Each department is made a separate business carrying its proportion of the divisible expenses, buying the raw product and supplies going into the manufacture and receiving credit for all sales effected in the same manner as if owned by an individual and the business conducted at some remote point. The raw material transferred from one department to another is charged. At the end of each period, or weekly, those in charge, put a price on all the different products transferred from one department to another, generally using the market price which could be obtained if sold outside.
This method of analysis frequently shows that the department has lost money. It may develop that some other manufacturer has developed a field wherein he can pay a price for the raw product in excess of its value as used in the department and that it should be sold for cash rather than to use it for manufacturing purposes.
Expense Account.
—There are a number of expense accounts that are borne upon an allocation, that is, apportioned among several departments, perhaps by percentage of sales, units in use, tonnage or other means devised by the ingenuity of the accountant, all with a view to an equitable division. These embrace, for example, Steam-Expense, which, as its name implies, is the cost of producing steam subdivided into four general uses,—cooking, power, lighting and refrigerating. Each made up of all items going into its cost. This provides a total of four items.
Administrative or Executive Expenses embrace the cost of office, telegraph, telephone, stationery, printing, advertising, insurance, interest and all other items of general expense. There are also some general plant expenses that are itemized for other purposes that may be included in this ledger account, or divided upon some basis and charged to the departmental ledger account.
Department.
—The parent products are cattle, sheep and hogs. These are subdivided into accounts about as follows:
| Cattle. | Hogs. | Sheep. |
|---|---|---|
| Beef | Fresh Pork | Mutton |
| Hides | Sweet Pickle | Skins |
| Oleo | Dry Salt | |
| Casings | Lard Refining | |
| Tallow | Sausage | |
| Fertilizer | Smoke House | |
| Bones | ||
| Tongue | ||
| Tripe and Pigs Feet | ||
| Beef Cutting | ||
| Beef Cellars | ||
| Veal |
Where one subdivision, such as Tongue, embraces several kinds of products, like sheep, beef and pork, it is operated as one department and not further sub-divided. Usually the outside departments are separated so that the departmental results are ascertainable. The divisions are carried on indefinitely depending upon the size of the business.