted by a corps of engineers, draftsmen,
bookkeepers, and clerks, numbering more persons than the entire
factory's force of non─producers twenty years previously. A _Credit and
Collection Department_ attends to all collections, and the _Treasurer_
and _Cashier_ see to it that the money for the pay─roll is on hand when
wanted. A _Production Engineer_ regulates the volume of work going
into the shop, and the sequence of mechanical operations by which each
piece or part is to be machined and perfected. An assistant to the
Superintendent looks after the condition and maintenance of grounds and
buildings, yards, and the transportation facilities of the plant.

By these developments of the system of management into a division
of duties and responsibilities, the time, attention, and abilities
of the Superintendent may be devoted to his legitimate purposes of
_superintendence_ or _supervision_, planning and directing the work of
the assistants and heads of departments.

=A Typical Manufacturing Plant.= For the purpose of taking up the
question of Management in a systematic and practical manner, we must
first assume that we have a shop to manage; and secondly, that it is of
the usual type of manufacturing plant, built, organized, and managed at
the present day. The plan of such a plant is given in Fig. 1.

In planning a plant of this character, provision must primarily be made
for the various departments for the following purposes:

 1. An _Engineering Department_, wherein the machines forming the
 product may be designed and the drawings made for the various classes
 of mechanics who are to perform the work of turning out the product.

 2. A _Pattern─Making Department_, in which the necessary patterns are
 made for use in the foundry for producing the castings.

 3. A _Forge Shop_, capable of producing such forgings as are required
 in the machinery to be built.

 4. An _Iron and Brass Foundry_, in which may be produced the rough
 castings of the parts that are to enter into the machines constituting
 the product.

 5. _Manufacturing Departments_, in which all parts (large and small)
 of the product are made from the rough stock──such as castings,
 forgings, bar stock, and the like, to the completed parts ready for

 6. _Assembling and Erecting Departments_, in which individual parts
 may be assembled into groups of related parts, and these erected into
 complete machines.

 7. A _Power Plant_, containing the proper equipment for furnishing
 the necessary power for driving the machinery in these various
 departments, and for providing lighting and heating facilities for the

[Illustration: Fig. 1. Typical Layout of a Manufacturing Plant.]

 The _General Office_ of the concern is of course understood; but, as
 it cannot properly be classed with departments of the plant, it is not
 included in the above enumeration.

In addition to the above list of principal departments, there will be
the following──quite as necessary, but secondary in importance:

 1. The _Transportation System_, including shop and yard tracks and
 cars, elevators, cranes, hoists, and all similar appliances for
 handling material.

 2. The _Tool Room_, for making tools, jigs, and fixtures, and for
 properly storing them in a convenient manner for issuing when they are
 called for.

 3. An _Experimental Room_, which all progressive concerns find
 necessary in the development of their product.

 4. The _Store─Room_, in which are stored the raw material and the
 purchased stock, either partly or completely manufactured, which are
 issued to the different departments as needed for their daily routine

 5. The _Finished Parts Store─Room_, in which the smaller parts of the
 product, as fast as they are completed, are stored and held until
 wanted for the process of assembling.

 6. The _Pattern Storage Room_. In this department, often occupying
 several floors of a building specially constructed for this purpose,
 are stored all patterns for the iron and brass foundries, and also
 those sent to outside foundries for malleable and steel castings.

 7. The _Carpenter Shop_. This is a general utility department making
 boxes and crates for shipping; doing carpenter work in keeping the
 grounds and buildings in proper repair, and making necessary changes
 therein; making and repairing flasks for the foundry; and similar work.

 8. The _Paint Shop_. A small room serving little more than as a
 storeroom for paints and painters' materials, as their work is
 principally done at various points in the shops, wherever the machines
 or parts may happen to be.

 9. The _Shipping Room_. In a plant building large machinery, the
 shipping room is simply an office for the shipper, the physical work
 of shipping being done in the shops, wherever the machine may happen
 to be at the time.

Referring to the plan given in Fig. 1, it will be seen that the
Administration Building is placed in substantially the center of the
front line of the plant. The first and second floors of such a building
are usually devoted to administrative, commercial, and accounting
purposes. The upper floor is usually occupied by the Engineering
Department and drafting room.

The three Manufacturing Buildings numbered 1, 2, and 3 are devoted
to the various operations of making the parts of which the machinery
product is composed. These parts are then sent to the Erecting Building
(No. 4).

The system of shop transportation consists primarily of shop tracks and
cars, and is extended to the yard, being so designed as to connect all
buildings of the plant with one another and with the yard. It also
reaches the railroad tracks at numerous points. Overhead traveling
cranes cover the manufacturing buildings, and extend into the erecting
building far enough to form a connection with the large traveling crane
serving it, by which the large parts of machines are carried from place
to place as may be required by the erecting men. This crane serves to
load the finished machines upon the railroad cars, when they are to be
shipped, the railroad track being extended within the building for this
purpose, as shown in Fig. 1.

The Tool Room is given as central a location as possible, and would
naturally be near the junction of building No. 2 with the erecting

The Experimental Room has no particular place, but is frequently so
placed as to be away from the active manufacturing operations, with
which it is liable to interfere if too closely related.

The general Store─Room for purchased material may be in the erecting
building, but is frequently located, for convenience of communication,
nearer the general offices──as for instance, in front of building No. 1.

The smaller parts are stored in a Finished Parts Store─Room, usually
located in this building. Thence they are issued to the Assembling
Department as required.

The Pattern Shop building will often be composed of three floors.
On the ground floor will be the Carpenter Shop and flask making and
repairing work. On the second floor will be the pattern─making shop,
and on the third floor will be the pattern storage rooms. A large
elevator serves all three floors.

The Paint Shop is sometimes located in one of the manufacturing
buildings or the erecting building; but as the painting of machine
parts and complete machines is generally done in any one of the
departments where the work may be, and the paint shop is hardly more
than a storeroom for paints, a due consideration of the question of
fire protection would indicate that it had better be placed in a small
building entirely detached from all manufacturing buildings.

The Power House, in the former method of transmitting power by shafting
and belting, was located as nearly as possible in the center of the
space over which power was to be distributed. Since the advent of
electricity and its common use for transmitting power, the question of
the location of the power house is relieved from this condition; it
may be located at the point most convenient to railroad facilities for
receiving fuel, or for obtaining the necessary water for boilers, for
fire purposes, etc.

In a plant manufacturing small machines or a kind of product which
is shipped in small quantities, it is obvious that the Shipping Room
must be convenient to the point from which these goods are to be
taken by railroad cars, by boat, or by teams. If most of the shipping
is of large machines or articles which must be handled by cranes,
the railroad tracks will be run into the erecting building, and the
machines loaded there, in order to avoid the expense of extra handling
and moving them. This is the arrangement shown in Fig. 1. In this case
the shipping room may be in the Administration Building, so as to be
convenient to the other office departments. In some kinds of business
it is convenient to have the shipping room and general storeroom near
each other, as there is considerable business done in each that is
quite closely related to the other.

The Iron and Brass Foundry is usually located at some distance from
the manufacturing buildings, in order that the latter may be as free
as possible from the annoyance of smoke and dust. It is connected
with the other departments by the system of shop and yard tracks, and
the railroad siding track passes through one end of the building as
a matter of convenience in shipping castings. There is also a branch
track running along the side of the foundry building for the purpose of
delivering coke, coal, moulding sand, pig iron, scrap iron, and other
foundry materials.

It should be noted that the buildings shown in the plan are located in
a compact mass, with considerably less than the usual yard room. In
this instance, however, the plan was so drafted to economize space on
the drawing. It is the law in some European countries that not over
50 per cent of the area of a manufacturing site shall be covered by
roofs. Such a law would be of much value in this country, to prevent
the crowding of buildings to such an extent as to be unhealthful to

While factory buildings are frequently erected of from three to to six
floors, the modern tendency is to reduce the number of floors in all
shops and manufacturing buildings; and in the case of machine shops,
a large majority of them are built of only one floor. Some, however,
have wide galleries at the side, by which considerable second─floor
space is added; while the central portion remains open to the roof, and
supplies ample space for the accommodation of the overhead traveling
crane, as well as the necessary added height needed for erecting large

Foundries are necessarily built of a single floor, although there are
several in different parts of the country where moulding rooms are
located as high as the third floor. This latter arrangement is usually
made for brass moulding, rather than for iron moulding.

=Organization of a Manufacturing Plant.= Having the design of the
plant, and assuming that the required buildings have been erected
in accordance with this plan, the next step will be to organize
the management both in a general way and also as relates to the
various departments usually necessary to inaugurate the business of

As the scope of this treatise covers only the shop and its management,
we need not take up the commercial organization of the company by
which it is capitalized and maintained. We shall therefore consider
the General Manager as the head of the organization, and proceed to
examine the methods usually adopted for the division of authority and
responsibilities from him to the actual workmen at the bench, at the
machines, and on the floors.

The chart shown in Fig. 2 illustrates the plan of the organization.
Nearly all minor officials and office employees, such as bookkeepers,
clerks, stenographers, etc., are omitted from this chart, to avoid
confusion and to simplify the understanding of the organization plan
and its numerous details.

The General Manager has a personal Assistant, and, for his commercial
affairs, the service of a commercial Accountant and a Cashier. Other
office employees are similar in number, duties, and responsibilities to
those in the usual commercial office.

By referring to the chart, it will be seen that the organization
is divided into two distinctly different parts. First, that of
_production_ or _manufacturing proper_; and second, that of _selling_
or _marketing_ the output produced.

In this case the production division is by far the most numerous and
complex. This, however, is not always the case──as, for instance,
in the case of a manufacturing concern selling its product through
local agents. Frequently the territory over which sales are made is
divided along state lines, and a _District Agent_ appointed for each
state. These, in turn, appoint the _Local Agents_. This necessitates
an organization of hundreds of local agents, supervised by state or
district agents, and these in turn by a _General Agent_. Thus a very
large organization is built up for disposing of the product.

[Illustration: Fig. 2. Chart Illustrating Plan of Organization of a
Typical Manufacturing Plant. Showing channels of authority connecting
officials and departments.]

Another plan is the employment of _Traveling Canvassers_, each having
a certain territory to cover, who make their reports to either state
or district agents, or to the general agent located at a central
point──sometimes at the factory, but not necessarily so.

As competition becomes stronger and net profits smaller, the problem
of marketing the product becomes more and more important; greater and
more complex selling organizations are necessary; and the expense of
selling increases. The advertising organization, or what has come to be
known as the _Publicity Department_, is a most important adjunct to the
modern manufacturing business; and large amounts of money are annually
expended in its maintenance.

In the case under consideration, the selling of the product is in
charge of a _Sales Manager_, who has as his office staff the _Publicity
Manager_; the _Preliminary Engineer_, and the draftsmen and estimators
who assist him; the _General Salesman_, who is in reality the personal
assistant to the Sales Manager; and the _Credit and Collection Clerk_.

The _Publicity Manager_, sometimes called the _Advertising Manager_,
has charge of all advertising of whatever kind, demonstrations at
expositions and at agencies, and, in fact, all work that may be
properly comprised under the term "publicity"──that is, keeping the
public informed as to the product of the company and its adaptability
to meet the needs of the public in the special lines it manufactures.

The _Preliminary Engineer_ is in charge of such engineering matters
as are necessary upon new work, or work upon which the Sales Manager
desires to estimate. It frequently happens that considerable designing
and drawing are necessary in this connection, previous to definite
orders being given or contracts signed. It often happens that the
product of the concern must be changed in certain details so as to
adapt it to the uses of various customers, to the different local
conditions under which it is to be used, and to the various purposes
for which it is to be used. In case an order is given and contracts
signed, the preliminary drawings thus produced become a part of the
transaction, and are used by the Production Department in getting out
the machinery to fill the order.

The purpose of the _Credit and Collection Office_ is to canvass the
financial standing of customers and prospective customers; to make
collections when necessary to do so; and generally to advise the
Sales Manager on these important matters. The official in charge of
this office is frequently called the _Credit Man_, and must be a
person of peculiar ability in his special line in order to protect
the concern from fraud, imposition, and financial losses when dealing
with customers of commonly unknown or doubtful financial ability and

The Production Division is under charge of the _Factory Manager_,
who has for his personal assistant a _Production Engineer_ or
_Superintendent_, who plans the productive scheme of the factory
and supervises the departmental distribution of the work and the
shop operations necessary for the routine work upon it. In a large
manufacturing establishment, the Production Engineer will be at the
head of a considerable force of draftsmen and clerks comprising
what is sometimes called the _Planning Department_, which arranges
all operations, shop routine, time schedules, premium rates, and
similar matters. The Factory Manager will also have the usual office
assistants, and have direct control of the _Purchasing Department_, the
_Time and Cost Department_, the _General Store─Room_, and the _Shipping
Room_. In some concerns the Time and Cost Department is a part of the
Planning Department, as the records of this department cover nearly
every kind of information required for the Time and Cost systems.

All other departments of the factory are divided into two general
classes. The first comprises the general departments, as follows:

 The Engineering Department, or Drafting Room.

 The Experimental and Development Department.

 The Power Plant, for both the generation and the distribution of power.

 The Iron and Brass Foundries.

 The Forge Shop and Cutting─Off Rooms.

 The Carpenter Shop (including sometimes the Flask Making and Repairing

 The Paint Shop and Painters' Supply Room.

 The Transportation Department for shops and yards.

These are under the supervision of the General Superintendent, who has
charge of all mechanical matters except those strictly pertaining to
production or to the actual manufacturing of the product.

[Illustration: Fig. 3. Chart Showing Official Channels of Communication
and Authority from Superintendent to Workmen in a Typical Manufacturing

The second general class is that of Production, and will ordinarily
consist of the following departments:

 The Planing Department, including shapers and slotters.

 The Drilling and Boring Department, including vertical, horizontal,
 and radial drills and boring machines.

 The Heavy Turning Department, including lathes of less than 24─inch

 The Milling Machine Department, including horizontal, vertical, and
 special milling machines, profile machines, etc.

 The Gear─Cutting Department, for the making of all classes of gears.

 The Grinding Department, including cylindrical, disc, and surface

 The Polishing Department, which includes polishing, buffing, etc.

 The Assembling Department, in which parts (usually comparatively
 small) are assembled in groups of related parts and stored, pending
 the final erection of the machines.

 The Erecting Department, in which the entire machine is erected and
 usually tested, and inspected, receiving the final painting and other
 finishing work ready for shipping.

 Should the character of the product be such as to require it, there
 will be also a Plating Department, usually located adjoining the
 Polishing Department.

This class of departments will be under the direct supervision of the
_Production Superintendent_.

Each department is in charge of a _Foreman_, who is responsible for
the discipline, the work, and the efficiency of the force under him.
Frequently the department is large enough to require one or more
assistant foremen. Under these may also be _Gang Bosses_, each of whom
will have a small force of employees, called _gangs_, for whose work
and efficiency he is responsible.

=Shop Management.= Referring to the Chart, Fig. 2, it will be
noticed that the rectangular figures representing different offices,
departments, or officials are connected by lines. These are commonly
called _lines of authority_, and a careful study of them will show in
what manner and through what channels the orders of an official pass to
the employees for whose work he is responsible.

Tracing these lines from the head of the establishment through the
various offices and officials to the different departments, we get a
fundamental idea of _Shop Management_.

This system will be rendered somewhat simpler by reference to
the Chart, Fig. 3, which shows the path or official channel of
communication and authority from the Superintendent down to the
workmen. It also emphasizes the fundamental idea of all official
business passing through the officials in charge of intermediate

Thus, if the Factory Manager desires a certain thing done, he does
not give the order to one of the workmen, nor to a foreman, but to
the Superintendent. The Superintendent will give his orders to the
foreman of the department wherein the work is to be done. If this is a
department in which there are gang bosses, the Foreman will give his
orders to the proper gang boss, who will select a suitable workman, or
as many of them as may be necessary, and instruct them as to the work,
and will personally see that it is performed promptly and in the proper
manner. When the work is completed, he will report the fact to the
foreman, who will in turn report to the Superintendent, who informs the
Factory Manager that his orders have been executed.

This process may seem unnecessarily complicated, and in consequence it
is sometimes referred to as _red tape_. It is, however, necessary to
have a well─defined and properly understood system and channel for all
routine business, some of the reasons for which are as follows:

 _First_──it has been said that "no man can serve two masters," and
 this is quite true in all questions of shop management. Every loyal
 workman has learned by precept and tradition to look to his immediate
 superior for all orders and instructions relating to his work, and he
 naturally and properly resents any attempt to ignore or belittle his
 legitimate "boss."

 _Second_──As the efficiency of the workmen depends to a great extent
 upon their loyalty to the management, and as that loyalty can be
 secured and maintained only by a spirit of justice and fair─dealing to
 all, including officials and workmen, all authority and responsibility
 should be sharply defined and properly limited, to the end that the
 business and work may proceed in an orderly and efficient manner; that
 all officials and workmen may know when they are within their proper
 limit of rights; and doing their duties without fear of overstepping
 their due bounds or interfering with the rights and privileges of
 their fellows.

Nearly all rules are subject to some exceptions, and the above have
theirs. The discipline of the shop, or what is sometimes referred to as
the _police regulations_, are expected to be enforced by _all officials
at all times_.

Two of these exceptions are of such a general nature and application
that they are here noted.

 _First_──Any official noticing an infraction of the discipline of the
 plant may call the attention of the employee offending, without regard
 to the department in which he works, and require him at once to cease
 violating the rules. But the official should, as soon as possible,
 report the matter to the head of the department in which the offending
 employee works.

 _Second_──Any official noticing work being wrongly done, or material
 wasted, or machinery obviously injured, or the safety of the workmen,
 the building, or the machinery endangered, may peremptorily order
 the action to cease, and at once report the fact to the head of the
 department or to the Superintendent, as he may judge proper.

[Illustration: Fig. 4. Form for Ordinary Official Communications. A
carbon copy is made on tinted paper.]

=Official Communications.= For ordinary communications other than
General or Special Orders, Production Orders, letters, etc., a written
form should be habitually used. The usual form is shown in Fig. 4.
These forms are put up in pads of alternate sheets of white and
light─tinted paper, the former being perforated at the top so as to be
readily torn out while the tinted sheet remains fast at the stub. Both
sheets are printed with the same form, and all are serially numbered
in pairs of one white and one tinted sheet. Carbon paper is used, the
white sheet being written upon and the tinted one receiving the carbon
impression. Each official is supplied with these pads, and by their use
he always retains a copy of any memorandum or communication he makes
to another official or department. The serial numbers are intended
to aid in the identification of any memorandum that may have become
somewhat illegible. The use of these blanks saves any misunderstanding
that might occur from giving and receiving verbal orders; and serves to
prevent errors and mistakes, and to fix the responsibility for their
occurrence upon the party in error.

=Successful Management.= The spirit of shop management should always
be a spirit of _leadership_. This cannot usually be obtained unless
the manager possesses natural ability as a leader. Successful military
chieftains are examples of this condition. They _lead_ the men instead
of _driving_ them, and the result is a condition of enthusiastic

It is also quite as necessary that a leader should be a practical man
with sound technical training and practical experience in the business
which he undertakes to manage. If he is not thus equipped for his
duties, the facts soon become apparent to his subordinates, and his
reputation suffers accordingly. The workmen lose confidence in his
leadership, and lack enthusiasm in the performance of their duties,
going about their work in a listless and perfunctory manner that is
very detrimental to the efficiency of the plant.

Still another quality necessary in the successful manager, is the
ability to judge men and their capacities for various duties. To
get always the right man for the position, the machine, or the job,
is a valuable trait in any man who is to direct the work of even
a moderate─sized establishment. The larger the plant and the more
diversified the business carried on in it, the more valuable and
indispensable this characteristic will become. The manager who is
continually or frequently changing his subordinate officials, and
consequently producing changes in the working force, will always find
his duties arduous, and will also find it well─nigh impossible to get
the plant up to the degree of efficiency that is to be reasonably
expected. The volume of output will continually fall below the normal
point, and the quality of the work will also deteriorate. The work
of management should be a constant upbuilding of the force, and of
development and education along the lines of advancement in the special
output of the concern. This cannot be carried on if the composition of
the force, or the officials who handle it, are in a transition state of
change, doubt, and uncertainty.

BRIDGE Chicago Bridge & Iron Works, Chicago, Ill.]

There is, on the part of many officials having charge of men, a
propensity to interfere too much with workmen and their work, and thus
to hinder rather than help them. While it is quite true that every
official from the Gang Boss up to the Factory Manager can, at various
times, help the workmen in their allotted tasks by timely advice and
suggestions, it is also true that this is a matter that can be easily
overdone, until it becomes an annoying nuisance and unnecessarily
interferes with the men in the discharge of their legitimate duties.

Workmen are quick to discern when suggestions and advice are well meant
and instructive, and when they come as a kind of veiled criticism.
The official who permits himself to indulge in this sort of dictation
soon falls into a practice of _nagging_ that is most exasperating to
the men. It is a practice that first weakens and then destroys the
official's influence with the men, who obey only from necessity. When
this condition exists, the working efficiency of the force is at a very
low ebb.

On the other hand, really helpful advice and suggestions, made in a
cheerful manner and from a quite apparent desire to assist workmen,
will usually meet with a quick and loyal response that argues well for
the efficiency of the workmen.

Another point on the road to success, is a patient and interested
listening to suggestions that workmen have to make, even though it is
on trivial matters. It should always be borne in mind that the workman
laboring day after day on the same class, and often on the same kind
of pieces, of work, is in a position to discern and to study out
many minor improvements in tools and methods which are valuable. A
kindly hearing accorded him, the adoption of such suggestions as are
practical, with some substantial reward for his study, will encourage
not only him but other workmen to study their work and endeavor to
find better and more efficient ways of doing it. Thus an active and
interested spirit of loyalty is brought about that is one of the most
valuable assets of the plant.

The successful manager is he who is enabled to _unite_ his working
force of subordinate officials and workmen in a complete and loyal
organization, all working for the common good and for the success and
prosperity of the concern. Having gained this condition, the question
of efficient and economical manufacturing is practically as well as
theoretically solved.


From the principles that have been advanced in connection with the
subjects of Manufacturing and Shop Management, it will be readily
seen that the work of the manufacturing plant of the present day is a
very complex matter, and there must necessarily be very complete and
carefully formulated plans and systems by which all its operations are
regulated, and a somewhat elaborate plan of records by which these
operations and their results are recorded and filed.

In formulating the necessary plans for the methods and records of a
manufacturing establishment, we must first determine the requirements
of the work and decide definitely on what we wish to accomplish. In
other words, the conditions must be first examined and analyzed, their
various factors studied at their true value, and the requirements
determined, so that a general plan of operations may be followed.

These methods shall cover the following subjects:

  1. The selection and employment of workmen.
  2. The methods of keeping the time of all employees.
  3. The manner of paying workmen.
  4. The ordering of work into the shops.
  5. The routine of passing work through the shops.
  6. The method of drawing stock and materials.
  7. The ways of keeping and issuing tools.

=Importance of Records.= Each of these methods will become a part of
the routine of the establishment, and the operations carried on under
it will be proper matters for regular records made from day to day.

Such records are exceedingly valuable as current information, and, when
properly filed, become quite as valuable for reference in the future as
for use in current operations.

In all improvements in the working routine of manufacturing operations,
there should be previous records by which the present performances may
be checked and compared. By this arrangement, it is comparatively easy
to ascertain whether or not any improvement is being made, and in what
direction it is being made. This knowledge will suggest further plans
and betterments. Should the records prove that there are losses rather
than gains being made, the warning is equally valuable, and we make
haste to better results and greater efficiency in the work.

Thus, whether the plans and methods in use are really successful, or
quite the reverse, it is of the utmost importance that we should know
by prompt and accurate records just what the results are, in order
to keep in close touch with the progress of events, and that, when
plans do not produce the favorable results expected and desired, the
information may be promptly available, the warning be heard, and plans
altered or amended until they bring about a successful routine in the
manufacturing operations.

=Selection and Employment of Workmen.= This is an important matter,
since it costs money to introduce new men in any business, and
requires from a day or two to several weeks for the new man to become
sufficiently accustomed to his work and surroundings to be of the same
value as the man who is perfectly familiar with the shop, the routine
and methods of work, and the foreman under whom he works.

[Illustration: Fig. 5. Application Card.]

It is therefore necessary to go about this matter in a methodical
manner, and to keep records of:

  (_a_) All persons making application for employment.
  (_b_) All persons regularly accepted as employees.
  (_c_) Individual records of all regular workmen.
  (_d_) All employees who leave the employment of the company.

