(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 applied.