the following information; viz.,-(a) The quantity and cost' of raw materials, factory supplies, and finished products on hand; and the cost of goods in process. (b) The gross profit on sales. (c) The expenses of the selling department. (d) The expenses of the administrative department. (e) The net profit from sales. (f) Miscellaneous income, interest charges, etc. (g) The general condition of affairs, i. e., a statement of the assets and liabilities, or balance sheet.

§ 108. (a) Raw Materials, Supplies, and Finished Products.

Raw Materials. Any commodity which forms a part of the finished product belongs under this heading. A manufacturer of worsted suitings may find it cheaper to manufacture yarn than to buy it in the open market. The yarn is a finished product in so far as the Yarn Department is concerned but when requisitioned by the Weaving Department it is considered a raw material, or a semi-raw material to be technically exact.

Factory Supplies. This term includes coal, coke, lubricating oils, waste, belting, packing, small repair parts, small tools (hammers, shovels, saws, brooms, etc.), etc.

Finished Products. An article becomes a finished product when it is ready for delivery to the purchaser. Before that stage it is considered as being in process of manufacture.

109. (b) Gross Profit on Sales.

The difference between the sales and the production cost of the goods sold during a month represents the gross profit on sales.

§ 110. (c) Expenses of the Selling Department.

All expenses incurred in maintaining the selling department belong under this heading; e. g., salesmen's salaries,

agents' commissions, salesmen's expenses, credit-man's salary, commercial agency fees, advertising, expenses of circularizing, etc.

The aggregate of these expenses reflect the cost of marketing the products, or of creating a market for products.

§ III.

(d) Expenses of the Administrative Department.

All expenses not directly applicable to either the production or selling departments, but which are general to the business considered as a whole, belong under this heading. They consist of those expenses which are not materially affected by the volume of business done; e. g., officers' salaries, corporation taxes, office help, office supplies, general postage, telephone charges, legal fees, etc.

§ 112. (e) Net Profit on Sales.

This represents the difference between the gross profit on sales and the total expenses of the selling and administrative departments. Interest on borrowed capital, cash discounts on purchases and sales, miscellaneous income, etc., should be deducted from or added to net profits, as the case may be, in order to ascertain the net results from operations.

There are three elements which enter into the cost of a finished product; viz., productive labor, raw materials and manufacturing expenses-sometimes designated as "OverHead Expenses," "Indirect Expenses," etc. There are two general methods employed in arriving at the cost of production; viz., the "Production-Order " method and the "Process method, which are discussed in the two following divisions of the present chapter.

(1) THE PRODUCTION ORDER METHOD.

§ 114. Procedure.

This method provides for arriving at the cost of each job. A production order is issued to the superintendent for each lot

Cut. No. 14. Simple and Condensed Form of Cost Ledger Sheet.

(Size of Original, II x 81⁄2 inches.)

of goods to be produced. The order should be given a permanent number, and be registered in a book kept for the purpose. It should specify the style, class, etc., of the commodity and the quantity to be produced. The superintendent has charge of making out the sub-production orders, laying out work, etc.

A cost sheet should be allotted to each job. The foregoing cut illustrates a condensed form for a cost ledger sheet.

§ 115. (1) Factory Wages and Salaries.

Under the production-order method it is necessary to secure the time which each workman devotes to a job. This

Cut No. 15. Simple Form of Workman's Weekly Time Sheet. (Size of Original, 6 x 61⁄2 inches.)

may be done by means of time recording devices, job tickets, etc. Cut No. 15 illustrates a simple form for a time sheet. It covers one workman's time for a week, and allows for his working on twelve different jobs.

.

These time sheets may be

printed on heavy stock, and, when in use, be kept in numerical order by the foreman of each department, or each workman may keep his own time sheet and turn it in weekly, depending upon the intelligence of the laborers employed. All time sheets should be turned in at the end of a month, regardless of whether that marks the end of a week.

The time clerk should compute the cost of time as shown by the time sheets. If jobs are completed in a short time, and if the number of workmen are few, the time sheets may be posted direct on the cost sheets. Otherwise it is advisable to provide a monthly time sheet for each job with six double columns (allowing for five weeks and the fraction of a week) and one to the extreme left for employees' numbers. The double columns should be headed "Time" and "Amount." The footings of the "Amount" columns should be posted in the aggregate to the proper cost sheets at the close of each month. The sum total of all monthly time sheets should, at the close of each month, be charged to "Manufacturing" and credited to "Pay Roll" accounts in the general ledger as per monthly journal entry No. 1.*

It is advisable to allot permanent shop orders to represent the following classes of labor charges; viz., repairing machinery, cleaning machines, lost time, maintenance of real estate (work on lawns and roadways, repairing buildings, etc.), miscellaneous non-productive labor, etc. Monthly time sheets should also be kept for recording the cost of such classes of labor charges, which should be reported in the same manner as time devoted to regular jobs. The totals of these monthly time sheets should be used in making a monthly journal entry as illustrated by No. 2.*

The monthly cost of wages and salaries of superintendent, foremen, engineer, firemen, stable-men, drivers, watchmen, etc., may easily be computed at the close of each month, and such items should be used in making a monthly journal entry as

* See Cut No. 18 in Chap. XV.