To accomplish these results, the official whose duty it is to employ
men will fill out, or will have a clerk fill out, an _Application
Card_ of the form shown in Fig. 5, for each person applying for a
position. It will be noticed that it is important to know whether the
applicant has ever been employed in this establishment previous to the
present application. If so, his record can be readily referred to for
information as to the desirability of employing him again. It is also
necessary that the record of his last employer be known, and frequently
of the employer previous to the last, as these matters will also be
taken into consideration in determining his fitness for the position
for which he applies. It is also necessary to know how many years he
has been employed in manufacturing establishments, as this fact, taken
in consideration with his age, will frequently furnish information upon
which to base judgment as to his fitness.

[Illustration: Fig. 6. Employment Card.]

The Application Card, being on file, is available for the use of such
foremen or other officials as may be in need of workmen. Should the
applicant be decided to be available, after consultation between the
official to whom application was made and the foreman desiring to
increase his force, the applicant will be sent for, and employed at
a rate mutually satisfactory, and an _Employment Card_ of the form
shown in Fig. 6 filled out. This will repeat some of the information
contained on the Application Card; but it is necessary to have two
cards in any event, as the information must be filed in separate

The Employment Card will also give the name of the official employing
the man, as well as that of the foreman under whom he is to work, the
kind of work he is to perform, and when he is to commence work. It will
also require the approval of the Superintendent or Factory Manager, as
the case may be, to make it valid and operative.

The applicant having become one of the regular employees of the
concern, a third card is made out for filing in the _List of Employees_
drawer. This will be upon the form shown in Fig. 7, and is called a
_Service Card_. It will be noticed that each of these three cards is
headed with the name and address of the person whom it represents.

The Service Card gives the department in which the employee is to work,
the kind of work which he is to do, the date he begins work, and his
rate of pay. Spaces are also provided for noting the amount and date of
any increases in his rate, and for the record of a transfer to another
department should he be moved, as is frequently the case with new men
who may not be quite adaptable to the kind of work first attempted, but
entirely satisfactory at some other class of work.

[Illustration: Fig. 7. Service Card.]

A space is also provided for noting the date of the workman's leaving
the employ of the company, and also for giving the reason for it. This
will be valuable information in case the workman should subsequently
apply for employment. When an employee leaves the service of the
company, his Service Card is removed from the List of Employees drawer,
and placed in a fourth drawer labeled _Discharged or Quit_, being held
there for future reference.

=Individual Record of Standing.= In many well─conducted manufacturing
establishments, it is customary to keep a record of the standing of the
men as rated each month, as a valuable reference in cases of proposed
promotion, increases in pay, reliability for special work and positions
of responsibility. Various methods of marking the records of the men
each month have been tried, but the simplest method is to use the
number 100 for perfect, and to divide it as follows:

  Good workmanship                                  50
  Punctuality in reporting for work                 30
  Deportment during working hours                   20
              Total                                100

[Illustration: Fig. 8. Individual Record Card.]

Demerits are marked off as to workmanship, by the foreman, according to
his judgment aided by the Inspector's reports of the work done by the

Punctuality is judged by the number of times late, each instance
reducing the mark by one unit. As the workman enters the shop twice
a day, morning and afternoon, assuming 26 working days in the month,
a practical disregard of punctuality soon reduces his record in this
respect to zero.

Deportment is judged by the Foreman, who also takes into account
occasions on which the workman may have been reported for violating the
regulations in this respect.

A _Record Card_ is shown in Fig. 8, upon which monthly records are
kept. The total for any period, divided by the number of months covered
by the record, will give the percentage of a perfect record. This card
provides for a record for two years.

If it seems advisable to do so for special reasons, a similar card
may be formulated covering the six working days of the week. A year's
record in this form may be entered on a card 4 by 6 inches, by
arranging the horizontal and vertical ruling for that purpose.

Such a record may be profitably kept of the work of the office force,
as well as of the men in the shops. It will be valuable in many ways in
judging of the availability of the men for special work, as well as for

Necessarily such records should be very carefully kept; otherwise there
is liable to be serious injury done to the working reputation and
integrity, as well as reliability, of the men.

=The Employment Agent.= In large concerns, an official is regularly
appointed as an Employment Agent, and it is his duty to keep the office
and the shops supplied with competent men engaged at reasonable wages.
He must therefore keep in close and accurate touch with the labor
market, for the same reasons that the purchasing agent must know the
state of the market for material and supplies. He must know how and
where to reach workmen of the different classes whenever he is called
upon to furnish them.

While ordinary laborers may nearly always be obtained from the daily
applications made at the office, skilled men must be hunted up; and
it is not usually easy to find just the man with the qualifications

When men are wanted for positions above the average skilled workmen,
the best and most promising will be nearly always distributed among
the present employees who are deserving of advancement. To promote one
of them, rather than hire some man from outside the organization, is
usually good business policy. The man and his abilities are generally
well known, while a stranger is always an unknown quantity. The men,
being acquainted with the man, will be pleased to see him get the
deserved promotion; and it is always wise to consider the popularity of
proposed orders affecting the working force. The man himself will feel
his added responsibilities much more than an outside man will, and will
generally work harder to succeed in his new position. Therefore it is
always best to give the first chance to present employees who have been
faithful to the responsibilities thus far placed upon them.

It will be found that in most of the departments there are employees
who from one reason or another are doing work quite below their real
capacity, hoping that later on there may be better opportunities
for the coveted position. The Employment Agent should know the men
of the force, and their abilities, so as to take advantage of these
conditions. A man may be needed by a foreman in one department who is
not aware that in a neighboring department may be just the kind of man
he wants. The Employment Agent should know where to find the man at

Again, one department may, from the condition of the work, be short of
help, and may request the Employment Agent to hire a certain number of
men of certain qualifications and abilities. At the same time, there
may be another department in which there are more men than can be used
to advantage. An arrangement for the temporary or permanent transfer of
some of these men will be a great help to both departments, and will
have the added advantage of keeping good men permanently employed.

If a workman feels that his employment is permanent, and that there
are fair opportunities for advancement, this will be the surest way
to hold him faithful and loyal to the interests of the establishment;
and the conditions that bring about this condition of mind in him will
also draw other good men who will be glad to be counted as among those
faithful to a company which appreciates their services and which will
look to their interests as they consider those of their employers.
The result will be that these men will give their best services, and
even be on the alert to further the interests of the employer who has
favored them. Thus a strong working organization is built up, which
becomes one of the best and most valuable assets of the company.

=Time Keeping.= As cost of labor is usually greater than any other in
the manufacturing plant, and frequently greater than all other factors
in the cost of manufacturing, it is very important that the records
pertaining to this expense be properly planned and accurately kept.

Various methods have been adopted and used for this purpose. Some of
the more prominent plans will be given. They are each adapted to some
certain kind or class of work, and it will often be found that in
practice still different forms must be devised in order to meet the
existing conditions.

There are three methods of recording the time of employees──namely:

 1. By entering the time in a book or upon cards, by a Time─Keeper.

 2. By entering the time upon cards by the workman himself.

 3. By stamping the time upon cards by the workman in a time─recording

The first of these methods is the oldest form, and has now to a great
extent gone out of use.

[Illustration: Fig. 9. Pattern Shop Time Card.]

A large majority of the work of a manufacturing plant requires that the
time worked by the employees shall be registered twice. That is, one
entry shall be of the _day time_ (time paid for _by the day_), which
necessitates the recording of the total number of hours worked each
day; the second entry shall record the _job time_ (the time worked upon
the different jobs during the day). This second entry is sometimes
called _Time Distribution_, since the employee's time is distributed
over the different jobs upon which he has worked.

=Time─Card Forms.= This work is sometimes done by means of time cards
as shown in Figs. 9, 10, 11, and 12, which are given as characteristic
examples of these methods. These cards are of different tints as a
convenient method of recognizing them.

Fig. 9 is yellow, and is used in the Pattern Shop.

Fig. 10 is chocolate─colored, and is used in the Forge Shop.

Fig. 11 is blue, and is used by the Carpenters and Flask Makers.

Fig. 12 is white, and is used in the Machine Shop.

[Illustration: Fig. 10. Forge Shop Time Card.]

[Illustration: Fig. 11. Time Card for Carpenters and Flask Makers.]

Similar card forms may be devised for any other department of a plant,
or for the departments of plants doing entirely different work.

When these cards are used as a means of distributing the time to the
various jobs or orders in force in the shop, the _day time_, from which
the pay─roll is made up, is usually recorded on a strip of paper in
a time clock, the operation being performed by each employee as he
passes into the shop morning and afternoon, and when leaving at noon
and night. Passing to the clock, the workman swings a lever to his
individual number, and presses in a knob, whereby the exact time of the
operation is recorded upon a slip of paper, a ribbon, or a disc within
the clock.

[Illustration: Fig. 12. Machine Shop Time Card.]

In other forms of time clock, an individually numbered key is inserted
in one of the individually numbered holes, turned around, and
withdrawn. The time is recorded in a manner quite similar to that used
in the case just described above.

The four forms for time cards shown are quite similar, the difference
being in the list of operations given at the right─hand end of the card.

At the top of the card are spaces for the date, order number,
workman's number, and the number of the machine upon which he works
(provided the work is done on a machine). In the next space, the
name of the department is given. This is followed by spaces for the
_quantity_──that is, the number of pieces, feet, or inches of such
material as is designated in this way, or the number of pounds in
weight of the material. Then comes a brief description of the work.

Opposite each of these is a square in which the workman can indicate
the particular kind of work he has been doing, by marking an X.
Thus the form shown in Fig. 9 contains the following classes of
work──namely, Pattern Making, meaning new pattern work; Pattern
Repairs, referring to repairs charged to the job; Foundry Repairs,
or repairs to patterns or fixtures the expense of which is to be
charged to the Foundry Department; Equipment Repairs, referring to
pattern shop equipment; General Office, consisting of small jobs of
equipment and maintenance that are better done by a pattern maker than
by a carpenter; Drafting Room, similar new work and repairs, such as
drafting boards, angles, etc.; Tool Room, similar work chargeable to
this department, such as boxes or cases for special tools, and work not
entrusted to a carpenter.

Whatever may be the kind of work the employee is engaged upon, he
checks it as described; and after the words "Time Started," he notes
the hour and minute he begins work. When the job is completed, he notes
the time after the words "Time Stopped," The elapsed time, the rate,
and the value are filled in by the time clerk.

This card is turned in to the foreman or dropped in a box provided for
that purpose, it having been approved by the foreman of the department
in which the work is done. It then goes to the time clerk.

As each workman has a card for each different job and for each day,
it follows that all the job cards for a single day must aggregate the
same amount of time as that indicated on the stamped record within the
recording time clock. Discrepancies of this kind are investigated, and
the time distribution readjusted until satisfactory, the foreman of the
department usually being consulted in the case.

=Recording─Clock Time─Cards.= Recording time clocks are also made which
operate automatically to produce changes in the position of the card
dropped into a receptacle provided for the purpose, such, that when a
lever is manipulated, not only is the exact hour and minute stamped
upon the card, but it is stamped in its proper place upon the card so
as to correspond with the proper day of the week and also indicate
whether forenoon or afternoon. The horizontal changes of position are
made by hand, previous to manipulating the operating lever.

[Illustration: Fig. 13. Day Time Card.]

[Illustration: Fig. 14. Back of Day Time Card.]

[Illustration: Fig. 15. Job Time Card.]

A form for a regular Day Time card is shown in Fig. 13. The days of the
week are given, and each divided by horizontal lines into spaces for
forenoon and afternoon. Vertically the dividing lines divide spaces for
the time the workman comes IN, goes OUT, and for similar records for
lost time or overtime, as the case may be.

At the top of the card is the date, generally given as the last day
of the week for which time is made up. This is followed by the number
and name of the employee. Following the table prepared for the time
stampings, is a space for the total time, the rate, and the amount due
for the week.

The back of the card is shown in Fig. 14, and is plain except at the
top, which is printed in large and plain type "This Side Out," as
employees are liable to introduce the card with its face outward. For
convenience the employee's number and name are given on this side as
well as on the face.

By the above method of time recording, _all_ employees will use the
regular Day Time card. Such employees as work on the regular production
orders, and on work properly chargeable to them, will in addition to
the Day Time card use a Job Time card, of the form shown in Fig. 15.
This card is provided with spaces at the top for the order number,
date, employee's number, machine number, article or piece upon which
the work is being done, and the name of the operation that is being
performed. The body of the card has the same spaces for the recording
stampings. It will be noticed that the card shown in Fig. 13 runs from
Monday to Sunday, inclusive. This is the usual form, but in some shops
the fiscal week ends on different days of the week. In the job card
shown in Fig. 15, it ends on Thursday.

In the use of these job cards, a card is made out for each job or
order, without regard to the number of different jobs an employee may
have in a day. The aggregate of the time shown on all these cards for a
day must aggregate the amount shown on the day time card from which the
pay─roll is made up. Thus each card acts as a check on the other, and
accuracy is insured to a considerable degree.

When the work for which the job time is issued has been completed, and
the card receives its final stamping, it may be turned over to the
foreman, who will send it to the Time Clerk. This gives the foreman an
opportunity to look it over and correct any mistakes that may have been
made. In some shops the card is dropped into a box marked _Job Time
Cards──Completed_, whence it is gathered up with others, by the Time
Clerk. Coming into the possession of the Time Clerk, he will check it
up, together with such others as the workman may have used on the same
day, in order to ascertain if the total time on the job cards for the
day equals that shown on the day time card.

When the Time Clerk has compared the cards, he will send the job cards
to the Cost Clerk, who will enter the amounts in a _Job Time Summary_
book of the form shown in Fig. 16. On this blank, the number, name, and
rate of each man are written. The succeeding columns are headed with
the various current order numbers. Entries are made opposite the man's
name, of the pay─roll value of the time he has worked on the various
orders or jobs for the day. The total, carried out in the extreme
right─hand column, represents his pay for the day. The totals at the
bottom of the job columns represent the value of the time spent on each
order, for the day. The work is checked as correct when the sum of all
the totals of the right─hand column is exactly equal to the sum of all
the totals at the foot of the columns.

[Illustration: Fig. 16. Job Time Summary.]

Allis─Chalmers Company, Milwaukee, Wis.]

The entries in this book are made by quite young clerks, who handle
only these job cards and books as their daily tasks, and who become
very expert, accurate, and rapid at this work. The totals are carried
by the Cost Clerk or one of his assistants to the _cost ledger_, in
which the costs of both labor and material, as well as all expense
charges, are brought together. Sometimes this work is done upon cards,
each one representing an order and containing in brief and condensed
form all the charges of whatever kind made against the order.

=Methods of Paying Employees.= The methods by which pay─rolls are
made up and the employees paid, are important; and whatever plans are
adopted, they should realize the following desirable requirements:

 1. The record of amounts due the men should be absolutely accurate and
 in accordance with the rates at which the men were employed, subject
 (_a_) to such modifications as may be made by reason of properly
 authorized changes in rate; (_b_) to such modifications as may be made
 from week to week by overtime work, or by the operation of methods
 of "piece work," "premium work," or any of the several plans for
 rewarding exceptionally efficient work; (_c_) to such deductions as
 may properly be made on account of advance payments that have been
 made upon due authority.

 2. The methods of making up the pay─roll and paying the men should
 secure promptness in this work, so that the pay of the employees
 may not be held back for an unreasonable length of time pending the
 necessary clerical work.

 3. The methods of payment should be such that no workman can know the
 amount paid to any other workman.

To accomplish the results desired in the first requirement, if the
amounts due the men are made up from the time recorded by the men
themselves──that is, in a recording clock──is a comparatively easy
task, since it is principally a matter of mathematics, with a strict
attention to details.

Changes in rate of pay do not usually take effect until the week
following that in which the order is given. This order will be in the
form of a request by the foreman of the department in which the workman
is employed, stating the reasons for the increase. This is sent to the
Superintendent or Factory Manager for approval. If approved it is then
sent to the Pay Clerk, who files the notice for future reference and
makes the required change on his pay─roll.

Premium work rates will be made up by the foremen of the departments,
and approved by the Superintendent, in smaller shops. In large plants
the rates will be made up by a clerk in the Production Department, and
approved by the Production Engineer. In either case they will be sent
directly to the Pay Clerk.

Advances to men will be made only in special cases, upon a written
request from the foreman, stating the reasons and approved by the

The second requirement can be met by having the time cards of the
style used in recording clocks (as shown in Figs. 13,14, and 15).
The convenience and rapidity of making up the time of these cards is
apparent from the fact that the record of the entire week is contained
upon the face of one day time card, lost time being checked only in red
ink in the total column at the right, and the sum of the amounts of
lost time being subtracted from the regular working time for the week
Thus, if the working time is 55 hours per week, and the lost time was
½ hour one day and ¼ hour another, making ¾ hour, we subtract
that from 55, leaving 54¼ hours as the time for the week. This is
much more rapidly done than to carry out the total time for each day
and add up these totals for the six days of the week.

The _Pay─Roll Sheet_ or _Pay─Roll Book_ is shown in Fig. 17. This is
now frequently made as a loose sheet or such number of sheets as may
be necessary to contain all the names, frequently as many as 50 names
on the sheet. Upon examination of this printed form, it will be seen
that the regular time is divided into _productive_ and _non─productive_
labor. This is for the purpose of ascertaining what portion of the
labor is applied directly upon the product, and what portion is applied
indirectly, such as foreman, clerks, general laborers, etc., whose work
is classed as non─productive.

The amount of the regular time is computed, and entered in the column
headed _Amount_. If there is an amount due in premiums, it is entered
in the next column, and the two amounts added in the column headed
_Total Amount_. In the next column is entered the amount of any
advances that may have been made, which is deducted from the total
amount, leaving the net _Amount Due_, which is entered in the next
column. This amount is paid over to the employee, who signs his name in
the space under _By whom received_, and the operation is complete. The
men's numbers are placed at the extreme left hand and right hand of the
form as a matter of convenience in rapidly handling the work of paying

[Illustration: Fig. 17. Pay─Roll Sheet.]

When the pay─roll has been completely made up, it is submitted to the
Superintendent, who certifies as to its being a correct list of men
actually employed, and to the rates of the different men. It is then
submitted to the Factory Manager for approval. After the amounts due
the men are actually paid and receipted for, the Treasurer certifies
the fact, and the pay─roll becomes a voucher for the amount represented
on the roll.

=Giving Orders for Manufacturing Work.= As ordinarily considered,
orders are of two general classes, namely:

 1. _Production Orders_, by which the production departments are set to
 work manufacturing some regular or special product which is to be sold
 to customers.

 2. _Plant Orders._ These orders relate to the repairs and maintenance
 of the grounds, buildings, and equipment of the plant, and to new
 additions to and alterations of the same.

Both of these classes originate with the Factory Manager, who receives
instructions as to all important orders from the General Manager of
the company, who will authorize and keep in touch, not only with
the production of the plant, but in a general way with all changes,
improvements, and maintenance expenses of the establishment.

[Illustration: Fig. 18. Production Order.]

=Production Orders.= Fig. 18 shows the form of a regular production
order. This card or blank is made of such dimensions as the kind
of manufacturing business to which it pertains may require. It is
customary to use a card 4 by 6 inches; but if such is to be written
upon the central space in order to describe the work properly, it
should be somewhat larger. The principal features of this form are
spaces for the title of the card, the order number, and date. At the
bottom is given the date when the work is expected to be completed,
and the date of its actual completion. These dates are important as a
matter of reference in considering the promptness and efficiency of the
departments where the work has been done.

The work to be done is briefly described in the central portion,
together with such references to sets of drawings, etc., as may be
necessary to render the terms of the order indisputably certain. This
order is signed by the Factory Manager and sent to the Superintendent.
In a large concern it is sent to the Superintendent of Production or
the Production Engineer, according to the particular manner of the
organization of the official force.

[Illustration: Fig. 19. Sub─Production Order.]

In any event the order is turned over to the official having charge of
production, who will make out _Sub─Production_ orders (Fig. 19) for
each department in which the particular work described upon the orders
is to be done. A time limit is given for the completion of the work,
and a space provided for the actual date of completion. They are not
signed when issued, but are dated and signed by the foreman when the
work is completed.

=Plant Orders.= As has been described, plant orders are those necessary
for the changes, improvements, and maintenance of the plant and
equipment. In some establishments there are two series of orders,
namely: (_a_) those for improvements and maintenance of the _plant_
proper──that is, grounds and buildings; and (_b_) improvements and
maintenance of _equipment_. This is a very proper and natural division.
These accounts may be subdivided to a very great extent, but not with
corresponding value.

[Illustration: Fig. 20. Plant Order.]

Plant orders are usually issued by the Superintendent (or General
Superintendent, in a large plant), and are returnable to him, as will
be seen upon reference to the form shown in Fig. 20. This order is
usually directed to a certain department. If more than one department
is involved in the work, a separate order is issued to each. The
general form of the order is the same as in the two preceding ones, the
instructions being changed to suit the nature of the case.

On the back of this order is a form for entering the cost of material
and labor, as shown in Fig. 21. The dates upon which each item (or
group of items) of material is furnished, are given, as are also the
dates for the various items of labor, although the work of an entire
week may be entered upon a single line. On the second half of the card,
space is provided for the totals of both material and labor cost;
also such general expenses in the form of a percentage or such other
apportionment as may be authorized, are entered.

[Illustration: Fig. 21. Back of Plant Order Shown in Fig. 20. For
entering cost of material and labor.]

By this method the order for the work, and a summary of the expense of
executing the order, are contained upon the same card, which is very
convenient for future reference and comparison.

=Storing and Issuing Stock and Materials.= The orders having been put
in force in the shop, the next step is to obtain the necessary material
or stock with which to do the work.

All purchased stock, material, and stores are turned over to the
General Storekeeper, whose duty it is to classify them, store them
properly, and issue them only on properly authorized requisitions. A
large portion of his stock he obtains by making requisitions upon the
Purchasing Agent.

To account properly for the receipts and issues of this stock so as
always to have on hand what is wanted, and at the same time to avoid
carrying an unnecessarily large stock of any of the articles in store,
he uses a _Stock Ledger Card_ of the form shown in Fig. 22. This gives
the name of the article listed, and its dimensions, weight, etc. At the
right of this are entered the maximum and the minimum quantities to
be kept in stock. Whenever the stock on hand is reduced to near the
minimum quantity, the Purchasing Agent is requested to order enough
more to bring the quantity up to the maximum.

[Illustration: Fig. 22. Stock Ledger Card. Same form is printed also on
back of card.]

[Illustration: Fig. 23. Form of Requisition. Carbon copies of the
entries are made on the Invoice form, Fig. 24.]

In making requisitions upon the Purchasing Agent, the Storekeeper must
take into consideration the length of time necessary to obtain the
article wanted. Wire nails, wood screws, and such articles can usually
be obtained in 24 hours, while brass tubing may take three weeks. Iron
castings can be had in two days, while steel castings will frequently
require six weeks.

When articles are _received in stores_, the date and quantity will
be entered under the heading _Received_, and other quantities added
to these as received. Articles issued will be charged under the
heading _Issued_, giving the date and amount. The quantity on hand
may be quickly ascertained by adding the quantities received and the
quantities issued, and subtracting the sum of the issues from the sum
of the receipts.

[Illustration: Fig. 24. Form of Invoice. Entries are made by means of
carbon paper, duplicating those made on the Requisition form, Fig. 23.]

As most articles are purchased in considerable quantities and issued in
small lots, there will be few entries of receipts and a large number of
entries of issues; therefore the greater portion of the card is devoted
to records of issues. The card is printed with the same form on both
sides; and when the spaces on the first side are filled, the account is
balanced, and the results carried to the opposite side.

These cards are kept in filing drawers, where they are located in
alphabetical order by the names of the articles they represent.

A foreman, on receipt of a regularly numbered and authorized
production order or sub─production order, is thereby authorized to
make requisition for such stock and material as may be necessary to
use in the execution of the order. This he will do by the use of the
_Requisition_ shown in Fig. 23, entering the order number and date, and
specifying the quantities and descriptions of the articles required.
Ordinarily each requisition will contain but one article or class of
articles. At the bottom of the requisition, the foreman will enter the
name of his department and his own signature.

These requisition blanks are made up in pads (the form shown in Fig.
23), of white paper alternating with tinted paper on which is the
_Invoice_ form shown in Fig. 24. This latter form has its ruling and
other principal features identical with the form of the requisition, so
that by the use of carbon paper the foreman makes a duplicate on the
Invoice blank, of the order number and date, the articles required, the
name of his department, and his own signature.

[Illustration: Fig. 25. Returned Material Card.]

