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.
AIR-COMPRESSOR ERECTING ROOM, CLAREMONT, N. H., FACTORY, SULLIVAN MACHINERY CO.
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.