COST SHOWING
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.
AN EXCELLENT EXAMPLE OF THE MODERN FOUNDRY FOR SMALL 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 time.
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.