When the Storekeeper issues the articles, he first enters upon the
requisition blank the date issued, and then passes it to his assistant,
who notes the issue on the _Stock Ledger Card_, and then places it on
file. The Storekeeper will enter on the invoice the rate and value of
the articles issued, and the date of issue, and will sign it under the
foreman's signature. He will send it, with the articles issued, to the
foreman, who will in turn make it a part of his report of material used.

When the work on an order is completed, such serviceable stock and
material as may remain will be returned to the Storekeeper, together
with a _Returned Material Card_ of the form shown in Fig. 25. The
Storekeeper will enter upon it the value of the material returned,
credit it to the department from which it came, and sign the receipt
in the lower left─hand corner. The card will then be returned to the
foreman as his authority for deducting the amount from the material
account in the order in question.

=Follow─Up Methods for Tracing Orders in the Shop.= The Sub─Production
orders having been put into the departments, the first one will
order the material for starting the work. For instance, the first
step may be upon iron castings. Theoretically all stock and material
come from the Store─Room. Therefore we might say that upon a strict
construction of this general rule the castings should be furnished by
the Foundry and sent to the Store─Room, from which they might be drawn
upon requisitions the same as any other material. Practically this
would be not only a troublesome but an expensive method, requiring a
great deal of unnecessary handling and transportation. The problem
is much more practically solved by considering the Foundry as one of
the manufacturing departments receiving its raw material (namely, pig
iron) through storeroom accounts, and thus "constructively" from the
storeroom, while physically it is in the foundry yard. This answers the
demands of a theoretical as well as a practical view of the case.

Therefore the first sub─production order will go to the iron foundry,
which will make the castings and deliver them to such departments as
are required to do the first work upon them, as directed upon the
order. The sub─production order which this department has received,
directs to what department they shall be sent when completed; and so
on, until they have gone through the last department and are sent to
the Finished Parts Store─Room.

This arrangement is all right as far as it goes. If every man attended
strictly to his business and pushed work along as rapidly as possible,
and every foreman sent his work along to the next department as soon as
his department had completed its work, this plan _might_ work fairly
well. Unfortunately, however, these conditions seldom or never exist;
and there must be ways and means devised to keep the work moving and
to be able to _trace_ and _locate_ the work upon any order at any time
when information is desired upon it or its state of progress.

To accomplish this, there is a _Transfer Office_, located as
conveniently as may be for all departments, and serving as a sort of
"clearing house" for all departments in transacting inter─departmental
business so far as it relates to the transfer of the work in progress.
By this method, departments send all their work by way of the Transfer
Office, where proper records are kept of all such transfers, so that at
any moment the Transfer Clerk can locate any piece of work in progress
in the plant.

[Illustration: Fig. 26. Transfer Card.]

The operation of this method is as follows: The sub─production orders
are sent to the Transfer Clerk, who fills out two _Transfer Cards_, as
shown in Fig. 26, one of which he sends with the order to the first
department that is to do work on the order, and the other he retains.
This card provides spaces for the various departments, which are
designated by numbers. Following these are spaces for entering the
dates of transfers, the entries being made with a rubber stamp. After
these spaces are columns for the number of pieces of work received and
the number of pieces delivered.

When the first department has finished its work, the number of pieces
is entered in the column headed _Pieces Delivered_, and the work and
the card sent to the Transfer Office. The duplicate transfer card
that was retained by the Transfer Clerk was filed in a compartment
in a _Transfer Case_ corresponding to the department where the work
began. He stamps the date of transfer on both cards, entering the
number of pieces on his own, and sends the work on its way to the next
department, together with the transfer card. His own card he removes
from the compartment representing the first department, and places it
in a compartment representing the department to which he has now sent
the work.

Subsequent transfers are made in the same manner, small lots of work
actually being sent to the Transfer Office, but large lots or heavy and
bulky work being sent directly from one department to the next, but
under the personal direction of the Transfer Clerk or his assistant.

When the parts are completed and ready for inspection, the Inspector is
notified; and upon inspecting the parts previous to their being sent to
the Finished Parts Store─Room, he enters the results of his work in the
space at the bottom of the card that has accompanied the work in its
progress through the departments.

[Illustration: Fig. 27. Transfer Clerk's Card Tray.]

The Transfer Clerk's _card tray_ is shown in Fig. 27, and is made
with compartments of sufficient dimensions to hold the number of
cards expected to be on file in any one department at the same time.
The cards are filed in numerical order. In a large concern the usual
card─index method of guide cards is used, so as to render the work of
finding the right card when wanted, easy and expeditious.

=Tool─Room Methods.= A large number of small tools such as drills,
taps, reamers, and the like, and also numerous jigs and fixtures of
various kinds, are drawn daily from the Tool Room and returned there
after being used. The problem of keeping track of these valuable tools,
of knowing where to locate every tool that has been issued, and getting
them back promptly after they have been used, is an important one.

The simplest method of doing this is by the use of small brass checks
bearing the individual numbers of the men. For this purpose a _Tool
Check Board_, as shown in Fig. 28, is provided. This is lined off
in small square or oblong spaces, the number of spaces equaling or
somewhat exceeding the number of men employed in the departments served
by the Tool Room. At the top of each of these spaces is the name of
one of the men; and beneath the name two pins project about an inch
from the face of the board. Under each pin is the man's individual
number. Two forms of brass checks are used, a circular disc of ⅞ inch
diameter, and a rectangular one ½ inch by 1¼ inches. Each check
has a hole by which it may be hung on the pins, and each bears the
individual number of the man, the checks being used in pairs of one
circular and one rectangular check.

[Illustration: Fig. 28. Tool Check Board.]

All tools are kept upon shelves, divided for individual tools or, in
some similar manner; and in front of each tool is a pin similar to
those on the board, upon which checks may be hung.

The operation of this method is as follows: the circular checks (there
are usually twelve of them) are issued to the men of corresponding
numbers. The rectangular checks are held upon the left─hand pins under
the men's names. When a man goes to the Tool Room for a tool, or
sends a boy for one, he presents one of his circular checks. This the
Tool Keeper hangs on the right─hand pin under the man's name. He also
removes one of the twelve rectangular checks, and hangs it on the pin
in front of the space from which the tool was taken. If the workman
sends for another tool, another circular check is added to the first
one, and another rectangular check removed from the board.

It will be seen that there must always be twelve checks on the board
under each name, counting both rectangular and circular ones. The
absence of a tool from a shelf is accounted for by the rectangular
check hung on the pin in place of it, and the number of this check
shows what man has the tool. The number of circular checks on the board
shows how many tools each man has in his possession.

The result of this method is that tools can be issued and taken back
very rapidly; and accurate and positive records are very quickly made,
without the use of a book, card, slip, or writing of any kind.

At the end of the week, _all_ tools are turned in to the Tool Room,
thus enabling the Tool Keeper to check them up and rectify any possible
errors that may have been made during the preceding week. On Monday
morning, such tools as are needed are re─issued.



=Definition.= Cost─Analysis Engineering is that branch of Engineering
which has for its object the analysis of costs of construction or of
operation, with a view to effecting a greater economy of production,
and with a view to securing accuracy in estimating the probable cost of
projected structures or operations.

=The Modern Manager a Cost─Analysis Engineer.= It takes few men to
design machines and structures, but it takes many men to superintend
their operation. Therefore the great field of activity for the engineer
of the future is in the field of operation rather than of design.

Until very recent years, engineers have rested satisfied with being
designers of labor─saving appliances. Now, however, they are beginning
to assume the broader and more profitable function of operating
the plants which their brains have created. To handle the ordinary
industrial enterprise successfully, involves:

 _First_, the application of engineering ability in selecting and
 improving the machines used;

 _Second_, managerial ability in organizing the workmen, and in
 stimulating them to produce a large output economically;

 _Third_, advertising ability to sell the product.

The man who combines in himself the maximum sum of these three
abilities is the man best adapted to succeed as the executive of an
industrial enterprise. Since the introduction of systems of cost
analysis and unit─payments for work done, engineers have become best
qualified to act as managers of manufacturing plants. We include
contracting and railroading among manufacturing industries, for the
contractor manufactures structures, and the railroader manufactures

Before cost analysis had been developed to its present stage of
excellence, the successful manager of men was usually one who had
relied upon his lynx eyes and his knowledge of the weaknesses of human
nature. He was often a man who owed his success largely to the fear he
could inspire in his subordinates. He was domineering; he held his men
to their tasks; he was, indeed, an industrial captain; and he used
army discipline. He regarded every worker as a thief who would not
hesitate at petty larceny of time, even in the face of the foreman, and
who delighted in grand larceny behind his back. His foremen were his
spies; and he set himself to spy upon his foremen. But cost─analysis
engineering is evolving a wholly different class of managers and

To most people, a cost─keeping system means nothing but a sort of
bookkeeping; and they are unable to understand how a bookkeeper can
develop into a successful manager. But the truth is that modern cost
keeping involves cost analysis, and cost analysis involves a study
and comparison of methods and machines, and such a study leads to
improvements and to commercial success.

Cost keeping, in the sense that we use the term, has for its main
object the determination of the efficiency of men. A proper system of
cost keeping tells you daily what each workman or each gang of workmen
has accomplished. It is better than a foreman, for it cannot "stand in"
with the men. It is better than a foreman, for it costs you less and it
tells you more. A cost─keeping system tells you who are your good men,
and who are your lazy men. It shows you whom to discharge, and whom to
promote. It tells you whose wages are too high, and whose are not high
enough. And, finally, it leads to that ideal condition of industrial
organization known as _profit─sharing_. How often have we read in
novels of Utopia, where all men share in the profits of all business;
and how often have we smiled with incredulity at the prospect? Yet
Utopia is right here in America, in spots; and it is a Utopia far more
rational than that of the dreamers. There are many firms that pay
their men on a unit─price or bonus system. This is profit─sharing, and
it is a profit─sharing begotten by the use of cost─keeping systems;
for, when a manager has learned by cost keeping that certain men or
groups of men produce more than others, he soon perceives the advantage
of stimulating them to further use of brain and muscle by paying
them either a bonus for each unit produced in excess of a prescribed
minimum, or a unit─price for each piece of work performed. The men
invariably respond to this stimulus, and often in a remarkable degree.
It is nothing unusual for a man to increase his output 50 per cent
upon the introduction of a bonus system of payment; and there are
many instances of increase amounting to 200 per cent. Each man then
becomes a contractor, and works with the zeal of a contractor, for his
earnings increase as his energy and ability increase. This is practical
profit─sharing that any workman can understand. It is not something
vague and intangible, like 5 per cent per annum. It is something very
real and immediate, for a man can feel it in the pay envelope at the
end of every week.

Cost keeping, then, leads to better management, although dispensing
largely with submanagers. It substitutes the record card for the "big
stick," yet the record card itself is the biggest stick ever devised.

=The Science of Management.= The managing of industrial enterprises is
still more or less of an art; but the art is fast passing through the
period of evolution that produces a science. There are, unquestionably,
certain underlying principles of management which can be summarized
into rules or laws. These rules or laws constitute the science of
management, and it is our purpose to present certain of the more
important laws of management.

=Individual Incentive.= When a group of men undertake to do a certain
piece of work, such as shoveling earth into a wagon, the tendency is
for each man to do as little as his neighbor. The inevitable result
is that the shovels move with rhythmic precision, and the slowest man
becomes the pacemaker for the rest. If any one of the men is ambitious
to do a larger day's work, he is deterred by the knowledge that his
employer will never know that it is he to whom the credit is due for a
larger output. Then, too, the other men are apt to upbraid an ambitious
man, and urge him not to set a "bad example" by working fast. To offset
this tendency to fall to the lowest level of efficiency, employers have
placed foremen over their employees, the duty of these foremen being
to accelerate the motions of the men in any way possible. Each foreman
has an _individual incentive_ to get work done economically, for his
employer studies the total amount of work done by the gang under the
foreman, and rewards or punishes the foreman accordingly, the reward
usually consisting of praise and an increase in salary. But the workmen
under such a foreman have no _individual incentive_, and they will
shirk their tasks as far as possible. Clearly, then, the first law of
management is to create an _individual incentive_ for every employee to
do his best.

=Creating Individual Incentive in a Gang.= There are, and always will
be, certain kinds of work that must be performed by a group of men
working together, or, as we shall call it, a _gang_ of men. When
this is the case, the first step to be taken is to devise a method of
readily and accurately measuring the work performed _each day_──not
each week or each month──by the gang. The next step is to notify the
men that, for all work performed daily in excess of a specified number
of units of work, a bonus or premium will be paid for each excess unit.
Of this bonus, the foreman will get a specified percentage, and the
men will divide the rest among themselves. Thus a powerful individual
incentive is created. It is true that certain men in the gang will
remain less efficient than certain others, but the general average
output will be greatly increased. The foreman himself will have enough
incentive to see to it that the lazy or inefficient workmen in the
gang are discharged, for it will no longer pay him to play the part of
indulgence for the sake of being "a good fellow."

=Devising Ways of Dispensing with Gang Work.= Simply because it has
always been the custom to do certain classes of work by gangs, should
not deter a manager from endeavoring to devise a way of splitting
the gang up into individual units. Indeed, it should be self─evident
that if the creating of individual incentive is the fundamental law
of management, a great amount of study may profitably be devoted to
increasing individual incentive by doing away with gang work entirely.
To illustrate, let us assume that 12 men are engaged in shoveling
earth into wagons, working in two gangs of 6 men, with one foreman
supervising the 12. If a sufficient number of teams and wagons are
used, there will always be 2 wagons in the pit being loaded, and 6 men
shoveling into each wagon. As fast as a wagon is loaded, it pulls out,
and an empty one takes its place. If a manager is told that he can do
away with this system of gang work, he will usually reply that it is
impossible. Nevertheless, it is possible to reduce this gang work to
individual work in most instances, as follows:

Instead of having 2 wagons and teams in the pit all the time, have 6
wagons without teams──6 empty wagons. Assign two men to each wagon.
Provide a dividing board between the sides of each wagon, running
either longitudinally or cross─wise, so that each man has his definite
half of the wagon to fill. Then pair the men off according to their
respective abilities, putting the two best men on one wagon, the two
next best on another wagon, and so on. When a team brings an empty
wagon into the pit, let it be unhooked from the empty wagon and hooked
to a loaded wagon, thus saving team time, which would otherwise be
consumed in waiting for the wagon to be loaded.

It is possible to give many illustrations of this sort, but not
desirable, for our object is to indicate the laws that should
be applied, rather than to solve specific problems. The student
of cost─analysis engineering will derive his greatest stimulus
from applying the laws to specific cases that come under his own

=Prompt Reward.= Most men believe in Heaven, and many believe in Hell;
but few are greatly affected in their action by the hope of the one
or the fear of the other. Any reward or punishment that is remote
in the time of its application, has a relatively faint influence in
determining the average man's conduct. To be most effective, the reward
or punishment must follow swiftly upon the act. Hence a managerial
policy that may be otherwise good is likely to fail if there is not a
prompt reward for excellence. All profit─sharing systems have failed,
principally because of failure to recognize the necessity of prompt
reward, as well as because of failure to recognize the necessity of
individual incentive. The lower the scale of intelligence, the more
prompt should be the reward. A common laborer should receive at least
a statement of what he has earned every day. If, in the morning, he
receives a card stating that he earned $2.10 the previous day, he will
go at his task with a vim, hoping to do better. But if he does not know
what he has earned until the end of a week, his imagination is not apt
to be vivid enough to spur him to do his best.

One contractor, known to the authors, has a large blackboard on which
the hourly record of his brickmasons is chalked up. He has found
that this constant record of where they stand in the day's race is a
splendid stimulus.

=Sufficient Reward.= When a man produces more than has been his custom,
he feels entitled to a very large percentage of his increased output.
His sense of justice is keen on this matter, and rightly so. It is true
that he is not entitled to all the increase, for his employer may have
provided him with machines or tools of a better kind, for which payment
must ultimately be made. Moreover, more rapid work with any machine
means more rapid wearing─out of its parts, and a consequent expense to
the employer. Finally, the employer who has used his brains to devise
ways of increasing the output of the employees is entitled to a very
substantial reward. No one begrudges Thomas Edison his wealth. He has
earned it by virtue of his inventions. In like manner, every man should
be richly rewarded for every labor─saving machine or method which he
creates or which he applies. However, employers are prone to try to
take too large a part of the profit effected by an introduction of a
system of unit─payment for work done.

Mr. Fred W. Taylor says that a workman should receive 30 to 100 per
cent increase in wages upon the introduction of a piece─rate or
bonus system of payment. Mr. Halsey says that the workman should
receive one─third of increased value of his product resulting from an
application of the bonus or premium system of payment. But the fact
is that the employer should share liberally with his men; and, in the
long run, the competition of other employers who are bidding for the
services of workmen will force wages up to a point where the workman
secures all but a very moderate percentage of the value of his daily

=Educational Supervision.= As previously stated, the old type of
foreman mingles the functions of a spy with the functions of a
mule─driver. The higher we go in the scale of human intelligence,
however, the more noticeable is the fact that _the supervisors are
teachers of the men they supervise_. These supervisors, foremen,
managers──call them what you may──have learned that it pays
better to spend time in training their men than to spend time in
tongue─thrashing. Only of late years has it been discovered that
systematic training of the least intelligent of workmen pays equally
as well as the training of the most intelligent. The manager who
recognizes the necessity of educational supervision, undertakes,
first, a careful time study of each class of work. Then he analyzes
the results, and deduces methods of securing greater economy.
Having evolved a method of procedure, he reduces it to writing, and
furnishes his foremen with detailed written or printed instructions
to be followed, or, where the workmen are intelligent enough, the
instructions are given to them directly; otherwise it is the function
of the foreman to instruct the workmen.

=Divorce of Planning from Performance.= We have just spoken of the
education of the workmen by the manager; but, before such education is
possible, the manager must educate himself. In brief, he must study
the problem and plan its most economic solution. According to the
old─style method of management, each foreman was left largely to his
own resources in planning methods, and, added to this duty, he had
several other duties to perform, such as "pounding the men on the back"
when lazy, seeing that materials were promptly supplied, employing and
discharging men, looking after the condition of machines, etc. This
multiplicity of duties can be properly performed, only by a foreman
possessed of a multiplicity of talents. Since few foremen can comply
with such a specification for brains, it follows that good foremen of
the old style are rare indeed. The modern system of management consists
in taking away from the foreman the function of planning the work, and
in providing a department that does all the planning. This planning
department should be under the supervision of the Cost─Analysis
Engineer, for it is he and his assistants who, by unit─timing of work
and by cost keeping, are best able to ascertain what methods should be
applied to get the most economic results. Having planned a method, the
Cost─Analysis Engineer delegates its pursuance to one or more foremen.

=Subdivision of Duties.= The previous rule of action comes under
another, still more general in character──namely, the law of the
_subdivision of duties_. Men are gifted with faculties and muscles that
are extremely variable. One man will excel at running a rock drill,
another at keeping time, another at surveying, and so on. It is clear,
therefore, that the fewer the duties that any one man has to perform,
the easier it is to find men who can perform the task well. But give a
man many duties to perform, and he is almost certain to do poorly in
at least one respect, if not in several. One foreman may have a great
knack at "keeping an eye on" machinery, and in having few break─downs
and delays. Then it is the part of wisdom to burden him with no other
duties, unless the magnitude of the work does not warrant dividing
the duties among two or more men. Let him be the _machinery and tool
foreman_, reporting directly to the Cost─Analysis Engineer, and
subordinate to no other foreman.

Another foreman may have a special knack at teaching workmen how to use
tools and machines. Let him have no other duty but to see that the men
have the proper tools, get them promptly, and use them properly. Let
him be the _gang foreman_.

According to the magnitude of the work, there may be different kinds
of foremen, all coming in contact with the same men, perhaps, but each
performing different functions.

=Limitations of Military Organization.= Most industrial organizations
to─day resemble military organizations, with their generals and
intermediate officers, down to sergeants, each man reporting to but one
man higher in rank. There is little doubt that the present tendency in
industrial organizations is to abandon the military system to a very
large extent, and for the following reasons:

A soldier has certain duties to perform, few in number, and simple in
kind. Hence the man directly in command can control the actions of
his subordinates easily and effectively. Control, moreover, should
come invariably from the same officer, to avoid any possibility of
disastrous confusion, and _to insure the instant action of a body of
men as one single mass_.

On the other hand, industrial operations do not possess the same
simplicity, particularly where men are using machines; nor is
there the necessity of action in mass. The military organization,
therefore, should be modified to suit the conditions; and one of these
modifications is the introduction of two or more foremen in charge
of certain functions or duties of the same men or groups of men, as
explained in the paragraph on _Subdivision of Duties_.

=Opposition to Change.= All men have a certain mental inertia which
makes them resist any change of their methods and habits. Foremen are
particularly resistant to change, because of their custom of giving
orders more frequently than receiving orders. Hence the Cost─Analysis
Engineer who is trying to introduce modern methods is sure to meet with
violent opposition from foremen; and the older the foreman, the more
violent the opposition. When the Cost─Analysis Engineer introduces
a new method, he must personally attend to every detail, or it will
surely "go wrong." The old foreman will see to it that it does "go
wrong," just to show that the "new─fangled ideas" are worthless.

Opposition may also develop among labor unions, particularly if it is
proposed to pay on the piece─rate plan──that is, to pay so and so much
for each unit of work performed. The bonus plan and the premium plan
(to be described later) are schemes to overcome this opposition to the
piece─rate plan, but in essence they are all the same.

No manager of men can attain great success unless he has grit enough
and tact enough to overcome the opposition to change which he will
encounter from all quarters. If he realizes in advance that such
opposition is as certain to manifest itself as it is certain that it
takes power to change the direction or speed of motion of a heavy
body, he will have possessed himself of one of the laws of successful

A man cannot impart motion to a very heavy rock by violent impact of
his own body against it; but he can separate it into fragments, and
move each fragment by itself. In like manner, no attempt should be
made to change all the methods of an industrial organization at one
stroke. Separate it into elements, and take one element at a time,
beginning with the simplest. Apply your cost─keeping system to that
element──it may be only the hauling of materials with teams──and effect
the change desired. Then take another element of the organization, and
apply the system to it. Continue thus, fragment by fragment, and you
will overcome the opposition that would otherwise resist your greatest

=Respect Your Own Ability.= One of the most common mistakes made by
managers lies in assuming that a skilled workman necessarily knows
better how to perform work than does the manager himself. A manager
should first aim to familiarize himself with the methods used by the
best workmen, and then, by an itemized time study, he should set his
own wits to work to improve the methods. Workmen, for the most part,
do their work just as robins build their nests──by the pattern of
precedent. They put little or no brains into improving the process,
because it usually means no money in their pockets to effect an
improvement, and because they reason that an improvement that effects
a saving in time may actually result in the discharge of some of their
fellow workmen. It should be a cardinal law of management to give very
little weight to the claims that workmen make as to their own skill or
knowledge; and the same holds true as to foremen. Because a man has
blasted rock for twenty years, should not make his opinion of such
force as to prevent a manager from undertaking to show that man how to
do rock─blasting more economically. We have frequently effected great
economies in rock─blasting after a time study occupying fewer weeks
than the blaster had occupied of years in the same sort of work. The
trained mind of the Cost─Analysis Engineer enables him to analyze costs
and methods, and to develop improvements which no amount of so─called
"practical experience" can effect.

Weigh carefully every _reason_ against any proposed change in method,
and act accordingly; but pay no attention whatsoever to predictions of
failure that are bare of reasons. Do not be influenced even by many
positive statements that your proposed method has been tried and has
failed; for its failure may have been purposely brought about, or some
small condition essential to its success may have been absent.

Therefore, respect your own ability. The manager who cannot improve
upon methods used by his men is not fit to manage.

=Profit Does Not Mean Excellence.= Many a manager points to the profits
of his business as the profit of his ability. He forgets that to a
plainsman a small hill looks like a mountain. The general level of
mediocrity makes such managers fancy that they are quite extraordinary
if their business shows a large profit.

The Cost─Analysis Engineer can frequently take a profitable business
and convert it into a wealth─producer beyond all dreams of the ordinary
self─satisfied manager. Nor should the Cost─Analysis Engineer himself
grow satisfied. _There is positively no limit to the economies in
production which may be effected by the human brain._

=The Human Engine.= The human body is an engine, or rather a boiler
and engine combined. Its fuel is about 3 pounds of solid food daily,
containing about as much energy as one pound of carbon or coal. One
pound of coal will develop energy enough to perform about 10,000,000
foot─pounds of work; that is, it will raise 10,000,000 pounds one foot
high, if there is no loss of power. But in all boilers and engines
there is a loss of power, due to heat lost by radiation, heat carried
away in the escaping gases and solids, etc., and heat developed by
friction. A steam boiler and engine suffers so much loss of heat energy
from these sources, that it rarely develops an efficiency of more than
10 per cent of the theoretical energy of the coal consumed. Curiously
enough, the human body is not much more efficient than a steam boiler
and engine; so that, while the one pound of carbon fed into the human
body has a theoretical energy of about 10,000,000 foot─pounds, the
actual useful work performed by a man is seldom more than 1,500,000
foot─pounds a day, or about 15 per cent of the theoretical energy of
the food consumed.

