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.
Fig. 4. Statement of Departmental Operating Expense