When a man is walking, his whole body rises and falls each step, the
rise being about one─seventh of a foot. Hence, in walking 25 miles
in a day, about 2,000 steps per mile, a man weighing 140 pounds does
1,000,000 foot─pounds of work in raising the weight of his own body,
to say nothing of the energy consumed in swinging his legs. A man may
walk the 25 miles in 10 hours, or he may walk it in 8 hours. In either
case, he does substantially the same amount of work, and burns up
substantially the same amount of food.

It should be clear, therefore, that when workmen are doing intermittent
work, with periods of comparative rest, they are capable of working
correspondingly harder during the periods of exertion. Thus, in running
a rock drill, the physical labor is light, except when shifting the
drill or when changing drill bits. At such times, the men should be
required to work with great vigor in order to reduce the lost time.

It should also be clear that workmen should be taught to make no
unnecessary movements of the body in doing work. Yet it is a fact that
few workmen economize their energy by avoiding unnecessary motions.

It should also be clear that it pays to house workmen at no great
distance from their work, so as to reduce the labor of going to and
from the work; for every foot─pound of energy spent in going or coming
reduces by that much the available energy of the man.

If it were practicable to measure the amount of resistance involved
in doing each class of physical work, we could readily reduce to a
science the setting of reasonable daily tasks. The authors are of the
opinion that a careful study of _resistances_ will eventually enable
managers to fix certain tasks with great accuracy. To illustrate, let
us assume that it is desired to know how much sand a workman should be
able to shovel into a wagon box 5 feet from the ground in a day. It
is not impracticable to measure the force required to push the shovel
into the sand, and the distance pushed. The average weight of the
earth on a shovel, and the weight of the shovel can be ascertained.
The vertical height that this load is lifted, is easily measured. If
the workman bends his body to fill the shovel, the weight of his body
above the waist, multiplied by the height that the center of gravity of
that weight travels will give the foot─pounds of work done in bending
the body. And thus, by a calculation of each element of work done, an
accurate forecast of the total possible work could be made.

Such a study as this will often disclose an unsuspected lack of economy
in using certain tools. From such a study, for example, it is perfectly
clear that the long─handled shovel, universally used in the far West
for shoveling sand, gravel, etc., is a more economical tool than the
short─handled shovel used in the East. Men have argued about this
matter for years without coming to a definite conclusion, the reason
being that workmen accustomed to the short─handled shovel prefer it,
while workmen accustomed to the long─handled shovel show an equal
preference for that type of tool.


In taking of time and in the application of the cost of labor to
the cost of work, there are probably as many systems as there are
organizations doing work; and even within any one organization using a
well─defined system throughout its entire operations, there will be no
two men making the same interpretation of the rules laid down, or──more
especially──whose methods of attack will be the same. But in spite of
these many variations of method, there are several primary systems
which are standard, and which can be found in one form or another on
all properly conducted work.

The starting point of all cost getting is the taking of the time in the
field, and it is here that the greatest variation in individual method
is found. The most common way of taking this time record from which
the pay─roll and the cost distribution is made, is for the time─keeper
to go over the work with a notebook and put down therein with a pencil
the number of each man and the particular part of the work that he is
engaged on.

Two systems of record keeping, of which small cards form the
basis, are also in vogue. One of these systems uses what is known
as _punch─cards_──that is, cards in which the records of time,
distribution, and performance are made by means of an ordinary
conductor's punch; and the other has the record made in a way somewhat
similar to the entries in a notebook──a written record being made on
the cards with a pencil. Another system bases its records upon reports
turned in by foremen.

=Time─Keeper with Notebook.= While the manner of taking time with
a notebook varies according to the training and experience of the
time─keeper, it may be said that there are in general two ways in which
such notes are kept. In the first, the time─keeper has a list of the
numbers of all men on the work, and, as he goes over the work, simply
checks off the numbers, showing that each particular man is at work and
indicating upon what branch of the work he is engaged.

A more common way, however, is for the time─keeper to make headings
corresponding to the distribution used in making up the office
records, and to write under each of these headings the numbers of the
men working upon the part of the work so named. This method is often
simplified by the time─keeper becoming so familiar with the foreman,
and the numbers of the men under the particular foreman, that he
is able to dispense with the headings entirely, and simply use the
foreman's name or number in place of it. This, of course, makes the
time─keeper's notes more or less unintelligible to anyone but himself,
and makes it necessary for him to do office work as well as his field
work. Moreover, not being a permanent or intelligible record, it is
impossible for even the man who made the notes to return to them in
case any dispute arises or a mistake is found to have been made, and
get information after the notes have "grown cold." The time─keeper
becomes so familiar with the appearance of the men who are on the
work, that he learns to know their numbers, and often attempts to put
them down without seeing their numbered checks. This is often a source
of error, as the uneducated foreign laborer is very liable to make a
mistake in stating his number; and if he does, there will exist no
record of his having worked that day, and he will get no pay for it.
The apportioning of the cost of his labor to any work that he may have
been on, will also be the cause of trouble.

Of course, the time─keeper's memory serves him if any men are absent
from the gang for any reason, and he is able to ask the foreman whether
or not that particular man is working. A man may be away from the gang
and be missed by the time─keeper altogether. In this case, no chance is
given for correction of the record, unless the time─keeper goes over
the work again soon after; and the consequence is that costs will be in
error, and the men will be short of pay at the end of the month. This
is especially liable to be true when night work is being done.

Men may be changed from gang to gang, or a whole gang may be changed
from one job to another, and the time─keeper knows nothing of it
unless he happens to be on the spot at just the right time. Such a
change would not show in his time record; and while the men would get
credit for their full time, the distribution of costs would be much
in error. The difficulty in recording such changes can be seen from
the following extract from a report of a Consulting Engineer after
inspecting work upon a road─making contract:

 "In one case, at 10:30, there were eight men carrying stone to the
 crusher, and three men on the crusher platform. Two others were in the
 cut, loosening earth and loading; and half an hour later, two of the
 four men who had been blasting were also loosening and loading."

[Illustration: Fig. 1. Time─Keeper's Slip. Duplicate record is made
automatically on a similar slip by carbon paper.]

This, of course, indicates an unusually loose organization, but is an
example of what a time─keeper with a notebook has to contend against.

In case of emergency──say in steam shovel work──a train of dump cars
goes over the side of a dump, and a track gang is called upon to help
the regular dump gang so that the difficulty may be overcome as soon as
possible. The time─keeper might fail to make record of an hour or an
hour and a─half which the track gang put on this work, because he did
not see them at work at that particular time. This, of course, affects
the distribution of cost. One advantage from the notebook is that
much of the distribution is made in the field, with a corresponding
reduction of office work.

=Punch─Cards.= The keeping of time by means of punch─cards has been
tried with considerable success on many jobs, but only recently has it
been reduced to a practical basis for use on large construction work.

The Construction Service Company of New York City has developed a
system of time and cost keeping, using the duplicate punch─card almost
entirely. Several of these cards are reproduced in connection with this

As a general thing, the punching of the cards is done by foremen of the
gang, or by someone who has the performance of the gang under direct
observation. The cards show not only the time worked by each man upon
any one day, but just as exactly the time worked upon any job by all
the men. A duplicate of the record is made automatically, to be kept in
the time─keeper's office, the other going to headquarters for permanent

The record thus obtained is absolutely exact, especially as to
distribution; but the system has some of the same objections that
the notebook has. For instance, unless the cards are kept by the
foreman himself, whoever punches them may inadvertently miss a man.
This, however, is not so liable to happen as when a notebook is used.
Whenever a single punch appears opposite a man's number, it is apparent
that all his time must be accounted for in some way or other; while,
with a notebook, it may be that, having been missed once, no record of
any time will appear.

There is absolutely no opportunity for a time─keeper or for a foreman
to "fudge" his account in any way, for a punch mark once made in the
card cannot be erased or destroyed in any way. The record stands.

=Time─Keeper's Cards.= Instead of the time─keeper keeping his records
in a notebook, as has been described, he may be provided with slips of
tough paper of such size and shape as will readily go into his pocket,
or will fit in a filing cabinet.

The _modus operandi_ of these cards or slips is as follows:

Each card or slip is devoted to but one gang and one ledger
account──such, for example, as placing ties in railroad work, gang No.
6. It will show the foreman's name; the name or number, or both, of
each man; and the amount of time that he spent on this particular class
of work. The sum of the amounts for the gang on this classification,
will be the cost for this gang and this account for the day in

If a man has been working at more than one piece of work on that
day, the time─keeper makes the apportionment of time on the spot;
and the portion of his time that he has spent placing ties is put on
the "Placing Ties" card or slip. The remainder of his time is placed
on another slip corresponding to the other ledger account. If the
time─keeper is uncertain as to which ledger account the work belongs
to, he writes a description of the work at the top of the card or slip.
A convenient form for a slip is illustrated in Fig. 1; and a convenient
form for a file card, in Fig. 2.

[Illustration: Fig. 2. Time─Keeper's Card. Duplicate record is made
automatically on similar card by carbon paper.]

It is frequently of advantage to have time─cards show, in addition
to their pay and work performed, a log of the conditions, such as
temperature and weather; the causes and duration of each delay; the
general conditions on the work; the kind, condition, and the make of
tools, machinery, etc.; and any further details that may be important.
How this can be done on the various cards illustrated in this volume,
can be seen from a study of the illustrations.

=Written Time─Cards= have the advantage of the minimum of departure
from existing methods; the disadvantages that arise are slight; and it
is difficult to so arrange the cards as to obtain duplicates. A foreman
with a dirty thumb will make a paper sheet on which he writes in the
field look as if it had been dragged through the mud; while, with a
punch, he can bring his card in with comparatively small damage. In
general, it may be said that for the time─keeper's use the written card
has a slight advantage over the punch─card; while the reverse is the
case for records to be obtained by the foreman, or whenever the men,
such as drillers or teamsters, hold their own cards.


=Foreman's Report.= When the making─up of the pay─roll and the
distribution of cost depend upon the reports of foremen, many serious
difficulties are introduced into the work. Most foremen are intelligent
enough to make a satisfactory report, and even more of them are honest
enough to make a correct report. It is a curious fact, however, that
among men of this class, while they would use every care in accounting
for money entrusted to them, there is no tendency to consider time in
the same light; and in consequence the reports of time given are liable
to be very lax.

Moreover, if a foreman felt so inclined, if there were no one checking
him or his reports, it would be a very simple matter for him to "fudge"
his accounts so as to be able to acquire considerable graft.

If the foreman is intelligent and conscientious, a report and a
distribution can be obtained from him which would be very easy to work
into an excellent office record. Unfortunately, the desired combination
seldom obtains, and there are very few large works carried on with such
a system of time─keeping.

=Cost Distribution.= The time having been taken in the field, it now
becomes necessary to make a distribution of costs in the office. The
cost is that which is paid for producing work, being the material and
labor cost of production, added to the proper proportions of expense
cost, the expense being incurred in carrying on the operation and so
making the actual work a possibility. The distribution of the cost
is necessary in order that the contractor may see whether or not any
particular operation is profitable; and a detailed analysis of the
distribution, such as will be given later, will indicate in what
respect the work may be made cheaper and more profitable.

In all cost distribution, there are certain items which cause
trouble; and their proper disposition has led to much discussion
among authorities on them, and has been the source of many different
arrangements for their proper apportioning to the various operations
on the work. For instance, there is the time of such men as are
engaged upon water─supply service, drainage systems, the blacksmith,
machinists, electricians, water boy, the time of watchmen, police,
etc., which may come under the heading of "general labor;" and there
are such items as the transportation and distribution of coal to
various parts of the work, the transportation and handling of stores,
and numerous other items which, while seemingly affecting the whole
work, are directly chargeable to some particular operation.

In many instances of distribution, the item of _General Expenses_,
which includes the expense of storekeeper, time─keeper, bookkeepers,
clerks, and such office force as may be required, is rather difficult
of disposition. Those items which are usually monthly, may be
distributed daily at a rate per day found by dividing the monthly rate
by the number of days in the month, or they may be lumped at the end
of the month and apportioned to the various operations. If they are
distributed from day to day, it is rather difficult to tell just what
proportion of them should go to each operation, as the cost of any
operation is liable to vary greatly from day to day. If they are left
to the end of the month, it is impossible to tell from day to day the
exact cost of the work.

_Overhead Expenses_ are another source of difficulty. Under this
heading can be placed all salaries which do not ordinarily appear
upon the pay─roll, such as the salary of the General Manager of the
work, the Chief Engineer, and the officers of the company, and such
expenses as office rent, telephone, office furniture, stationery, etc.
Just where General Expenses leave off, and Overhead Expenses begin, is
rather hard to determine, the line of demarcation varying in almost all

One of the greatest troubles in distribution is caused by overtime of
men who are on a daily and monthly basis. Under the same head might be
placed _Lost Foreman's Time_──that is, the time which the monthly and
daily men are paid for, and which produces no output.


A page from a time─keeper's notebook is reproduced in Fig. 3. The
necessity for an explanation of such a record is apparent. The work on
which this record was made, was a job of rock excavation on which two
steam shovels were being used, and the time and output of each shovel
were kept separately. The record was made on the 17th of the month.

At the left of the page, within the curved line under the heading "_sh.
2_," we have the names of the shovel crew and the numbers of the pit
men. At the side of these names and numbers, is the record of the
performance of the shovel of the day previous, the 16th, the shovel
runner having given it to the time─keeper while the latter was on his
first round on the 17th. Just below the record of the shovel, there are
four numbers under a heading _Ditch_. In order to drain the shovel pit,
it was necessary to use four men for cutting a ditch, and the time of
these men is charged to the shovel. Underneath the record for the No.
2 shovel, is the record of shovel No. 1. It is recorded in exactly the
same way as the other record.

[Illustration: Fig. 3. Page from a Time─Keeper's Notebook.]

In the center of the page, at the top, is the record of the drill
gang for each shovel. There were six drills working in gang No. 2;
but the record does not show this clearly, as there are two columns
of six numbers each, one column being the driller's numbers, and the
other being those of the drill helpers. Then there is a column of four
numbers representing the muckers. The time─keeper knows, of course,
which is which; but if for any reason anyone else than himself had
to use the notes in the office, they would be useless. The number
under the line is that of the man who carries bits to and from the
blacksmith. The name of the fireman of the boiler which furnishes
steam to the drills is given, and the number of his helper.

The record of gang No. 1 is given in the same garbled manner, there
being 5 drillers, 5 helpers, and 4 muckers in the gang, besides the
man carrying bits, the fireman (whose name is given), and his helper.
It will be noticed that in neither gang is the name or number of the
foreman given, the time─keeper relying upon his memory to make the
record complete in the office.

In the upper right─hand corner of the page, is the record of the
blasting gang, in front of shovel No. 1. There are 5 men, including
the foreman, whose number is given first. Within the ring is shown the
number of pounds of powder used on the previous day as reported by the
foreman. The record reads "on the 16th, 150 pounds of 30% powder, and
750 pounds of 40%."

Directly below this, midway down the page, is the record of the men
working on dump No. 1. The foreman's number heads the list, the numbers
of his men following.

Just to the right of the shovel records, and below the record for
drill gang No. 2, is the heading "_ng.tr. # 1_;" and the men whose
numbers are under this heading are engaged in laying and repairing
the narrow─gauge track for the dump trains from shovel No. 1. Just
below the middle of the page, is a list of names and numbers utterly
unintelligible to anyone but the one who made it. The facts are these:
_Donovan_ is the man who looked after the storage of powder; within
the bracket, _Nick_ (the time─keeper, not knowing the last name, used
his number, as well as the part of the name that he knows) is the
blacksmith; and No. 72 is his helper; No. 118 helped the blacksmith
for two hours, having been taken from the narrow─gauge track gang. The
time─keeper had to depend entirely upon the blacksmith telling him
this, or his record would have been incomplete. The next three men
whose names appear in this column were engaged upon repairing a 6─inch
pipe line; and the next two pairs within brackets, marked No. 2 and No.
1, are the pipe─fitters for the drill gangs and shovels No. 2 and No. 1


The time─keeper, having taken his notes over the entire job, sends them
to the office so that the time may be posted for each man, and the
distribution made.

The time─keeper goes over his notes, and picks out the items that are
chargeable to drilling. In gang No. 2, there are 6 drillers at 30 cents
per hour; 6 helpers, 4 muckers, 1 man carrying bits, and one fireman's
helper, all at 17 cents, and one fireman at 25 cents. From the note
at the bottom of the page, he knows (although no one else would) that
_Lear_ at 20 cents and No. 278 at 17 cents, were also with this gang.
This, with the foreman at $3.50 per day, figures to $29.08. These are
the charges that go directly to drilling, being the cost of time of
the men actually engaged upon that operation and nothing else. But
besides this, there must be apportioned to this cost a certain part
of the Superintendent's salary, a portion of the labor on the 6─inch
water pipe and the whole water system, a portion of the time of the
blacksmith, the watchman, the storekeeper, the time─keeper, clerks, the
water boy, and numerous other items.

In exactly the same way, the cost of the operation of the steam shovels
is figured. For instance, No. 2 has an engineer at $125, a cranesman at
$100, and a fireman at $75, a month, and 6 pitmen at 20 cents per hour,
making the total charge of crew $19.27. To this the time─keeper added
$5.44 as the cost of digging the ditch that drains the shovel pit. To
charge this whole amount against the shovel for that day, is manifestly
unjust, as the work of draining through this ditch will continue for
many days, always facilitating the work of the shovel. The cost of
subsequent days' work is lessened, while the cost of this particular
day, as given with the $5.44 charge against it, is entirely too high.
The spreading of an item of this kind is an extremely difficult
matter, but it must be done. The steam─shovel cost must also have its
proportional share of the charge for Superintendent, water system,
blacksmith, etc.

The charge for narrow─gauge track is $14.86, being the time of one
foreman at 20 cents, and 9 men for 8 hours and one man for 6 hours at
17 cents. The charge against No. 1 dump is $8.40, being the time for
one foreman at 20 cents, and 5 men for 8 hours at 17 cents. The cost of
blasting is figured exactly the same way, and the 900 pounds of powder
used entered in the material account charged against the work in front
of shovel No. 1.

The headings for the distribution of steam─shovel work, aside from
_Drilling_ and _Blasting_, would be _Shovel crew_, _Pit crew_, _Dump
crew_, _Laying shovel track_, _Train crew_, and _Laying narrow─gauge
track_, all of which in the end can be summarized under _Loading and
Transporting_, and the unit─cost of moving a yard of material figured
from this summary.


The manner in which the time─keeper takes his notes in a notebook has
been shown, and the impracticability of many of its phases pointed out.
Two punch─cards for use on such work as that mentioned──namely, rock
excavation with steam shovels and dump trains──are shown in Figs. 4 and
5. They are the _Steam─Shovel Card_ and the _Train Record_. The shovel
card is kept by the shovel runner or the fireman, and the train record
is kept by the dinkey runner. Each keeps his own record separately;
and, at the end of the day's work, the records must check each other.

The steam─shovel card shows the date, the number of cars loaded per
hour, and the total number loaded per day. It also shows the time of
starting and stopping the shovel for any reason, the stops for moving
up being indicated in a different way from other stops; and thus a
record of moves is kept automatically. The time of the shovel crew
and the exact number of hours worked by the pit crew, are also shown,
together with the cubic feet of coal consumed by the shovel. The causes
of delays and the condition of the shovel are written in the blank
spaces under their proper heading at the bottom of the card; but with
this exception, the entire record is made with the use of an ordinary
conductor's punch.

The train card shows the number of trips made by a train each day, the
time of leaving the shovel on any trip being shown to the nearest 5
minutes. The number of cars hauled by all the trains during any hour
must check with the number of cars loaded, as shown on the shovel card.
The train card, besides showing the date, shows the total number of
cars hauled (the total of all cards must check the total cars as shown
by the steam─shovel record), the cubic feet of coal consumed, the
average yardage per car, the haul in stations of 100 feet, the number
of the dinkey engine, and a report of its condition, whether it be
good, fair, or bad. This card is signed with the dinkey runner's name.

It will be seen that the record is very much more complete than that
taken by the time─keeper, and is more reliable as to methods, being
made while the work is going on; and the greater part of it is checked
by having two records made separately, instead of taking a verbal
report from the shovel runner the following day as in the example
previously shown.

[Illustration: Fig. 4. Punch─Card for Recording Work of Excavation with
Steam Shovel.]

[Illustration: Fig. 5. Punch─Card for Recording Work of Dump Trains in
Excavation Work.]

Neither the train record nor shovel card, however, show any
distribution of time, but are really performance records. The pipe and
steamfitter's card reproduced in Fig. 6 gives an excellent example of
how the time is taken and the distribution automatically made all at
one time.

The classifications of labor are: Shovel, Channeller, Drills, Dinkey,
and Trains, Pump, Tank, General Water System, and Blacksmith, being
lettered, it will be noticed, from _A_ to _H_ at the head of the
column. Each card provides space for the record of the foreman and 14
men. These eight classifications will probably cover all the work that
the pipe and steamfitters are called upon to do; but if not, there are
two extra lines on which can be written any classifications out of the

There will be certain men assigned to certain regular work, as in the
case previously quoted under the head of the Time─Keeper's Notebook,
where there were two pipemen for each drill outfit. If these men spend
their entire day of eight hours doing nothing but looking after the
water supply for the drills, a punch mark would be made above the
number of each of them on the card and opposite the figure 8, which
represents the hours worked. To the left of the eight, and in the same
line, and also in the vertical column opposite the word _Drills_,
another punch mark will be made. Again, opposite the letter _C_, which
is the key for the classification of drills, and in the column assigned
to each man, and below his name, another punch mark will be made. This
gives the workman full time, showing that he worked eight hours on
drill water supply and nothing else. Suppose the foreman worked three
hours on the general water system, three hours on the pumping station,
and two hours directing the repair of the water tank. There would then
be on the record a punch mark in his column opposite 3, 6, and 8; at
the left of 3 in the column headed _G_, another punch will appear; at
the left of 6 in the column _E_, another punch will be found, and still
another at the left of 8 in the column _F_. In the column under the
foreman's name, punch marks would be made opposite _E_, _F_, and _G_,
showing that he worked on these three classifications.

In the same way, the time and occupation of each man under this foreman
can be indicated, no matter how many changes he may make in his work
during the day. The time, however, is recorded only to the nearest

[Illustration: Fig. 6. Pipe and Steamfitter's Card, Showing Method of
Taking Time, and of Simultaneous Automatic Distribution.]

Provision is made in the lower left─hand corner, for the punching of
the date; and along the lower edge is the place for the recording of
the number of hours used in thawing the pipes, etc., and in providing
protection for them. This latter record was found necessary, because
the work on which these cards were used was done in an extremely cold
locality and continued throughout the entire year.

When the records are made in the field and are sent in to the office to
be transferred to permanent records, it is not necessary for the man
who made the record to be at hand to interpret his notes, as there is
absolutely no opportunity given him to allow his note taking to vary in
the least from day to day, the record being absolutely automatic.


While the object of the regular distribution of cost is the obtaining
of unit─costs, there is another cost analysis which may be called a
refinement of the cost─keeping system, and which, if properly used,
can bring about a marked reduction in all costs. While this will be
discussed more fully in the chapter upon _Reduction of Cost_, it is a
form of time─keeping, and so will be touched upon here. On more or less
rough construction work, it seems rather absurd to attempt to reduce
the various processes of any operation to such a fineness that they may
be timed to minutes and even to seconds. Conditions vary so greatly,
the character of the work being done changes so much from time to time,
and the personnel of the organization is sometimes shifted so much,
that it seems impossible to reduce performance to any satisfactory
basis which may be used as a standard. Nevertheless, without attempting
to reach such a basis, careful watching and timing of the different
parts of the work will result in much better performance and increased
profits, as can be clearly shown.

Take, for instance, a driller working with a steam drill in fairly even
rock, with no marked obstacles in his way and with very little mucking
to do. Notice the exact time at which his tripod is in place and the
drill ready to work. The driller places his bit in the drill, turns on
the steam, and the drill starts. Note the time of starting the drill;
note the time when the drill stops, the bit having gone down its full
length; and do the same with each subsequent bit, noting carefully the
exact time consumed in changing. When the last bit is down its full
length and the hole is finished, note the time required to take out the
bit, move the weights, loosen the tripod, and make everything ready for
the moving. Then note just how many men are required to move the drill,
and just how long it takes them to do it; and finally, how long it
takes the driller to get his drill again in working order and started.

It will be found that a large majority of drillers take entirely too
much time in the changing of bits, and that almost invariably there
are too many men helping to move a drill, and that they take too long
for it. Another source of delay is preparing the drill for work after
it has been moved. It is perhaps just as well to take plenty of time
for this, in order to get the drill properly set and adjusted before
starting it; but the loss of time between the adjustment and the
starting may be said to be about the same as that lost in changing
bits, if not a little more.

When the driller takes too long in changing bits, it is largely his own
fault, and he should be watched more carefully by the foreman, and, if
necessary, instructed. If time is wasted in the moving of the drill, it
is the fault of the foreman alone. By a careful timing and balancing of
the various processes in drilling, the most competent men can easily be
picked out.

In the case of concreting, the minutes lost in the handling of a batch
of material from the stock pile to its final position as concrete,
often amount to a great deal. Suppose on a small job a half─yard mixer
is being used, and it averages for 8 hours 30 batches per hour, or 120
yards per day. If it is possible to reduce the time of each batch 15
seconds, the output of the plant will be increased over 14 per cent;
or, figured on a basis of 120 yards, there will be an increase of 17
yards, which──at, say, $5.00 per yard──would mean a handsome increase
in the daily profits. And still, 15 seconds seems to be almost too
trivial a matter for which to spend time and perhaps a little extra
money in the way of time─keeping.

Starting with the unmixed material in the stock pile, notice how long
it takes the men to load their wheelbarrows with sand and stone; then
the time that the material remains in the wheelbarrow, both at the
beginning and stopping end of the trip to the mixer; and also the time
in transit. If the material is dumped into measuring boxes, note the
time that it remains in the boxes. If it is dumped directly from the
wheelbarrows into the mixer, it is necessary to take the time of mixing
from when the first wheelbarrow was dumped until the batch is dumped.
The mixer may be said to be the governor of the whole operation; for
the men handling unmixed material can handle it no faster than the
mixer takes it, and the men handling the mixed concrete can get it
no faster than the mixer furnishes it to them. For this reason the
observation of the operation of the mixer should be made with special
care. It is not our intention to tell how, or to give advice concerning
the mixing of concrete; but it is desired to show how, if any time is
to be saved, it will be through the saving of seconds in each operation.

If the mixed concrete is to be dumped as a batch into the hopper or
hoist, the question of time saving is much simpler than if portions
of the batch have to be dumped into wheelbarrows. If, however, it is
necessary to dump into wheelbarrows, a basis for the time necessary
to empty the mixer can be found only by careful timing and noting the
action of the men during the timing.

The time between the filling and the emptying of the wheelbarrow of
concrete, will of course vary greatly according to the haul; but here
again, careful timing and observation will soon establish a basis from
which the most economical manner of distributing the concrete can be
made; and exactly the same thing is true of the return of the empty

All of this may seem to be a digression from the subject of cost
getting; but in fact it is merely a discussion of a very refined
form of cost getting, and a branch of the subject which has perhaps
been given too little attention. When the daily output of a job is
up to or above the average, everything looks bright, and no one who
is responsible feels overburdened with care. If, however the output
falls too low, some glaring cause is at once sought, and the fall of
output blamed to some unforeseen circumstance or accident. This is all
very well, as accidents affecting output cannot be entirely avoided,
and unforeseen conditions will make great differences in performance;
but the careful analysis of process cost subdivision will bring about
results that will astonish those "practical men" who think that they
have got their unit─costs down to the lowest point simply because their
output is generally large and everyone on the work seems to be working
to his top notch.


The reason for compiling the data for which the time─keeper is
responsible, is that, from the analysis of the distribution made, the
contractor is able to tell what work is being done with profit; and,
if any particular operation shows loss, the analysis will help more
than anything else to discover the reason for the loss. In figuring
his profit on any work, the contractor must figure on a unit─cost
basis, exactly the same as he figures when he prepares his bid. In
order to do this, he must have an exact measurement of output. In many
classes of work, this measurement is extremely simple; but in others
no little ingenuity is required to devise a scheme which will give the
information wanted exactly and without requiring much work.

The payment for work is based upon the engineer's estimate. The
_monthly estimate_ is usually more or less a guess, made simply for the
purpose of paying the contractor approximately according to what he has
done. The monthly estimate is generally a pretty fair approximation
of the exact amount of work done; and the _final estimate_ covers
everything included in the contract that has not already been taken
care of.

The contractor's measurements of work done each day should agree quite
closely with the engineer's estimate; but, if the work is difficult
to measure, the contractor has many times more opportunity of making
errors in his measurement by going over it daily than the engineer has
who only goes over it once. A careful consideration of the differences
in the amount of estimates will sometimes show the contractor how his
estimates can be made to balance with those of any particular corps of
engineers, and he can govern his daily measurement accordingly.

There are few measurements in the field which can be reduced to a unit,
or rather which can be counted directly. Linear measurements are easy
enough to get; the measurement of area is a little more difficult;
while the measurements of volume, especially in rough work, are often
extremely difficult to make in a satisfactory manner. Measurement by
weight is often found to be of great advantage, if proper facilities
can be arranged for weighing.

The measurement of drill output is extremely simple. The holes for any
one day's work can be marked as they are finished, and, at the end of
the day, all measured; or they can be measured as finished, and their
depth taken, and hence the entire day's work is easily determined.
This, of course, is a linear measurement; and in the same class would
fall such work as laying track, ballasting, grading with a road
machine, and the measurement of the work of track and wheel scrapers.

The measurement of quantities whose units are areas is only a little
more difficult. Paving, for instance, is very easily measured, the
distance from curb to curb generally being constant, and so really
reducing the measuring to a linear measurement──that is, the length
of the section of pavement laid. Brick laying, while really a cubical
measurement, is taken in the same way, the area of the face of the wall
laid being taken, and multiplied by the standard number of bricks to
any given thickness of wall. This really reduces the measurement for
brick laying to a unit─basis, the unit being one brick. Painting and
plastering are measured in the same way; and so also is roofing. On
road work, plowing and sprinkling are estimated per unit─area; and in
quarry work, channeling is so estimated.

The determination of volume on construction work is liable to be very
difficult. Take, for instance, the output of a steam shovel cutting
through rock. The walls of the cut will be very irregular both in line
and in slope, no matter how skilfully the shovel is operated; and the
face of the cut is liable to be even more irregular. No absolutely
exact measurement can be made; and for this reason it is common
practice to estimate the contents of the cars rather than attempt to
estimate the size of the pit excavation during any one day. Generally
the size of the pit is roughly measured, and the yardage figured from
this measurement. It is also figured from the number of cars loaded,
and, if carefully done and the estimate of the volume of the cars
loaded is correct, both figures should balance at the end of the month
with the monthly estimate, which, on account of the large volume
measured, can practically ignore such irregularity as would affect the
other two measurements. In earth excavation, the measurement is much
simpler, because the pit is more regular and the cars can be fully

There are natural working units that lend great simplicity to
calculations of cost──such, for example, as a floor panel in a
building, a column, a bridge panel, a pier of masonry, etc.

Another unit of measurement is often obtained through the percentage
of a total or of another unit, such as the amount of sand in a yard
of concrete. Knowing the mix, a percentage of the total yardage of
concrete will be the amount of sand that has been moved.

Care should be taken properly to subdivide the units of measurement.
The ordinary unit of concrete work is the cubic yard or the cubic foot.
The mistake is frequently made, of estimating the cost of forms and of
reinforcement only in terms of the cubic yards of concrete. The cost of
forms should be estimated also by the number of feet, board measure.
Reinforcing steel should be estimated by the pound.

One difficult kind of work to obtain costs on by the regular method, is
the laying of cut stone. A very simple way to obtain this is to paint
on each stone a number, and let the time─keeper get the dimensions of
the stone after it has been cut, before it has been placed in the wall.
Then the stone layer simply records the number of each stone as it is

A check on the measurement of the quantity of the work done is
frequently obtained by the measurement of the quantity of the work left
undone or of the material remaining in the stock piles.


The object of cost keeping is to furnish accurate and early information
to those in authority, both as to where they stand financially on the
work, and what necessities or opportunities there are for improvement
in economy.

In order to accomplish the object of cost keeping, it is necessary that
there be some efficient method of cost showing; and it is essential
that the system of cost showing, in combination with the system of cost
keeping, shall meet the following specifications:

 1. It shall be accurate.

 2. It shall be simple.

 3. It shall be easy to study.

 4. It shall be easy to compile.

 5. It shall be capable of being compiled in a very short time after
 the receipt of the original figures.

It needs no argument to prove that the cost─showing system should be
accurate. If it be full of errors, its usefulness is entirely obviated;
and 1 per cent of error in it will do a great deal more than 1 per cent
of damage to its efficiency, in assisting the manager to increase the
efficiency of the work. There is, however, a limit to the desirable
precision of such an affair. The cost of putting in ties on a certain
railroad for a certain month, for instance, may have been 7.2143
cents. If the last two figures are interesting from the statistician's
point of view, they are utterly useless to a practical manager. If
the previous month's performance has been, we shall say, 6.94 cents
per tie, this month's figures will have shown an increase in cost of
O.27 cent, which is approximately 3.9 per cent of the previous month's
figure. In other words, the tie─placing efficiency has decreased 3.9
per cent. It is very questionable whether the figure 4 per cent,
although not quite so precise, would not be rather more useful to the
manager than the figure 3.9 per cent; and, personally, the authors
would favor the briefer work. The degree of refinement to which these
records should be carried, is, in the last analysis, a matter for the
individual judgment of the manager himself. The student should bear in
mind the folly of unnecessarily elaborate figures.

CASTINGS The Moulding Machines are Shown in Operation. Note the
Plentiful Supply of Daylight. The Michigan Stove Co., Detroit, Mich.]

The second specification, that the cost─showing system shall be simple,
is almost as important as the first. If it be not simple, the chances
for inaccuracy will be tremendously multiplied. It will take more work
to carry it on; and the straightening─out of errors and discrepancies
will be so difficult, and will require so much of the time of persons
in authority, as to leave them no opportunity to do their other work.
Plainly, it should not be necessary for a manager to do a lot of
detailed work on cost─keeping or cost─showing systems himself.

Specifications Nos. 3 and 4 are more or less included in specification
No. 2. Specification No. 5, however, is also of great importance.
Information that is stale is about as useless as no information at all.
If you tell a foreman on Monday that the work of his gang for the week
ending ten days before was not up to the mark, he will not have much
respect for your cost─keeping system; he will certainly not remember
sufficiently well the causes that produced his bad work, to remedy
them; or he will be able to pick out of the haze of history enough
excuses to let himself out of the responsibility of his bad work, and
to put his manager at sea as to where this foreman and his gang really
stand. It is therefore of prime importance that the arrangement for
showing the manager what his costs are, with the salient conditions
affecting such costs, shall be so rapid as to be "red─hot" all the

The commonest arrangement of cost showing──and the only one ordinarily
found at the present day on most contract work──is an abstract prepared
on a piece of yellow paper by the time─keeper for the inspection of
the manager each morning; and this has so few disadvantages that it
would be very satisfactory, were it not that it is impossible from it
to compare at a glance the work done, let us say yesterday, with that
done previously. It is, however, far better than any other system which
lacks any of the essentials indicated above.


The best method that has so far been devised is by the use of charts
showing to scale the different unit─costs for the various days in the
month. Such charts are illustrated in Figs. 7 and 8. They are from the
records of the Construction Service Company. One of these (Fig. 7)
indicates the cost of channeling rock. It will be seen from the line
_A_, that during this month the number of square feet channeled varied
from 75 to 375, and that the labor cost varied from a maximum of 62
cents to a minimum of 8 cents. On the 8th, the morning crew did not
work, because, as it happened, of severe weather, which accounted for
the low output on that day. On the 24th, the night shift allowed the
pipes to freeze up. It may be mentioned that the foreman of the night
shift, whose name appears in brackets on the chart, has since turned
his attention to other fields of industry than channeling. On the 28th,
the channeler had reached a point where the cut was frequently filled
up by earth that slid in from the side and caused such a large amount
of sludge as to cushion the blows of the blade; and the chart shows on
that day a high cost, due to the cleaning away of this earth.

The chart illustrated in Fig. 8 is that for steam─shovel work on the
same contract of the Construction Service Company. Line _A_ indicates
the approximate number of yards moved per day. Line _B_ shows the
pay─roll, ranging from $165 to $310 per day, and including a percentage
for incidentals; while line _C_ represents the values of the _B_
quantity divided by the _A_ quantity, and gives the unit─cost in labor
per yard for excavating and moving rock. It will be noted that the
Sundays are skipped. These came on the 5th, 12th, 19th, and 26th of the
month. There were some men employed on each of these Sundays; but their
time was so distributed over the rest of the month as not to show for
the Sundays, as the steam shovels did not work on that day.

[Illustration: Fig. 7. Efficiency Chart Indicating Cost of Channeling

[Illustration: Fig. 8. Efficiency Chart Showing Costs in Connection
with Steam─Shovel Work in Rock Excavation and Removal.]

These charts are of a size to be filed in one of the standard
loose─leaf books, and their range is from zero to about 12; thus it is
possible to show any quantity to scale for any day in the month. This
company has not found it of advantage to plot more than 4 lines on any
one chart.

Charts such as these may be marked each morning by the time─keeper upon
a tracing prepared for this purpose; and at the end of the month the
lines connecting the points may be inked in, and the chart blue─printed
and the blue─print filed in a convenient place for immediate reference.

There are several ways of working out the unit─cost from the figures,
such for example as:

 1. Performance per time unit

 2. Performance per dollar;

 3. Cost per unit of performance.

The first of these is not, properly speaking, a cost statement,
although it is a function of a cost statement and for certain purposes
is more convenient. The number of feet of rock drilled per drill hour,
is a very convenient form for record.

When drilling under conditions of snow and ice, more muckers have to be
employed than at other times. If the cost of mucking is included in the
cost of drilling, as it frequently is, the true index of how well the
drills are getting on is the number of feet per drill hour, rather than
the cost of the operation to the contractor.

The second method is the reciprocal of the third. Other systems will
suggest themselves by virtue of the peculiar requirements of each case
in practice.

=Checking by Charts.= A great advantage of the chart system of cost
showing, is that it acts as an automatic check upon the cost─keeping
system in general. As indicated earlier in this volume, it occasionally
happens that a punch─card is not turned in, or the time─keeper fails
to get certain data. This is immediately discoverable by the gap on
the chart, and thus the chart acts as a check on the cost─getting
department. This will not entirely obviate the necessity for inspection
to ascertain whether the time─cards are properly kept and the work is
properly done.

The showing of costs should be made _daily_ for the men immediately
identified with the field work; they should be made _weekly_ for the
general manager, and _monthly_ for the home office. These monthly
office reports are sometimes valuable in the planning of the financial
arrangements for the work. On a job involving, say, a pay─roll of
$5,000 a week, with monthly estimates, early information as to
performance over the month is of very great value.

Showing the men certain charts and records will serve to increase
their interest in their work, but this should not be overdone. It is
as well that the men should not know the actual cost of their work to
the contractor in dollars and cents. If, on the contract price, the
contractor is making a handsome profit, the men want more money. If the
contractor is not making a handsome profit, the men are apt to think
that they are on a losing job, and become discouraged accordingly. The
economy of the contractor's work should be private information, since
it might do him considerable damage by becoming known to competing
contractors. The charts showing the performance per unit of time,
however, are not subject to the restrictions above mentioned.


In the foregoing there has been nothing that is a part of the regular
bookkeeping, with the exception that part of the time─keeper's records
are necessary to the bookkeeper. It should be appreciated at the start,
that the bookkeeper's work is of great importance, that it cannot
be superseded by a cost─keeping system, and that it should not be
divided up with the cost─keeping system. The scoffers at cost analysis
are inclined to take the ground that a bookkeeper, a cost─keeper,
a cost─analysis engineer, are more or less clumsy substitutes for
managerial intelligence; and they point to the proposition that in the
last analysis it should be easy to let the office boy run the job with
a textbook at one elbow and a calculating machine at the other.

It is insisted upon at the start, that cost keeping is as important as
bookkeeping, but that it has an entirely different function; and in
applying cost keeping to construction work, it is very important that a
distinct line of demarcation be drawn between the two branches.

Another error that is frequently made by antiquarian students, men
who are studying old methods of engineering and construction rather
than those of to─day, is that a cost─keeping system is assumed to
be complete by the man who runs it, when he knows how many feet of
hole his drillers are able to average per hour, per day, or per
week. The cost analyst will point to the fact that in the literature
of the subject many false statements are made as to the costs of
certain items of work, and will show that no allowance has been made
for depreciation, repairs, etc., not to say profit, interest on
the contractor's money, and a host of other things. The student is
warned that a proper cost─keeping system must of necessity take into
consideration _all_ the items of cost on the job; and, further, it
should take them into account with such detail that it will be a real,
living help to a man in estimating future costs on similar work.

Now, as a general thing, the essential similarity of items has been
lost sight of when these items are parts of work which is not generally
dissimilar. For example, the item of earthwork in the construction of
a large dam may be very similar in its essential cost to, and may be
of the greatest use in assisting a contractor or engineer to figure
the cost of, earthwork under similar climatic conditions on a railroad
embankment; yet those who are most interested in the subject are
inclined to classify dams as an entirely different sort of structure
from railroads. The designing of a dam is a different matter from the
design of a railroad; but to build one will often involve the same kind
of tools, the same kind of machinery, the same kind of men, the same
kind of "horse sense," and the same general principles of construction,
as to build the other. Therefore, if his costs are properly subdivided
and intelligently kept on one kind of construction, the contractor or
engineer will be materially aided, not only in estimating the cost of
the work upon the other, but in being in close touch with his work
after he has started.

Every construction organization ought to have a schedule of standard
items which may be called _ledger accounts_; and its books ought to
be kept in such a manner that the records of the total and of the
unit─amounts for these items on past work and on current work may
be immediately available for the benefit of its officers. No two
contractors will have the same arrangement for distributing cost; no
two will have the same items for the accounts; but there are certain
fundamental items that will come into use on almost every large piece
of work, and some of them have a peculiar significance, and should be
treated with special care.

=Estimates on Ledger Items.= In making estimates it is important to
have this list in sight, in order that important items may not be
omitted. Such a list, which will cover a large portion of the ordinary
charges, is here given:


  (_a_) Hourly rate;
  (_b_) Monthly rate.

The men who work by the month are apt to have to spend a good deal of
non─productive time, on account of weather conditions, etc.; while the
men who are on an hourly basis, as a general thing, do some profitable
work whenever they are paid. It is feasible to figure a good deal more
closely on the cost of work for those men who have practically no lost
time to be taken care of, as _emergencies_ or _incidentals_. It will
be noted, also, that the cost and the time of hourly and daily men can
be figured and charted day by day; whereas it is impossible to know
exactly what the charges will be for labor that is paid by the month,
until the end of the month. In order to make report charts showing cost
as completely as possible, it is a frequent practice to add a certain
percentage to the cost of the known items, to cover the so─called _lost
foremen's time_; and to make at the end of the month a correction of a
greater or less size, in order to make the cost─keeping end tally with
the bookkeeping end of the work.

2. GENERAL LABOR, ETC. This item will comprise the labor of the men
who have something to do with more than a few parts of the work. A
watchman's time is not spent in drilling, or on a steam shovel while it
is running. Nevertheless a proportionate part of his salary should be
divided among the different branches of the work. Sometimes this will
be a very small item, sometimes a large item. For example, if a steam
shovel is excavating 30,000 yards of material per month, the watchman's
unit─charge to excavation may be very small; but if the shovel is tied
up for nearly the whole month, the charge per unit for watchman's time
may be alarmingly high. This is one reason why unit─cost and total cost
should always go together. A blacksmith's time, part of which is spent
in sharpening drills, need not be all chargeable to drilling, because
he may spend a good deal of time in repairing the steam shovel or
fixing hand tools, etc.

3. OVERHEAD LABOR. Clerks, bookkeepers, messengers, office force, and
General Manager are ordinarily included among the items of _overhead
charge_, as well as salaries of general officers.

4. OVERHEAD MATERIALS. In this classification, there are included
stationery, office furniture, supplies, etc. When the office furniture
is disposed of upon the completion of the work, its value should be
credited upon this item.

5. OVERHEAD INCIDENTALS. These may include various items, such as
telephone, office rent, telegraph messages, express charges on
incidentals not directly connected with plant, etc.

6. PREPARATORY COSTS. These include the cost of getting ready to do the
work, and, depending upon the nature of the job, may include any or all
of the following items:

  (_a_) Temporary roads;
  (_b_) Temporary trestles;
  (_c_) Clearing and grubbing;
  (_d_) Snow removal and drainage;
  (_e_) Traveling expenses to job;
  (_f_) Preliminary estimates, calculations, and surveys;
  (_g_) Freight and handling of materials to and from job;
  (_h_) Freight on preliminary supplies;
  (_i_) Handling of preliminary supplies;
  (_j_) Licenses and premiums on bonds, etc.
  (_k_) Legal expenses;
  (_l_) Loss on initial operations;
  (_m_) Right of way and cost of site;
  (_n_) Sheds, storehouses, and other temporary buildings;
  (_o_) Tools, less final value.

7. SUPPLIES. These are chargeable F. O. B. the job, or at the railroad
station nearest to the work. They include all supplies for carrying on
the work, as distinct from _material_, including explosives, coal, oil,
waste, etc., and may include a _charge for water_.

8. INTEREST AND DEPRECIATION ON PLANT. This item is variously estimated
by different people, and may vary greatly. It is impossible to
establish an absolute rule; but on the average contractor's plant, it
may be stated that 1/10 of 1 per cent per working day is a very fair
general average figure. The average steam shovel, for example, will
work perhaps 200 days, under favorable weather conditions; and on this
basis the interest and depreciation charge will be 20 per cent per
year, and is not far from a fair figure. Some contractors allow 33 per
cent per year on such material as road machinery, including crushers,
steam rollers, etc. This is a little high, provided that a reasonable
charge is made for repairs.

9. REPAIRS TO PLANT. How much money it takes to keep the equipment in
proper condition for performing efficient work, is a question on which
the limits of space prevent a detailed discussion. On such a machine as
a standard─gauge steam locomotive in constant operation to the limit of
its capacity, repairs may run as high as 20 per cent per year; and on a
rock drill the repairs may be 50 per cent or more per year.

10. RENT, STUMPAGE, ETC. The item of _rent_ includes the rental of
ground and the storage buildings, if any, outside of the office
expenses. _Stumpage_ is the cost of standing timber, the purchaser
being privileged to leave the stump after cutting down the tree.

11. MATERIALS OF CONSTRUCTION. These are chargeable F. O. B. the job,
or at the railroad station nearest to the work.


13. FREIGHT, when not included in item No. 11 or No. 7.




17. TAXES AND INSURANCE ON PROPERTY (including boilers).

18. ACCIDENTAL INSURANCE, to protect workmen and the public.









The ultimate aim of cost analysis is economic efficiency; and
any system or method of cost analysis which does not result in
the lessening of the total cost per unit of work performed, must
necessarily be a failure.

After the costs on work have been partially analyzed, it becomes the
province of the engineer to introduce methods and devices whereby
the expense of obtaining the various data may be more than offset in
the general economy of the work. It was long ago realized that shop
practice could be economized by methods of systematization; and we have
an early instance of the appreciation of this fact in the story of the
struggles and methods re─sorted to by James Watt in the construction of
the early steam engines. The troubles arising from incompetent workmen,
drunkenness, and the necessity of doing work in different parts of
the country far removed from headquarters, were as real then as they
are now, with this disadvantage, that in the eighteenth century the
press, the telephone, and the professional schools had not reached a
development admitting of intelligent coöperation in the attack upon
this problem.

Within the last score of years it has been found that cost─analysis
applied to shop work problems gives most amazing results. When
the piece─work system was introduced, it was believed that the
final solution of the problem had been attained. The men were then
placed upon the footing of contractors. A man got so much pay for
accomplishing so much work; and it was most clearly to his interest
to accomplish the maximum of work in order to get the maximum of pay.
It was immediately evident that the good men would soon show such a
contrast to the poor men on the work as to inspire a constant rivalry,
thereby resulting in a very much higher output. In order that the
desire to accomplish more work should not interfere with the quality of
the work, all materials were systematically and rigidly inspected.

For a good many years the piece─work system flourished, and it is
still flourishing as compared with its predecessors. It is vigorously
fought by trades unions and by the less able among the men. It is
tolerated by those of mediocre ability, and it is heartily endorsed by
the most skilful. In order to remove the resistance of labor unions, a
modification of the piece─rate system, known as the _bonus system_, has
been devised. It will be described in a subsequent paragraph.

Remarkable development has been achieved in the shop by the most
brilliant work on the part of the men who have applied cost analysis,
favored by the fact that in the shop one has conditions of work which
are practically invariable from day to day. It is possible, then, to
compare the work done per unit of time in the morning, with the work
done per unit of time in the afternoon, or for each hour in the day,
and thus to determine the effect of fatigue of the operators upon their
efficiency and the effect of such specific influences as the character
of artificial light, the grade of steel in tools, and even the economic
value of providing reading rooms, white─enameled lavatories, and
recreation for the operatives. To cost analysis has been largely due
the development of the special high─speed steels and an amazing number
of improvements in machinery, entirely aside from the stimulus and
education of the workmen.

In field work, however, comparatively little has been accomplished in
the world at large along these lines, not because the opportunity is
lacking, but because certain of the difficulties appeal more glaringly
to the pioneer in the field, and offer some peculiar discouragements.
The conditions are not uniform from day to day. The locus of the work
is changing, the weather is variable, and a very large number of
external agencies will be continually interfering with the scheduled
regularity of the work. The method or process whereby a piece of work
can be done more economically, may be instituted at just the time when
some apparently trivial variation of the weather, or breakdown in a
water system, or interruption in train service, may produce an entirely
opposite effect which will more than nullify the advantages obtained
from the improved process or method, and will sometimes cover a period
of a good many days and possibly weeks, making it appear that the
improved method is not only a failure but a dragon in disguise.

Field work is constantly presenting obstacles and difficulties which
have to be met and fought, calling for emergency judgment on the part
of the men in charge and on the part of all the men on the work to a
greater or less extent; and here alone is one of the chief reasons why
a contractor comes to depend almost exclusively upon the personality of
his superintendent or foreman, to the exclusion of systematic analysis.

It is abundantly demonstrable that when results are properly charted,
and when a careful record is kept of the causes of interruption and
the extent of the accidental obstacles, the problem becomes much
simplified. It is astonishing how intimately a manager may come into
touch in a short time with the obstacles to his work, and with the most
efficient methods for their removal, by means of proper reports and
cost analysis, and especially by the intelligent use of charts.

=Effects of Weather.= The principal obstruction to economical
construction work in the temperate zone, is due to _rain_. If it is
raining at about the time when the men come upon the work, they will
rarely fail to retire to their homes or to some point so far from the
scene of operations as to make it difficult if not impossible to get
them back upon the job if the weather should clear.

If a rain comes on in the noon hour, they generally leave and do not
return to work. If it should start to drizzle in the middle of the
afternoon, and the men are under fairly good discipline, they stand a
very good chance to stay the day out rather than miss getting a full
day's pay.

Next to rain as an obstacle is _freezing weather_. On concrete work, if
the concrete is laid at temperatures below 22 degrees, and particularly
when a slow─setting brand of cement is used, special precautions have
to be taken, and even then the work is liable to be rejected. For
work in which steam engines are employed, as dinkeys, steam shovels,
steam drills, etc., continued cold weather is likely to result in the
freezing of supply pipes, the freezing of valves, and the breaking
of pipe connections, necessitating a good deal of frost protection
and a well─disciplined and well─handled gang of pipe─fitters under
a responsible foreman charged with the express duty of keeping the
water lines clear. In very cold weather──say below zero──the freezing
of water will seriously interfere with the economy of the work on
the water end alone. Where steam drills are used and the weather
is exceedingly cold, the steam from the drills blown upon the men
condenses and freezes upon their clothes, involving great inconvenience
and suffering. Under such conditions the men will not work so many
hours per day as otherwise, and frequently they will not work at all at
critical times in the progress of the work, to the great detriment of

It has been observed that a combination of stress of weather a few
hours before the coming of the paymaster seems to be more discouraging
than at any other time, and it is seized upon as an excuse to quit work.

In very windy weather, more coal is burned than at other times; and
sometimes a boiler which is capable of running seven or eight drills in
ordinary weather will not be able to furnish steam for more than 70 or
80 per cent of this amount in the high, cold winds.

For the above reasons it is essential to keep a record of the
temperature and weather.

=Accidental Conditions.= Besides the weather, there are a host of
accidental conditions that may arise to influence the economy of the
work and complicate a precise study of the performance. Some of these,
named at random, are:

 1. The blowing─out of the gasket in a main water supply pump.

 2. A shipment of poor coal.

 3. The wrecking of a trestle.

 4. A derailment of cars.

 5. The breaking of machinery on a shovel.

 6. The burning─out of a boiler, due to carelessness on the part of a
 watchman over night.

 7. The non─arrival of necessary and important material.

 8. Irregular blasting, due to irregular spacing of drill holes, or to
 bad loading, or to poor detonators or a poor exploding machine, or to
 irregularity in the character of the rock itself.

 9. Erratic action on the part of one or more of the men, due to
 drunkenness, ill─temper, or general contrariness.

 10. Errors on the part of foremen in coöperation, some of which are
 not detected in time to be eliminated.

In working out any special problem, care should be taken that such
accidental causes affecting performance──whether they decrease the
performance or, as may happen, increase it──should be carefully noted
and be a part of the regular report on the work. These features of a
report ordinarily are ignored as being unimportant, but they are of the
utmost value to the success of the work.


The art of persuading a man who is turning out 500,000 foot─pounds of
work in ten hours, to turn out 800,000 foot─pounds of work in ten hours
with a trivial increase in pay, is on its face difficult; but is by no
means impossible, and a list of some of the ordinary means of doing
this should not be out of place here.

1. =Watching the Work.= If, on the average work under the observation
of a foreman whom they know, the men are made to realize that their
individual performance is being watched and recorded by someone who
is above and beyond their own foreman, there will usually result
an increase in performance of from 10 to 20 per cent per man; and
particularly if a tab is kept upon the performance of the gang as a
whole, the foreman will add his own stimulus to that applied by the men
themselves, resulting in highly increased efficiency.

On such work as teaming, where teams are hauling earth along a road for
a considerable distance, a punch─card is very valuable. The driver
knows that the time of his trip is being recorded and compared with the
time for the same work done by other drivers; and it has the effect of
concentrating his mind upon his performance, which in itself causes
him to use more care in cutting down delays and keeping his team up to
their work.

In the operation of drilling, most valuable results have been achieved
by giving each drill runner a card on which, at the completion of each
hole, the time of the finishing of the hole is punched; and also the
time of starting the new hole, in the same way. This card will then
show the length of time that it took to drill the hole, and the length
of time required to move his drill. He will be stimulated to move
quickly, which in soft rock is an exceedingly important element of the
drilling work, and he will be stimulated in the effort to get his holes
down rapidly.

Where earth or rock is being loaded by steam shovels and hauled by
dinkey trains, great economy can be arrived at by providing each dinkey
runner with a punch─card or a report card on which he indicates the
time when his train left the shovel and when it returned again to
the shovel. This card then indicates the time for a round trip, and
his mind is constantly being stimulated to look out for causes of
delay; and, if he is at all conscientious, as most men are, he will
instinctively attempt to make the best time. Some remarkable results
have been achieved by this means alone in recent work.

When concrete is being mixed by hand, if a record is made of the time
when each batch is finished, there will inevitably be an increase of
activity of all the men in the mixing gang.

2. =Discharges.= The principle of natural selection of the men can be
very advantageously applied. Where the supply of labor is adequate,
it is advisable to make a rule of discharging a few of the poorest
men every few days, taking on new men to fill their places. This
necessarily results in an increase of the ability of the average
men on the work, and it gives a healthy spur to the men who are not
discharged. In carrying this method out, it should be done judiciously
and with care to avoid discharging good men, lest the discipline of the
work be interfered with. Any man who is not willing to do his best,
or who is caught loafing deliberately, is an economic disadvantage to
the work, and should be allowed to go. Likewise, any man who with good
intentions is so dull as to hinder the progress of the work, should
not be retained because of his good intentions alone.

3. =Bonus Systems.= An immense advantage can be counted upon by the
employment of a bonus system, of which there are a good many; and it
should be said at the start, that a bonus system may, although it
probably will not, be opposed by labor unions. The general idea of a
bonus system is to place the men upon a contract footing whereby they
will be guaranteed a minimum wage, and more money than the minimum
if they perform unusually good work. A refinement of this system may
be applied where the men receive less than the guaranteed minimum if
their work is noticeably poor. Where this latter arrangement should
be applied, will depend largely upon the local conditions; and this
feature is the one that is peculiarly obnoxious to the labor unions.
Where the supply of labor is adequate, it is usually better to
discharge the inefficient men than to attempt to work them under a
depressed rate.

On a recent piece of work, the steam drills, of which there were 14,
were averaging 4 feet of hole drilled per drill hour, the drillers
were getting 30 cents per drill hour, and helpers 18¾ cents.
For a period of ten days the drills were kept under the personal
supervision and instruction of the expert in charge; and at the end
of that time a bonus of 2 cents per foot for everything above 70 feet
in 8 hours was offered to the men. On this basis no one could get a
bonus unless he did 100 per cent better than the average previously
attained. Exceedingly cold weather intervened, preventing a good deal
of drilling; but within two weeks of the return to normal weather
conditions, the average drill output rose to over 6 feet per drill
hour, and one man obtained the remarkable record of 142 feet in 9
hours, or over 15.7 feet per drill hour. On this work a careful record
was kept day by day, of the performance of each man; and the men who
had a consistently low average were gradually discharged, thereby
helping out the bonus system. The men were also under more or less
constant instruction, and therefore the improvement was not entirely
due to the bonus system.

A further modification of the bonus system is advisable in some cases,
where an extra bonus is given for exceedingly high performance, such,
for example, as paying the men an extra cent bonus, making 3 cents
above, say, 90 or 100 feet per 8 hours. It is well, however, to apply
this modified arrangement only after there has been an elimination of
the poorest men. When possible, the payment of bonuses should be made
at very short intervals, and not left to a monthly settlement.


4. =Bulletin Board Posting.= Posting upon a bulletin board in the
storehouse or office, of the records of performance accomplished in
different parts of the work day by day or week by week, is a very
valuable adjunct to the other methods of stimulation. The methods above
indicated will keep the men on the _qui vive_ during the day. A very
valuable improvement can be instituted if the more intelligent among
them can be led to think about their work after working hours. This
must necessarily be done in rather a subtle way. Posting records at
the end of the day's work so that the men see them on their way home,
will do a great deal toward keeping the subject alive until the next
morning. When the men have been led to a state where they discuss with
each other the methods of improved efficiency, for the following day
amazing results can be counted upon.

5. =Gang and Team Work.= If a certain number of men have been working
together under one foreman on one particular piece of work, they come
to know each other's methods and their foreman's methods intimately;
and they necessarily will become very much more efficient than when
they are shifted from gang to gang or when they have to work under
different foremen. If the record of the performance of each individual
gang can be obtained, and the men, as well as the foreman, are
acquainted with the record, a spirit of rivalry between the gangs
can be developed which will add greatly to efficiency. In making
such a record, inasmuch as the gangs are likely to vary in size, it
is necessary to have a unit of performance that will be independent
of the number of men in the gang. It will be found that, shortly
after the application of this principle, the men are themselves
making suggestions as to improvements in method; and frequently their
suggestions are immensely valuable.

6. =High Pay.= Some contractors have found it economical to pay a
little more than the prevailing rate of wages, thereby attracting to
their organization the best of the labor available. As a general thing,
a man is perfectly willing to do 10 per cent more work for 5 per cent
more pay per hour; and the difference in men is so great as to make
it more than well worth while to secure the very best of the labor

7. =Prompt Pay.= Men will work very much more contentedly when they
can count upon their pay with promptness and regularity. There is
nothing that demoralizes a piece of construction work more than the
postponement of a pay─day. Special care should be taken that each man's
pay is accurate. A man will seldom be over─paid unless there is "graft"
on the job, but it sometimes happens that through errors on the part of
the time─keeper or bookkeeper a man's pay is short, much to the agony
of the man himself.

8. =Early Hours.= A good deal of money is lost by the men not starting
to work promptly at the commencing hour, and by quitting before the
final hour. On a recent piece of work that had to be drastically
reorganized, an entire blasting gang rested on their shovels for over
one hour, because their foreman had decided to quit without notice,
and the man who was supposed to be in charge of the work arrived
late himself, and was detained at the other end of the job. On this
particular piece of work, it was not the habit to blow a whistle at
the commencing or the quitting hour, and the men started work in the
morning and quit work in the evening according to their own timepieces.
It was noted that nobody on the whole job quit a minute after he should
have quit, or started a moment earlier than he was paid to start.

In factory work it is feasible to have all the men go through a gate
which is closed one minute after the hour and not opened again for
perhaps 25 minutes, so that, if a man is two minutes late, he loses a
half─hour's pay. This has the merit of not working injustice to anyone,
and, after being instituted, seems to be accepted by the men with a
reasonable degree of contentment. It is not easy to start a strike
because some men lose their jobs from being late.

Such a system as this, however, is practically impossible on outside
contract work; and while it may be feasible to institute a modification
of the time clock method, it is not known that this has yet been
successfully done. Probably the most satisfactory way of insuring
prompt arrival of the men, is to measure the output of each gang and
make each foreman responsible for it, thus giving him a personal
incentive to get his men on the job promptly.

9. =Enough Foremen.= It is necessary, in any organization, to have the
chain of responsibility lead through a sufficient number of foremen;
otherwise a superintendent or supervisor will find himself "spreading
out too thin," and will be attempting to perform a lot of work that
should be done by a foreman. One superintendent can supervise the work
of 20 or 30 foremen with a favorable layout, and each foreman can
supervise the work of from 10 to 25 men. If, however, there be more
gangs than there are foremen, the superintendent will find himself
trying to play the part of foreman in instructing the men, and not able
to do his own work, which is to instruct and supervise the foremen. In
the matter of drilling, a number of able managers are not in favor of
having a foreman over the drills. It is calculated that by substituting
a boy to keep the records of the drilling, and putting bonuses on the
drills, the difference between the pay of a foreman and the pay of a
boy is saved, with no appreciable loss in performance.

There are strong grounds for the opinion that there should be no
process, such as drilling, without a foreman, where the work is on a
large scale. When 10 drills are working, they will employ altogether 20
men on the drills, a number of muckers clearing the ground, and a pipe
man. The work of these men cannot fail to be improved by their being at
all times under the watchful eye of a man to whom they are responsible
for the quantity and quality of their work. Aside from this, if the
foreman is an expert driller, the instruction that he can give to the
less able of the drill runners will be worth ten times its cost.

The same argument applies to all processes in the field.

10. =Education on the Work.= As a general thing, men who take money for
their labor are more than willing to deliver a square deal to their
employer; and it will almost invariably be found that the more familiar
a man is with the difficulties and possibilities of his fellow─workmen,
the more efficient he will be himself. For this reason it has been
found highly satisfactory, in some lines of work, to change the men
around on the job. In a certain concrete building 12 stories high, the
upper stories were built in a small fraction of the time required for
the corresponding lower stories. The greater part of the extraordinary
increase in efficiency was attributed to the fact that the men were
so educated that a man at the top of the building knew how the men at
the mixer and in other parts of the job were doing their work, and
knew that the superintendent in charge was measuring the speed of the
deliveries from the hoist. The disadvantage of this method is that
it takes a long time to work up the efficiency. It is, however, an
admirable method for disciplining an organization.

=Discipline.= To the practical man, or to the intelligent student,
there seems to be no necessity for arguing in favor of _discipline_
as an essential to economical field work; but so large a percentage
of contract work in the field is badly disciplined, and the general
principles seem to be unknown to so many field organizations, that a
brief statement of them appears to be called for in this volume.

By _discipline_ is meant the cultivation of a spirit of:

  1. Co─operation;
  2. Obedience;
  3. Responsibility;
  4. Personal loyalty.

The subject will be discussed on the basis of _reorganization of work_,
because here the chief difficulties are met.

The three types of organization that are most clearly defined in the
way of discipline, are those of a _military nature_, _railroad work_,
and _factory work_.

On construction work, it is not feasible to introduce a military form
of discipline. In the first place, the penalties of the military
service are not permissible; and in the second place it is not
usually practicable to have so thorough a system of distribution
of responsibility; while in the third place the same men are not
here together for a long enough period to make military discipline

In railroad work a man is usually employed for a long term of years, on
rather small pay, with a large chance of promotion. From the day of his
initiation on the work, he is impressed profoundly with the necessity
of protecting lives and of keeping trains moving all the time; and,
in a short time, he comes to the frame of mind in which his pay, his
personal convenience, and his personal prejudice are subordinate
interests. The initials of the superintendent on a little slip of
paper are sufficient to make him do almost anything within the limit
of endurance; and, as a general thing, he does it ungrudgingly (but
not uncomplainingly), and with a cheerfulness that is in many respects

Such a degree of discipline is entirely feasible on any contract work
of long duration, and it should be obtained if economy is desired. It
is not possible to institute successfully radical reforms and methods,
without first securing good discipline on the work; and when work is
badly disorganized, the discipline should be the first point of attack.

It is necessary to have, first, a system of locating responsibility. If
a dinkey becomes derailed, if the spacing of drill holes be erroneously
made, if a steam shovel be out of line, if the wrong methods of
loading be pursued, if a pump be out of order, if necessary material
or supplies be wanting, if the pipes freeze up, if, in short, one
hundred and one little things happen that cause confusion on the work,
it should be possible to find someone who, by some crime of omission
or commission, is responsible for the trouble, and who can be made, in
some degree at least, to bear the brunt of it. The only man who seems
destined to be entirely free from the consequence of his mistakes, is
the clerk of the Weather Bureau.

The organization should be laid out from the bottom upward, rather
than from the top downward. The laborer is responsible practically for
carrying out the instructions of his foreman to the satisfaction of
his foreman and of no one else, and for this reason he should not work
under the impression that anyone except his own foreman is likely to
discharge him, to criticise him, or to praise him. If his foreman be
the right sort of man, the laborer, with his dozen associates, will
have at heart, besides the interests of the work, a strong feeling of
personal loyalty to the foreman; and this feeling will be reciprocated
by the foreman. If a foreman be noticed vigorously complaining that the
men he has to deal with are inefficient, incompetent, and a disgrace to
civilization compared to the men he had to work with some years before,
he may as a general thing be put down as a "blow─hard" and of little
value to the organization. The most successful are usually the ones
who are ordinarily quiet, cool under emergency, and yet of sufficient
determination to inspire among the men a wholesome respect for them.
A man who loses his temper on the work for any reason, does not, as a
general thing, make a good foreman or superintendent.

The relations obtaining between the men and their foreman, should
obtain to a more marked degree between the foreman and their
superintendent. Briefly stated, every man on the job should have
to look for orders from one man and only one man; and he should be
responsible to that man for the satisfactory performance of those

Conflicting orders can be avoided only by systematic compliance with
the rule just above outlined.

It sometimes happens after periods of financial depression, or as a
result of special conditions, that it is feasible to reduce the pay of
a good many men on the work. This should always be done with great care
and after an intimate knowledge has been obtained of the personalities
of the men affected. As a general thing, if you cut down a man's pay 10
per cent, you will cut down the work 20 per cent, at least for a time;
and it frequently happens that after such a pay reduction, small, petty
depredations on the work are committed. Articles get stolen; machinery
is damaged by "sore heads." It is usually unwise to reduce the pay of a
few men. As a general policy, where a small percentage of the working
force is to be affected, it is better to discharge a few men outright,
and endeavor by economic methods to increase the output of the others.

Differential pay is a prolific source of trouble, and it is very
common. By this is meant the payment to different men of different
rates for the performance of the same work. The men who obtain the
less pay think that their pay ought to be raised; and the man who gets
the most pay can in no probability appreciate the fact that he may be
over─paid. Rather than cut his pay down, it is well, if possible, to
put him at some other class of work.

It is often necessary for economical reasons to place men who have been
paid by the month, upon an hourly basis; and even when by this they
average rather more than they formerly received, it usually causes
discontent. Any man likes to know how he is coming out at the end of
the month regardless of the weather, and it is an additional source of
anxiety to him not to know what his pay envelope will contain. When he
keeps his own record of the hours worked, he is likely to disagree with
the time─keeper, and this can lead to a good deal of disaffection and

A frequent cause of disaffection on work is due to the habit too often
indulged in by time─keepers, of gossiping with the men. The time─keeper
and the storekeeper necessarily come into contact with a very large
percentage of the men every day; and if the time─keeper particularly be
disposed to gossip, he has abundant opportunity to gratify his desire,
and can produce a great deal of trouble. For this reason the general
character of the time─keeper should be carefully scrutinized before
employing him; and he should be cautious, when making his rounds, to
confine himself strictly to business. If the men on the job know as
much about the work as the General Manager, if they know all the ins
and outs and ups and downs of the contract, they necessarily discuss it
among themselves, and a great deal of restlessness is produced, which
is very difficult to stamp out, because, by the time it has reached a
pronounced stage, the men have learned so much about the politics, as
it were, of the job, as to interfere with the discipline.

If there be dissensions at headquarters, if the parties that control
the work are at war, and if the methods and performance of the manager
or superintendent be not absolutely satisfactory to every one of the
officials, nothing can be worse than to let a suspicion of this matter
get around among the men. How a general manager or superintendent can
prevent this, if an officer be disposed to talk, is a problem that no
attempt will here be made to solve. In reorganization, such a condition
is one for which the manager should be continually on the alert, and he
is advised to be suspicious of the time─keeper and storekeeper.

=Labor─Saving Devices Involving Plant.= If the men are in a reasonably
good state of discipline, it is feasible to make changes in the layout
involving special apparatus or plant; and in deciding upon such
measures, a question arises as to how much money it is justifiable
to spend for a new plant. A piece of work under reorganization
is ordinarily a piece of work that is more or less in financial
difficulties, and the purchase of plant for the economizing of the
work is usually looked upon by the officers as a dangerous move.
Particularly is this the case when any changes of this kind turn out to
be unsuccessful. A small amount of money wasted on special apparatus
is always in sight──at the scrap heap, if nowhere else──whereas a good
deal of money wasted in fruitless labor can be easily lost to view.

If the amount of saving on a certain operation by the installation
of special material be sufficient to pay for this material in a few
weeks, the purchase of the material can be immediately justified, and
the cost of the apparatus can be charged as _current expenses_ to be
shortly recovered in the economy of the work. Where expensive and heavy
machinery is to be installed, however, the matter should be gone into
with the greatest care and detail.

A few of the articles which come within the class chargeable to
_current expenses_, are:

 1. The use of water jets for increasing the speed of drilling in soft

 2. The use of hickory wands for stirring up sludge in drill holes, and
 increasing the speed of drilling.

 3. The use of special explosives and good exploding machines, and of
 loading tubes for blasting.

 4. Small grading machines for spreading earth and macadam.

 5. Special wheelbarrows or carts for moving material.

 6. Special small tools for the blacksmith, including a trough in which
 he can set his bits to be hardened, with the points in the water.

 7. A sufficient supply of picks and shovels.

Some of the items of plant that may be classed in the other category,

 1. Special wagons and scrapers for hauling earth.

 2. Concrete mixers especially adapted to the work in hand.

 3. Derricks.

 4. Locomotive cranes.

 5. Cableways.

 6. Bit─sharpening machines.

=Labor─Saving Devices Involving No Plant.= Where the labor preparatory
to introducing the improved methods is considered, it should be taken
as equivalent to a plant charge as affecting the interest of the
contractor. If, for example, it has been the practice to drill and
blast immediately in front of a steam shovel on rock excavation, and
it is desired to have the drilling and blasting so far ahead of the
shovel as to avoid the occasional necessity of holding up the shovel,
the money involved in the work done ahead should be considered in the
nature of a temporary investment and charged to money expended on plant
which will not come back for a period of perhaps one month.

A steam─shovel crew has a good deal more pride in its work, and will
continue working under more disagreeable weather conditions, than a
drilling gang; and when drilling in front of a shovel, severe weather
conditions may cause the drilling work to stop without interrupting the
operation of the shovel. If, then, the drills are working too close to
the shovel, the shovel may catch them.

On the other hand, it is unwise to blast far ahead of the shovel, for
a number of reasons. In the first place, there is no advantage in
investing money in drill holes, except to avoid such a contingency
as outlined above. In the second place, it is impossible to tell how
effective the blasting has been until the shovel has attacked the
broken rock; and if the blasting is done far ahead of the shovel, poor
blasting may go undetected until an immense amount of financial damage
has been done.

To cite a specific instance──On a recent piece of important work, a cut
several hundred feet long was drilled to a depth of supposedly fourteen
feet, and blasted with more or less unsatisfactory results. The steam
shovel was then put in, and excavated to a depth of five or six feet.
The subsequent cut of from eight to nine feet deep had to be entirely
re─drilled and re─blasted. The drilling in the already partly broken
rock was immensely difficult, the drills sticking a great deal and a
good many of the holes having to be abandoned; while the blasting was
unsatisfactory because of the fissures.

The rapid reorganization of work can be furthered by the issuance of
_special instructions to foremen in the field_. This practice has been
admirably followed by Frank B. Gilbreth, and is described in his "Field
System." As illustrations of such orders, are the following to drill
and blasting foremen, issued on some recent work:



 Drill foremen are requested to do their utmost to enforce the
 following rules for drilling:

 1. Each drill at the beginning of a hole is to be supplied with a
 complete set of sharp bits and a pump, which will be laid alongside
 of the drill tripod by the drill tender, under the directions of the

 2. As soon as a hole is finished, one of the muckers at the direction
 of the foreman will assist the two drill runners to move the tripod;
 and the mucker under the direction of the foreman will then pump out
 the hole that has just been completed.

 3. The foreman will then personally, with a wooden rod, measure the
 depth of the hole, and punch said depth on the drillers' card, the
 mucker placing a well─made round plug in the hole and hammering it

 4. Foremen will see that the drills are so distributed as to keep them
 as near as possible to the manifold, from which the steam supply is

 5. Pipe connections are to be made by a pipe─fitter who will be
 assigned to each drill gang, and who may be assisted by the foreman
 and by a mucker when necessary. No pipe─fitting is to be done by drill
 runners or helpers unless absolutely necessary.

 6. The time for drilling is from 8 A. M. until noon, and from 12.30
 until 4.30 P. M.; and the moving of the dinkey supplying the drills
 with steam is never to be done within those hours, unless absolutely
 necessary, and when it is necessary, a note to that effect must be
 made on the quarry card.

 7. Whenever for any reason the drills are out of steam, the drill
 foreman will indicate the time when the steam pressure failed and the
 time when pressure was again turned on, with a reason why the pressure
 gave out. This to be written on the quarry card.

 8. Foremen will see that each drill is in proper working order,
 and supplied with an exhaust pipe of the proper length and with a
 throttle. Whenever for any reason a drill is not in perfect condition,
 the foreman will immediately report it and make requisition through
 the storekeeper for the necessary parts and repairs.

 The attention of all concerned is particularly called to these rules,
 the enforcement of which is essential to the economic performance of
 the work; and all concerned are particularly urged to make a most
 earnest effort to see that, as far as it is possible, every drill on
 the work shall be in actual operation for 8 hours on every working day.

 By order of,

  RICHARD T. DANA, General Manager.



 Blasting foremen are requested to do their utmost to enforce the
 following rules for the conduct of blasting operations:

 1. Attention is called to the fact that dynamite will freeze in about
 45° temperature, and that at this temperature, a little above or a
 little below, dynamite is exceedingly sensitive to shocks, and should
 be handled accordingly.

 2. Whenever a part of the charge in a hole has been exploded, leaving
 any unexploded dynamite in the hole, do not under any circumstances
 blow out the unexploded dynamite with a steam jet. You may, however,
 put a stick of dynamite down into the hole on top of the unexploded
 powder and endeavor to fire the entire hole in this manner.

 3. The blasting foreman will provide himself with a measured wooden
 rod for tamping, and personally see that every hole that is loaded
 is down to grade. If he should find any hole that is not down to
 grade, he will immediately report the fact to the superintendent or
 assistant superintendent on the work, and make a note of the same on
 his time─card.

 4. The attention of the foreman is called to the fact that dynamite is
 not as efficient in a hole full of water as it is in a dry hole, and
 every effort should be made to load the holes as dry as possible.

 5. The tamping of the holes should be of the heaviest and stickiest
 clay that can be obtained, and this tamping should extend the entire
 length of the hole above the powder.

 6. Never thaw dynamite in front of the fire, or on a hot stone removed
 from a fire, or by piling sticks in a boiler or in an oven.

 By order of,

  RICHARD T. DANA, General Manager.

In hauling earth, the principal elements of team expense are the time
to haul and the standing still to load. This last item can be very
materially reduced by the simple expedient of having on the work an
extra wagon or two. A team can be changed from one wagon to another in
about one and a─half minutes, and the same number of teams on a short
haul will do easily 15 per cent more work by this trick.

The same principle applies to the mixing of concrete involving extra
wheelbarrows; and here it may be mentioned that the arrangement of the
concrete platform is seldom economical. The men, if left to themselves,
will usually not have sufficient runways, so that a man with a loaded
wheelbarrow will be painfully struggling up a plank, while a man with
an empty wheelbarrow is waiting for him to get out of the way. Much can
be accomplished by having the men move in procession so that no man
with a wheelbarrow will ever have to stand and wait for another man to
get out of his way. Of course the ideal method of handling concrete
into a mixer is to do it from bins with chutes; but the great majority
of this class of work is not done in this manner.

On contract work, the emergency charges for the moving of plant are
usually considerably higher than they ought to be, owing to the fact
that the work is done by men who are not especially skilful in this
kind of work. The direction of these processes should be given to a man
who is especially good at it; and the work should be provided with a
good supply of gin poles, snatch blocks, tackle, etc.

If a piece of work has been under personal observation for considerable
time, a great many sources of improvement in the performance can be
detected that are entirely invisible upon casual inspection; and the
student of economics is urged to devote a large amount of time to
the most careful and complete study of minor and apparently trivial
operations. Too much respect is usually given to established methods,
just because they are established methods; and the analysis of a
process that is apparently simple and of minor importance, but which
is repeated scores of times in a day, is nearly always given too
little importance as compared with the process that is elaborate and
complicated, and which may in itself be of great importance, but which,
on the particular work at hand, is dependent upon apparently minor
processes. To illustrate──A shovel, loading eight or nine thousand
yards of rock per month, was inspected; and the first impression
obtained was that the reason the shovel output was so small was because
of the inefficient layout of the shovel work itself. It was found,
however, that the shovel was actually able to work a good deal faster
than the drills and the blasting could provide broken rock for it; and
the ultimate solution of the problem was found in the reorganizing of
the drilling, in order to do more work with the same number of drills,
and in the use of improved methods in blasting. The handling of the
shovel took care of itself as soon as the other problems were solved.

The cost of spreading broken macadam on a road, to the average
contractor, is not far from 12 cents per cubic yard; and the work is
done with shovels and forks. This method is one that has been pursued
for a great many years; and there are very few contractors who realize
that it is exceedingly expensive. Some contractors, however, are doing
work of this kind with the aid of a road machine that requires for its
operation two or three men and four horses. A small grader machine that
can be operated by one man and two horses for rough spreading, assisted
by one man on the ground with a potato hook, has been known to do this
work for about 2 cents or less per cubic yard.

In bridge─erecting work, a great deal of money can be saved over
ordinary methods by the designing of special tools, such as dolly
bars; and a good system of keeping detailed cost on such work will be
sure to result advantageously. Much labor is lost in the erecting of
roof trusses and in the erection of trusses in general, by crude and
old─fashioned methods. The pneumatic riveter which strikes a great
many light blows per minute has revolutionized field riveting; but
the use of such a machine for cutting rivets has been unsuccessful in
competition with hand labor on at least one large piece of work in New
York City.

In painting, considerable time is ordinarily lost by the painters in
preparing their own staging. Whenever possible, these preparations
should be done for them under the direction of a skilled man; and the
use of small winches on the staging whereby the painters can quickly
raise and lower themselves, has been found of great value.

On contract work, the blacksmith is in a position peculiar to himself.
He is classed as an expert, paid by the month, and is supposed somehow
to get all the work done that comes to him. He has general charge
of his department, and he gets very few orders and practically no
instruction from the superintendent or manager. He is nearly always
an interesting personality, and, outside of a very limited field,
extraordinarily ignorant. The excuse on a great deal of uneconomical
work is that it is impossible to get a competent blacksmith who knows
how to do the work that he is called upon to perform. Tools will not
hold their edge, or they break. Upon the matter being referred to the
blacksmith, he will usually come back with a complaint about his coal,
or the grade of steel with which he is supplied, or his tempering
solution, or the condition of his forge. He should be provided with a
thoroughly good set of tools, and the superintendent should know that
his tools are of the best. He should next be carefully and thoroughly
instructed as to how to harden and temper steel. A convenient shop for
the blacksmith, and proper methods of forging and tempering, will add
incalculable value to the organization.

=Introduction of New Methods.= It should be adopted as a cardinal
principle, that there are no methods in the field which are not capable
of improvement along the line of economy; and it should be remembered
that a very small improvement in any one method is invariably worth
a great deal of thought and time in arriving at it. The systematic
perusal of the proceedings of the engineering societies and the
engineering press, will result in the suggestion of new and improved
methods and of a good many bad and unimproved methods; and the trained
expert should be able to sift the wheat from the chaff, and apply only
such as will fit his special needs.

The literature of shop development and shop economics is rich in
illustrations and suggestions that can be adapted to field work, and
should be gone over very carefully for this purpose. In this connection
it should be urged that it is a duty of a professional man to publish
new methods. There is no room for argument on the proposition that the
principle of free trade, showing the other fellow two blades of grass
growing where one grew before, is an advantage to all concerned.

=Design of New Methods.= When there is crying need for improved methods
in the field on account of special necessity, it behooves the man in
charge to invent improved methods and design improved apparatus. The
cardinal elements of such design include the following:

 1. Simplicity.

 2. Low first cost, so that if the experiment is not successful,
 nothing will be lost.

 3. The use of standard sizes of material.

 4. Generality of application.

Whenever possible, a new method or a new machine should be so
constructed as to apply to as large a proportion of the whole work as
possible, and every effort should be made toward the standardization of
materials and apparatus.

In attempting work in blasting, it should be remembered that the use
of new and untried explosives is attended with peculiar dangers. The
men are familiar with the use of the standard grades of powder; and
while they are ignorant of how dangerous it is to take liberties with
dynamite, they are at a great disadvantage when a new explosive is
given to them for trial. If it looks like dynamite and is exploded with
the ordinary detonating cap, its peculiarities do not receive much

Men in the field are instinctively opposed to new ideas, and it will
invariably be found that new methods meet with stubborn opposition.
A foreman to whom a new method is suggested will not expect it to be
successful, particularly if he has ever heard it condemned; and it
always seems as if the thought were father to the wish, for, when
ordered to try it in the field, if he can make it fail, he will do
so with unerring accuracy. As a general thing, however, when it is
successfully demonstrated, he will become a loyal supporter of it. In
presenting a new method to a foreman or superintendent, it is well
not to encourage the raising of objections. It is better to let the
objections raise themselves in the application of the process; and a
man who has not gone on record as saying that in his opinion a new
scheme is no good, is a much more loyal supporter of the new scheme
than when he has committed himself against it.

One of the difficulties in improving the efficiency of work, is the
extraordinarily ingenious line of excuses that the men will present
for not getting their work done properly. Of these, perhaps the most
hard─worked is that of improper and insufficient material. When a
man is berated for poor work, and presents the argument that he was
unable to do so and so because he ordered material for it several weeks
previously and the material has not yet arrived, the situation is
embarrassing. The best preventive of this is to have small requisition
blanks measuring about 2½ by 4½ inches, made up into pads of
about fifty each, and to give each foreman a pad. Each blank should
have a space for the date, the articles ordered, the time when the
article is needed, the particular part of the work where the article
is needed, the class of work for which the article is needed, and the
foreman's name. The foreman should then be instructed that material
will be purchased through the storekeeper, and that non─delivery of
material will not be accepted as an excuse. The storekeeper should
then go around a job at least once a day, and get from the foremen
their requisition slips; and an intelligent storekeeper will see to it
that useless and unnecessary material or superfluous material is not
ordered. Material that is ordered on requisition, and is not in the
storehouse, should be purchased if necessary on a rush order, because,
contrary to the ordinary apparent belief, it is economical to spend a
dollar for material in order to save two dollars in labor.

=The Field Layout.= In laying out the plan of campaign on starting a
new piece of work, it is important to consider the proposition from
the capitalization end, as well as from that of pure construction.
It is usually not appreciated by the engineer or the owner, that
the contractor is doing a piece of delicate financiering, for the
performance of which his own available money is usually inadequate,
and that he is therefore obliged to borrow money on the work as
it goes along, and to depend upon his monthly estimates. It is
sometimes specified in the contract, that the contractor shall own
all of his plant in fee, but it may be said that this arrangement
is seldom lived up to. He can in addition nearly always borrow the
amount of his pay─roll a month in advance, from his bank. He can
also sometimes borrow money, giving as security his interest in the
money retained on the contract, which is ordinarily something like
10 per cent. Therefore, provided that all goes well, if he gets his
estimates when they are due, if his pay─roll is not more than the
amount of his monthly estimate, and if no very large and disastrous
contingencies interfere with the progress of the work, the contractor
can swing a large piece of work with a comparatively small capital.
If, however, things do not go well; if, through the failure of the
owner's engineer, or through the insolvency of the owner, or through
liens and attachments upon the work brought by dissatisfied creditors,
the contractor does not receive his monthly estimates on time; if, in
order successfully to prosecute the work, it is necessary for him to
buy a large amount of additional machinery at a time when payments on
old machinery are due; or if the portion of the work that he is doing
is bringing him in less than the amount of his pay─roll and immediate
materials and supplies, unless he has a large capital back of him,
which capital is at once available, he is liable to be placed in an
exceedingly embarrassing position. At such a time, if there should
come a period of financial stringency, bankruptcy may stare him in the
face, even though he has at the same time a contract on which he can be
reasonably sure of making a large profit.

It is therefore of great importance that the work be prosecuted in
such a manner as to have a continuous running profit, if possible.
A contractor may turn in what is known as an _unbalanced bid_. In
that event it will be very easy for him to start a certain portion of
the work upon which he will lose money before he reaches the portion
on which he expects to make money. Unless, as above indicated, the
contractor is provided with a large fund for contingencies, great care
should be taken to avoid this. The nature of unbalanced bids will be
explained below.

As a case in point, on a certain contract involving over a million
dollars, the company that was organized to conduct the work was
provided with a small working capital, bought its plant on a time
basis, and proceeded with a small working capital, under the impression
that it would not be necessary to borrow any money, that the work
immediately commenced would be sufficient to pay all the expenses and
leave a profit, which profit would gradually accumulate and enable
a running fund to be maintained which would take care of future
contingencies. The idea was admirable. It happened that the work was
in earth and rock excavation also known as _unclassified_, and was
taken at a price which would admit of a large profit in any event. The
rock work, if taken economically, would cost more than the contract
price; the earth work, if taken economically, would cost considerably
less than the contract price. The original plan contemplated starting
the earth excavation at a point to which another contractor was
to excavate, and it was not deemed feasible to commence the earth
excavation until the other contractor had cut up to the line between
the two contracts. Dependence was placed upon the other contractor
doing his work on time, which he did not do; and it was then decided
that it would be impracticable to commence in the earth, and work
was accordingly commenced in rock, which work was conducted at a
considerable loss. The strong financial position of the contracting
company was the only thing that prevented it from going to the wall
with a most excellent contract partly completed and a lot of good money
tied up.


We shall assume, for purposes of illustration, that a certain
contractor desires to bid on some public work involving the removal of
100,000 cubic yards of earth work and 50,000 cubic yards of rock work.
He estimates that he can do the earth work for 30 cents per cubic yard,
or $30,000, and rock work for 80 cents per cubic yard, or $40,000,
making a total of $70,000 for the entire 150,000 yards, or 46.66 cents
per yard for an average of the earth and rock; and he puts in his bid
at this figure.

If the contract has been obtained as one of the Erie Barge Canal
contracts, the work will be let _unclassified_, as it is called. By
this is meant that no discrimination in monthly estimates will be made
between rock and earth removed; that the earth and rock removed will
be measured in excavation, and the contractor will be paid for these
two materials indiscriminately. Now, we shall assume that he can make
a profit of 4 cents per yard on the earth, and 10 cents per yard on
the rock, so that his total profit on the contract will be $9,000.
According to the terms of his contract, he will be paid on the monthly
estimates 46.66 cents per yard removed, less 10 per cent──or 42 cents,
the 10 per cent being retained until the completion of the contract.

Suppose, now, that he starts in on the rock, and he excavates the
50,000 yards at a cost to him of $35,000.00 for which he will receive
42 cents per yard, or $21,000.00. He will then be out of pocket
$14,000.00; but there will be coming to him as held by the State

Before he can begin to "see daylight" on his contract, he must proceed
to excavate earth until he has made up the $14,000.00. He gets 42 cents
in cash, and it costs him 26 cents, so that he must excavate 87,500
yards of earth, for which he will get the $14,000.00, and he will have
held up $4,083.33 additional. There will then be remaining 12,500 yards
to be excavated on which he will get $5,250.00, with $583.33 held back.
He will have been obliged to do 91⅔ per cent of his contract before
he stops putting money into it; and the money that he has put into it
he will not be able to draw interest on, because he will not be drawing
interest on the 10 per cent retained. The amount of money that he had
to put up to cover shortage on his contract will have been $14,000.00,
on which he will have to pay interest to his bank. If, on the other
hand, he commences the earthwork first, he does 100,000 yards of
earthwork, costing him 26 cents, on which he gets back immediately 42
cents, and he has $16,000 for working capital, in addition to $4,666.66
held up. He then does the rock work, and the rock work never exhausts
his capital, and he has no interest to pay except on his plant, which
he can easily do out of his $16,000.

This is not only a practical problem in how to handle a contract
without being wiped out financially, but it is an exceedingly important
one as defining where the ultimate success in the operation lies. It
can readily be seen that when a contract is taken on close figures, the
entire success of the financial operation will depend upon the proper
layout, as indicated above.

=Unbalanced Bids.= We shall assume again, for purposes of illustration,
that a certain contractor desires to bid on some public work involving
the removal of 100,000 cubic yards of earthwork and 50,000 cubic yards
of rock work. He estimates that he can do the earthwork at a profit
for 30 cents per cubic yard, or $30,000; and rock work for 80 cents
per cubic yard, or $40,000. If the work in the above example were
_classified_, and the contractor were paid so much money for each
yard of rock and so much money for each yard of earth excavated, and
his bid read 80 cents for rock and 30 cents for earth, it would be
said to be a _balanced bid_. Other contractors, seeing his bid, would
know that he considered that he could do the rock work at a profit at
80 cents, and earthwork at a profit at 30 cents. In order to prevent
them from obtaining this information, the contractor can _unbalance_
his bid, as it is termed; and in this event he would bid perhaps as
follows──namely, 100,000 yards of earth at 40 cents, or $40,000; and
50,000 yards of rock at 60 cents, or $30,000. The total amount of this
contract would be the same, and he would make the same profit; but his
competitors would be deceived as to his basis of doing work.

The disadvantage of this from the contractor's point of view is that,
in the event of an error having been made in an estimate of quantity,
he might find himself doing less than 100,000 yards of earth and more
than 50,000 yards of rock, in which event he would stand to lose money.

=Material Supply.= In concrete work particularly, it is all─important
that material──cement, sand, and stone──be promptly shipped, and at the
same time not too promptly shipped. If the shipments are not promptly
made, there will be a failure of material to arrive, which will throw
the men out of work, with all that this implies in high costs. If
the material is shipped too rapidly, it will be necessary either to
unload it into a stock pile, which will involve the re─handling of the
material; or to pay demurrage charges to the railroad company, if the
shipments are made by rail.

In such work, at a time when there is likely to be any freight
congestion in the country, stock─pile facilities should be provided to
care for a supply of material to carry the work for one to two weeks.

On a piece of work involving, say, two large concrete mixers capable
of mixing 300 yards of material each per day, there will be used 900
yards of stone and sand per day, which, on a ten─day basis, will mean
a very respectable stock pile. This 9,000 yards of material, costing
perhaps one dollar per yard, means an investment of $9,000 in stock
pile, on which interest must be paid at the rate of, say, 6 per cent,
or $2.00 per working day, which means a trivial item compared with
the advantages derived from having a constant supply of material.
The total cost of this stock pile, in addition to interest, is the
cost of one re─handling of material out of the stock pile, which at 5
cents per yard would be $450. This amount is very much less than the
damage that would accrue from not having any stock pile at all. On
most concrete jobs, there is usually provided a large storehouse for
cement; and when the work has to go over from one working season to
another, it is frequently the custom to leave the cement in storage.
This is frequently a cause of loss of money, because the cement, being
hygroscopic, absorbs moisture from the atmosphere, and is liable to
spoil in consequence. This can be avoided by keeping the storehouse dry
and warm through the winter, but this again is an expensive matter.

=Old versus New Machinery.= In planning construction work, the question
always comes up as to whether to use old or new machinery. No hard
and fast rule can be prescribed. A case occurred upon an important
contract where there were needed some new boiler tubes for the boiler
that ran the main supply pump. The purchasing agent of the contracting
company, who happened also to be the President and Chief Engineer of
the company, bought some second─hand boiler tubes, which were forthwith
put into this boiler. The saving on the boiler tubes was probably $8 or
$10. The loss caused by a breakdown of the same boiler was nearly $50.
In purchasing second─hand material, if the material can be thoroughly
and rigidly inspected, it is perhaps wise to purchase it, and sometimes
money can be saved; but as a general proposition, no second─hand
material should be purchased for a contract, unless it is done with the
determination of putting this material in first─class condition before
it is used. The best inspection, as a general thing, will not disclose
the exact condition of old material. By this it is not meant to
intimate that new material should be purchased for every new contract.

=Use of Maps.= A precaution on construction work that is very seldom
taken by contractors generally, and one that is a most certain saver of
money, is to have a complete map of the work to a large scale carefully
prepared, on which should be indicated day by day the progress of
the work. This map, if kept up to date, will enable the manager of a
company, or the president and directors, to know in detail the progress
of the work, without necessarily going out on the work; and from it can
be found the quantities of needed materials, such as rail, pipe, etc.

=Standard Instructions.= Every organization doing field work would do
well to follow the custom admirably illustrated by Frank B. Gilbreth,
of issuing regular standard instructions to foremen and to employees
generally. These instructions have been published in book form by the
Myron C. Clark Publishing Company, and are an admirable example of the
type. The idea follows that of the old Railroad Company's "Book of
Rules" that will tend toward evading similar accidents in the future.
In this manner eventually a contractor can obtain a control of his
organization, and a freedom from accidents, that will be extremely

=Chronological Charts.= These are intended to show the proposed time of
completion in certain parts of the work. A valuable aid to a manager on
work requiring a large amount of material, and where there is a small
amount of available space, is a chart showing the time and quantity
of expected materials and supplies. This will enable him to see at a
glance where he may expect to be in the matter of his materials, and
will tend to relieve his mind of one of its most annoying problems.
These same charts can also show him the estimated times of completion
of certain parts of the work.



In the foregoing sections of this Cyclopedia numerous illustrative
examples are worked out in detail in order to show the application of
the various methods and principles. Accompanying these are examples for
practice which will aid the reader in fixing the principles in mind.

In the following pages are given a large number of test questions
and problems which afford a valuable means of testing the reader's
knowledge of the subjects treated. They will be found excellent
practice for those preparing for Civil Service Examinations. In some
cases numerical answers are given as a further aid in this work.




1. What information is required by the purchasing agent?

2. Outline a system of catalogue filing suitable for a business of your
own selection. What styles of files would you recommend?

3. Describe and illustrate with suitable forms, a system of catalogue

4. Explain how special quotations can be recorded, and illustrate with
a suitable form.

5. What method would you suggest for keeping a record of orders placed?

6. Explain the routine of the purchasing department. Illustrate forms
for requisition and low stock reports.

7. Describe a system to be used in ordering goods, explaining the
purpose of each copy of the order.

8. How does the purchasing agent know when goods are received?

9. What papers in connection with an order are filed permanently in the
purchasing department? How are these papers indexed?

10. What are the functions of the stores department? Who should
supervise the stores department?

11. Describe a labor─saving system for taking an inventory.

12. Into what classes is the inventory in a manufacturing enterprise
divided? Illustrate a suitable inventory record form for one of these

13. Name three reasons why a stores record system is of value.

14. What general plan should be followed in locating storage places for
material and supplies in a manufacturing plant? How should the material
be arranged in the storeroom?

15. What steps are necessary to provide a record of the receipt of
material and supplies, and to prevent the acceptance of goods which
should not be received?

16. How are unauthorized deliveries guarded against? Illustrate a
suitable requisition form for a business of your own selection.

17. Into what two classes are stores records divided? Which class is
the more usual in the storeroom?

18. How should stores record forms be filed? How can the accuracy of
the stores records be verified?

19. Illustrate and explain a suitable form for a stores record of
materials and supplies, showing quantities only.

20. Illustrate a stores record form for supplies showing the
distribution to departments.

21. When a foreman draws from the storeroom more material than is used
on a job, and returns it to stock, what form of record should he make?

22. When material drawn for one job is transferred to another, what
form of report should be made?

23. Why should a complete record of machinery and equipment be

24. Describe a suitable system for the tool─room.

25. Illustrate the necessary forms for a record of tools.




1. Into what general classifications are wage systems divided?

2. Describe the characteristics of the _day wage_ plan. In what
respects does the day wage plan prove inequitable?

3. Describe the _piece rate_ plan. Name its advantages and

4. What is a premium system? What conditions are intended to be brought
about by a premium system?

5. What special points of merit does the Halsey plan possess?

6. What are the essential features of the Taylor differential wage

7. Name the special features of the _Gannt bonus system_. What are its
apparent disadvantages?

8. What are the principles of the _Emmerson efficiency system_? Name
some of the conditions necessary to a successful operation of this

9. What wage system or systems are used in the business with which
you are connected, or another selected for your illustration? Do you
consider the plan used the best suited to existing conditions; if not,
what changes would you suggest?

10. Into what two classes is time keeping divided? Which system is used
in a trading business? in a manufacturing enterprise?

11. Explain why time records are necessary when the pay of an employe
is based on the unit of production.

12. Explain the operation of the check system of time keeping. What are
its disadvantages?

13. Explain the operation of the time clock as used for recording total
time worked.

14. What is meant by _production time records_?

15. Illustrate a form of work order providing for a time record. Under
what conditions is the use of such a form justified?

16. Illustrate a form of time card which provides for an entire day's
production record. Why is this a dangerous form to use?

17. Illustrate a form of time card for a record of one job, suitable
for a business with which you are familiar. How is it used?

18. Describe the principal features of the different classes of
mechanical time recorders, designed to record the time worked on
specific jobs.

19. Name a business in which cumulative time records can be used to

20. Illustrate and explain a form for a piece work record, suitable for
a business of your selection.

21. Illustrate a suitable form of pay─roll sheet to include records of
both total and job times.

22. If the total time shown by the job cards does not agree with the
clock record, how should the discrepancy be adjusted?

23. To what account should time shown by idle cards, and time
unaccounted for, be charged, and how should it be distributed?

24. How can standard costs be determined? Why should the inefficiency
burden be added as a separate charge?

25. Why should a detailed record of every employe be kept?

26. Illustrate suitable forms for applicants' and employes' record
cards. How should these be indexed?

27. What is a _production order_? a _shop order_?

28. Name and give examples of four classes of production orders.

29. Illustrate a form of production order, suitable for a business of
your selection.

30. How are the instructions of the superintendent given to the
foreman? Illustrate a suitable form.

31. Explain, and give an example of the use of, _standing orders_.

32. Name three good reasons why a record of manufacturing orders should
be maintained.




1. Explain the relationship between expense and cost of production and
why the former should be absorbed by the latter.

2. Why is manufacturing expense related to cost rather than selling

3. Why is the labor cost of production considered the most reliable
basis for calculating expense?

4. What is a safe rule to follow in the segregation of pay─roll into
productive and non─productive labor?

5. Why is expense not added to operating costs?

6. For a factory with, say, twelve departments or processes, some
without any machinery, some with machinery in operation all the time,
and others where it is running but part of the time, what means for
handling the factory expense would you recommend and why?

7. What do you consider the value of machine rates and where can they
be used to advantage?

8. When selling expense is not included in the general expense
distribution, how is rate of same arrived at and the selling cost found?

9. Wherein would be the error to carry all the factory operating and
general expense in one account and distribute both by one average rate
for the entire plant?

10. The trial balance shows a debit balance for _operating expense_
Dept. F and a credit balance for Dept. G. What do these balances mean?
How should they appear on the balance sheet?

11. The debit balance of _operating expense_ Dept. F, at the end of the
month, is $100; at the end of the next month it is $200. What does this
increase signify and what should be done?

12. The credit balance of _operating expense_ Dept. G at the end of the
month is $100; at the end of the next month it is $200. What should be
done in this case?

13. The trial balance shows but one item of general expense──the
_distribution account_. How would you proceed to analyze the various
subdivisions of _general expense_?

14. Is a department operated at 50% of its productive labor necessarily
operated with any less efficiency than another where the expense is but
25%. Why?

15. The operating statement shows increasing percentages each month.
What does this condition of affairs reveal and what two ways are at
once suggested for improving the situation?

16. A foreman, to have the operating expense of his department show
more favorably, diverts his expense charges onto other work. How can
such irregularities generally be detected?

17. A workman's wage is 30 cents per hour in a department whose
operating expense is 40% of its productive labor and whose general
expense is 33⅓%. How much per hour should the company charge for
this man's services on a repair job in order to make a profit of 20%?

18. Calculate the departmental and general expense percentage rates for
distribution in a factory whose operating figures are shown as follows:

                          Operating Expense  Productive Labor
  Dept. A                    $2,619.20          $7,342.88
    "   B                     1,234.56           6,439.71
    "   C                       419.06           4,206.83
    "   D                       549.70           1,070.30
  Distribution Account        6,088.14
  Total Productive Labor                        25,281.49

19. Draw up a form for cost sheet and show thereon the cost of a job
done in the above plant whose direct charges are as follows, using the
next even percentage in each case:

  Labor      Dept. A       $125.10
    "          "   B         75.20
    "          "   C        100.30
    "          "   D         25.40
  Material                  150.50

20. What method should be used by the cost department to collect data
showing material and labor costs?




1. Why were the early New Englanders forced to become manufacturers?

2. What was the occasion of the first _boycotting_ movement in this

3. What is meant by a _combination of capital_?

4. Describe the operations carried on by a combination of capital
in acquiring possession of various small plants in the same line of

5. What is _Interchangeable Manufacturing_?

6. When were Milling Cutters first made?

7. Who introduced interchangeable manufacturing in this country?

8. What invention brought Eli Whitney into public notice?

9. What are the principal objects sought in modern manufacturing?

10. How can you account for the largely increased output per employee
of the present day as compared with former times?

11. What is meant by _Machine Shop Management_?

12. What are the principal departments of a manufacturing plant
building machinery and like products?

13. What are the secondary departments or rooms?

14. Where is the Power House usually located, and why?

15. What is meant by _lines of authority_ in shop organization?

16. What is the regular channel of official communication from the
General Manager down to the Workmen?

17. What is meant by the _Police Regulations_ of the shop?

18. What officials enforce the police regulations?

19. How would you seek to promote the loyalty of the working force?

20. What is meant by the _Suggestion System_?

21. What are the seven principal requirements of Shop Methods and

22. Describe the necessary steps in the employment of workmen, from the
application for a position to setting the man to work.

23. How are records of individual standing determined?

24. What usually constitutes the largest item of cost in the

25. What is a _Time Recording Clock_? How is it used?

26. What is a _Production Order_?

27. With what officials do production orders originate?

28. What is a _Plant Order_?

29. How are stock and material obtained from the Store─Room?

30. How are orders traced and followed through the different

31. How are tools obtained from the Tool Room?

32. How does the Tool Keeper ascertain who has certain tools?




1. What is the object of cost keeping and cost analysis? Of cost

2. What is "cost?"

3. What five essentials must a cost─keeping system possess?

4. What are _overhead expenses_?

5. What are the four most common ways of time─keeping? Give the basis
of each method.

6. What are some of the difficulties that confront the time─keeper when
taking time in the field?

7. How is brickwork measured? plastering? pavement? earthwork?

8. What is a _bonus_? How may a bonus system be applied to construction
work, and what are some of its advantages?

9. Devise a method for measuring the work done by a steam shovel in
each shift. Method to be operated by an engineer or inspector, and must
be quick and easy. No instrument to be used.

10. Upon what is the payment of the contractor from time to time based?
Does this always give the contractor all that is due him?

11. What is an _unbalanced bid_? Why are they sometimes used? What is
the objection to them?

12. What advantage can you see in process cost analysis? Make such
analysis for erecting centering for concrete factory.

13. Devise method for measuring brickwork so that work of each
bricklayer can be determined and credited to the right man. Do same for
dimension stone work.

14. What advantages are claimed for the piece─work system?

15. What is an _unclassified_ contract in excavation?

16. What effect may discharges have on work? State both good and bad.

17. Why avoid the storage of cement during winter when none is being

18. Should men be left in entire ignorance of the condition of work?
How far should the distribution of information be made on the job?

19. What principles should guide the design of new methods on work, and
what opposition is likely to be encountered?

20. Why are labor organizations generally opposed to piece─work and

21. What effect may slight raise of pay have on men's work? decrease of

22. What is the advantage of performance and efficiency charts over
tabulated reports?

23. What sort of foreman is most efficient?

24. What is _stumpage_?

25. What is a _differential piece─rate_?

26. What is the best way of getting the men to arrive on time in the

27. Why is it easier to estimate cost of work to be done by the daily
men, than that to be done by the monthly men?

28. How many men can a foreman supervise while he is doing work himself?

29. What is _lost foreman's time_?

30. What are the advantages and disadvantages of punch─cards as against
time─keepers' slips?

31. How many men, ordinarily, can one foreman efficiently supervise in
the field?



  Application card, 221


  Bonus systems, 298

  Boston ledger form, 175
    adopted for continuous cost record, 174

  By─products, 182


  Calculagraph, 90

  Calculagraph time card with coupons, 94

  Capital and labor, relations of, 196

  Card form for special quotations, 16

  Card record of a past employe, 109

  Card showing complete record of an employe, 108

  Catalogue filing and indexing, 12
    files, 13
    indexing, 14

  Chart records, 164

  Combinations of capital, 197

  Comparative record of material costs, 180

  Comparison of costs of standing expense orders, monthly, 181

  Controlling accounts, 185

  Cost─analysis engineering, 251─318
    chronological charts, 318
    cost keeping, 288
    cost reduction, 292
    cost showing, 282
    cost subdivision, 277
    definition of, 251
    discipline, 302
    educational supervision, 256
    field layout, 313
    gang work, 254
    individual incentive, 253
    instructions to foremen, 307
    introduction of new methods, 311
    labor─saving devices, 305

  Cost─analysis engineering
    material supply, 316
    modern manager, 251
    old vs. new machinery, 317
    output, 280
    rewards, 255
    science of management, 253
    standard instructions, 318
    stimulating the men, 296
      bonus systems, 298
      bulletin board posting, 299
      discharges, 297
      early hours, 300
      education on the work, 301
      enough foremen, 300
      gang and team work, 299
      high pay, 299
      prompt pay, 300
      watching work, 296
    subdivision of duties, 257
    unbalanced bids, 316
    use of charts, 284
    use of maps, 318

  Cost getting, 262
    cost distribution, 267
    foreman's report, 267
    punch─cards, 264
    time─keeper, 262
    written time cards, 266

  Cost summaries, 165─190
    continuous process factories, 182
    controlling accounts, 185
    for small shops and repair jobs, 178
    cost data, 166
      comparative cost records, 177
      job costs, 171
      labor costs, 170
      material cost reports, 168
      material costs, 167
    production records, 183

  Cumulative job time card, 96

  Cumulative time records, 95


  Daily record of piece work, 99

  Daily record of time of one man, 82

  Daily report of transfer clerk, 122

  Daily time card for machine operations, 83

  Day wage, 66

  Departmental expense, 143

  Departmental labor distribution sheet, 172


  Efficiency chart indicating cost of channeling rock, 285

  Efficiency chart showing costs in connection with steam─shovel
    work, etc., 286

  Emerson efficiency system of wage, 71

  Employe card showing complete record of, 108

    paying, 103
    records of, 106

  Employment card, 222

  Engineering, cost─analysis, 251─318

  Expense distribution, 127
    basis of, 128
      on cost of labor, 131
      on cost of material, 131
      on cost price, 130
      on selling price, 130
    methods of, 132
      machine─hour rate, 134
      man─hour rate, 133
      percentage, 137
    selling expense, 129
    time cost, 128


    application card, 221
    Boston ledger form adapted for continuous cost record, 174
    calculagraph time card with coupons, 94
    card form for special quotations, 16
    card record of a past employe, 109
    card showing complete record of an employe, 108
    comparative record of material costs, 180
    cost summary for use of a machine shop, 177
    cost summary for small shops and repair jobs, 178
    cumulative job time card, 96
    daily record of piece work, 99
    daily record of time of one man, 82
    daily report of transfer clerk, 122
    daily time card for machine operations, 83
    departmental labor distribution sheet, 172
    efficiency chart indicating cost of channeling rock, 285
    efficiency chart showing costs in connection with steam─shovel
      work, etc., 286
    Emerson efficiency wage system, chart of, 72
    employe, card showing complete record of, 108
    employment card, 222
    foreman's daily report of shop production, 122
    front and reverse of card showing total production and progress
      of orders, 120
    Gantt premium wage system, chart of, 71
    general operating expense, tabulation of, 160
    graphic chart showing fluctuations in labor costs, 162
    graphic chart showing fluctuations in operating expense, 163
    Halsey premium wage system, chart of, 69
    individual record card, 224
    individual time record card used with calculagraph, 99
    inventory for machine tools, 34
    inventory for small tools, 63
    inventory of manufactured goods, 40
    inventory of parts and finished stores, 38
    inventory record of small tools, 35
    inventory sheet for drawings and patterns, 36
    inventory sheet for materials and supplies, 37
    inventory work in process, 39
    invoice, 243
    job card showing names of operations, 86
    job card used with Dey time register, individual, 88
    job card with time chart, 85
    job time sheet used with Dey time register, 89
    job time summary, 234
    journal showing adjusting entries, 188
    labor cost, comparison of, 179
    labor─saving inventory tag, 31
    loose─leaf form for inventory of machinery and equipment, 33
    loose─leaf record of goods ordered and received, 21
    manifold order blanks, 25
    manufacturing order register, showing location of work in shop, 119
    material returned to stock, record of, 57
    monthly comparison of costs of standing expense orders, 181
    monthly recapitulation of job costs, 184
    monthly statement of material issued, 169
    monthly statement of supplies issued, 171
    official communications, 217
    operations tag used in an underwear mill, 97
    order record of manufacturer, 20
    pay─roll sheet, 237
    piece─work and time record combined for pay─roll purposes, 102
    plant order, 240
    private ledger labor account, 141
    private ledger operating expense account, 143
    production order, 238
    production order which is an exact copy of customer's order, 112
    production order to superintendent, 112
    production record for determining piece rates, 100
    production record of a gang of piece workers, 98
    punch─card for recording work of dump trains in excavation work, 274
    punch─card for recording work of excavation with steam shovel, 273
    quotation card for records of pieces of several sizes, 18
    recapitulation of costs for a single job, 176
    recapitulation of departmental labor and material costs, 173
    record card for applicants for employment, 106
    record card of employe, 107
    record of orders, including price and amount, 19
    record of orders placed, detailed, 19
    record of orders providing for details of each order, 20
    record of parts in stock, 56
    record of total time, sheet for, 101
    record of unfinished piece work, 100
    reports of goods received, 26
    report of materials transferred, 58
    requisition, 242
    requisition blank, 23
    requisition for material, special departmental, 49
    requisition for material to be used on a production order, 48
    returned material card, 244
    service card, 223
    shop order, 114
    shop order with name of shop, 116
    shop order showing progress of work, 116
    shop order showing total work cards, 115
    special stock record of machine tools, 62
    statement of departmental expense made to foremen, 161
    statement of departmental operating expense, 157
    stock ledger card, 242
    stock record of materials and supplies, 52
    stock record showing orders placed, 53
    stores card used by manufacturer, 54
    stores card for supplies, 55
    stores clerk's report of low stock, 24
    stores record of parts and finished stores, 56
    stores record which includes values, 55
    subject card for catalogue index, 14
    sub─production order, 239
    Taylor differential wage system, chart of, 70
    time card used with calculagraph, 92
    time card for carpenters and flask makers, 228
    time card, day, 231
    time card for day's operations, coupon, 84
    time card used with International elapsed time recorder, 93
    time card, job, 232
    time card for machine shop, 229
    time card for pattern shop, 227
    time─keeper's card, 266
    time─keeper's slip, 264
    time─keeper's note book, 269
    time record made by calculagraph, 91
    title card for catalogue index, 15
    tool check board, 248
    transfer card, 246
    transfer clerk's card tray, 247
    weekly time pay card used in Rochester recorder, 79
    weekly time record as made by the Dey time register, 80
    weekly time records for piece workers, 97
    work order with time and material records, 81

  Front and reverse of card showing total production and progress
    of orders, 120


  Gantt bonus system of wage, 70

  General expense, 143, 158

  General expense and cost summaries, 127─190

  General operating expense, tabulation of, 160

  Graphic chart showing fluctuations in labor costs, 162

  Graphic chart showing fluctuations in operation expense, 163


  Halsey premium wage system, 68


  Individual record card, 224

  Individual time record card used with calculagraph, 99

  Industrial conditions, betterment of, 199

  Industrial enterprises, development of American, 195

  Interchangeable manufacturing, 200

  Inventory for machine tools, 34

  Inventory for small tools, 63

  Inventory of manufactured goods, 40

  Inventory of parts and finished stores, 38

  Inventory record of small tools, 35

  Inventory sheet for drawings and patterns, 36

  Inventory sheet for materials and supplies, 37

  Inventory, taking, 29

  Inventory, work in process, 39

  Invoice, 243


  Job card showing names of operations, 86

  Job card used with Dey time register, individual, 88

  Job card with time chart, 85

  Job costs, 171

  Job time cards, 85

  Job time sheet used with Dey time register, 89

  Job time summary, 234

  Journal showing adjusting entries, 188


  Labor costs, 170
    comparison of, 179

  Labor records, 65
    paying employes, 103
    piece─work records, 97
    production time records, 81
    records of employes, 106
    time keeping, 74
    wage system, 66

  Labor─saving inventory tag, 31

  Loose─leaf form for inventory of machinery and equipment, 33

  Loose─leaf record of goods ordered and received, 21


  Machine─shop management, 193─249
    manufacturing plant, 205
    manufacturing work, 238
    methods and records, 220
    modern meaning of, 204
    official communications, 217
    plant orders, 240
    production orders, 239
    shop management, 215
    storing and issuing materials, 241
    successful management, 218
    tracing orders, follow─up methods for, 245

  Machinery and equipment records, 58

  Manifold order blanks, 25

  Manufacturing, 193
    American, 195
    conditions and developments, 193
    early New England mechanics, 194
    interchangeable, 200
    methods of modern, 200

  Manufacturing order register, 121
    showing location of work in shop, 119

  Manufacturing orders, 110─125
    production, 111
    records of, 119
    shop, 115
    standing, 118
    tracing, 124
    work, 117

  Manufacturing plant, typical, 205
    layout of, 206
    organization of, 210

  Manufacturing work, 238

  Material costs, 167
    comparative record of, 180

  Material returned to stock, 57

  Mechanical time records, 87

  Mechanics, early New England, 194


  Non─productive labor, 140


  Official communications, 217

  Operating expense statements, 150
    charts, 164
    comparative figures, 154
    expense of manufacturing departments, 155
    general expense statement, 158
    lengthy statements undesirable, 151
    source of data used, 155
    statements for foremen, 159
    tabulate essentials, 152
    what statement should show, 153

  Operations tag used in an underwear mill, 97

  Order record of manufacturer, 20


  Paying employes, 103

  Pay─roll distribution, 142

  Pay─roll sheet, 237

  Percentage method of expense distribution, 139
    departmental expenses, 143
    expense ledger, 140, 149
    general expense, 143
    how to use, 146
    journal entry for distribution, 148
    non─productive labor, 140
    pay─rolls dissected, 141
    periods for comparison, 141
    power, 144
    production ledger, 140
    productive labor, 139
    productive labor and expense compared, 145
    results of distribution, 149
    undistributed balances, 149

  Piece─rate plan of wage, 67

  Piece rates, 98

  Piece─work records, 97

  Piece─work and time record combined for pay─roll purposes, 102

  Plant order, 240

  Premium system of wage, 67
    Emerson, 71
    Gantt, 70
    Halsey, 68
    Taylor, 69

  Private ledger labor account, 141

  Private ledger operating expense account, 143

  Production orders, 111
    copy of customer's order, 112
    form of, 238
    to superintendent, 112

  Production records, 183
    for determining piece rates, 100
    of a gang of piece workers, 98

  Production time records, 81
    cumulative, 95
    daily time card, 83
    job time cards, 85
    mechanical, 87
    on work orders, 82

  Productive labor, 139

  Productive labor and expense compared, 145

  Punch─cards, 272
    for recording work of dump trains in excavation work, 274
    for recording work of excavation with steam shovel, 273

  Purchasing department, 11
    catalogue filing and indexing, 12
    department routine, 22
      checking invoices, 27
      checking receipts, 26
      filing, 27
      low stock report, 24
      purchase orders, 24
      requisitions, 22
    list of dealers, 11
    orders placed, 18
    special quotations, 16

  Purchasing and stores department, 11─63


  Quotation card for records of prices of several sizes, 18


  Recapitulation of costs for a single job, 176

  Recapitulation of departmental labor and material costs, 173

  Recapitulation of job costs, monthly, 184

  Record card, 225
    for applicants for employment, 106
    of employe, 107

  Records of employes, 106
    application card, 108
    employe's card, 109
    past employe's card, 110

  Records of labor, 65─110

  Record of orders, including price and amount, 19

  Record of orders placed, detailed, 19

  Record of orders providing for details of each order, 20

  Record of parts in stock, 56

  Record of total time, sheet for, 101

  Record of unfinished piece work, 100

  Report of goods received, 26

  Report of materials transferred, 58

  Requisition, 242

  Requisition blank, 23

  Requisition for material, special departmental, 49

  Requisition for material to be used on a production order, 48

  Returned material card, 244


  Selling expense, 129

  Service card, 223

  Shop management, 215

  Shop methods and records, 220
    importance of, 220
    paying employes, methods of, 235
    recording─clock time cards, 230
    selection and employment of workmen, 221
    standing of men, 224
    time─card forms, 227
    time keeping, 226
    tool─room methods, 247

  Shop orders, 115
    form, 114
    showing progress of work, 116
    showing total work cards, 115
    with name of shop, 116

  Special stock record of machine tools, 62

  Standing orders, 118

  Statement of departmental expense made to foremen, 161

  Statement of departmental operating expense, 157

  Statement of material issued, monthly, 169

  Statement of supplies issued, monthly, 169

  Stock ledger card, 242

  Stock record of materials and supplies, 52

  Stock record showing orders placed, 53

  Stores card used by manufacturer, 54

  Stores card for supplies, 55

  Stores clerk's report of low stock, 24

  Stores department, 28
    deliveries, 47
    installing, 44
    inventory, 29
    inventory records, 31
    a money saver, 43
    organization, 28
    receiving of material and supplies, 45
    records, 48

  Stores records, 48
    forms, 51
      material returned to stock, 57
      material and supplies, 52
      material transferred, 57
      parts and finished stores, 54
    including values, 55
    verification of, 50

  Subject card for catalogue index, 14

  Sub─production order, 239


  Taylor system of wage, 69

  Time book, 76

  Time card
    used with calculagraph, 92
    for carpenters and flask makers, 228
    coupon, 84
    daily, 83
    Dey, 231
    used with International elapsed time recorder, 93
    job, 85, 232
    for machine shop, 229
    for pattern shop, 227

  Time clocks, 78

  Time─keeper's card, 266

  Time─keeper's note book, 268
    distribution from, 270

  Time─keeper's slip, 264

  Time keeping
    methods of, 74
    systems, 76
      check, 76
      time book, 76
      time clocks, 78

  Time record as made by the Dey time register, weekly, 80

  Time record made by calculagraph, 91

  Time records for piece workers, weekly, 97

  Time pay card used in Rochester recorder, 79

  Title card for catalogue index, 15

  Tool room, 59
    record of tools, 62

  Tool check board, 248

  Tools of early mechanic, 196

  Transfer card, 246

  Transfer clerk's card tray, 247

  Tracing orders, 124

  True cost, determining, 128


  Wage systems, 66
    day wage, 66
    piece rate, 67
    premium systems, 67
      Emerson, 71
      Gantt, 70
      Halsey, 68
      Taylor, 69

  Work orders, 117
    with time and material records, 81

                          TRANSCRIBER'S NOTE

─Obvious print and punctuation errors were corrected.

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