illustrated by No. 3.* Since all moneys paid for factory wages and salaries are charged to "Pay Roll" account, it follows that the balance of that account, after monthly journal entries numbers 1, 2 and 3* are posted, should represent the cost of factory wages and salaries accrued but not due.

From the foregoing it will be seen that the cost of all productive labor is charged to the jobs which have been active during the month in accordance with the time actually devoted to them; and that the cost of non-productive labor is charged to "Manufacturing Expenses," "Maintenance of Real Estate," "Selling Expenses," and "Administrative Expenses according to the nature of the service rendered. Thus all factory labor is accounted for and properly apportioned.

It is the duty of the treasurer or other person responsible for payments, to see that every possible precaution is taken in connection with the weekly paying off of factory labor. The person who makes up the pay roll should not pay off. Some one should do this who does not come in contact with the time records. If this cannot be arranged, it is well to devise means of checking the work of the pay clerk. This may sometimes be done by having the foreman of each department distribute brass checks, distinctively marked, to the workmen of his department the day prior to the pay-day, reporting to the treasurer the number of checks distributed and returning the surplus checks. The clerk who pays off should collect a check for each envelope handed out, and the number of checks returned by him should agree with the number of envelopes made up, and with the number of checks distributed, assuming that all envelopes are given out.

§ 116. (2) Materials and Factory Supplies Used.

All raw materials and factory supplies, excepting fuel, should be in charge of one or more storekeepers. Requisitions

* See Cut No. 18 in Chap. XV

should be given to the storekeeper when materials or supplies are to be used, showing the quantity and kind of commodities required, the job number as an indication of what they are required for, and the signature of the person who requires them. The requisitions should be delivered to the bookkeeping department where they should be arranged according to job and standing-shop-order numbers. The clerk who has charge of the stock ledger should post the quantities of materials and supplies used direct from these requisitions, at which time he should extend the cost of items shown thereon.

The total cost of raw materials used during a month, as shown by the requisitions, should be debited to "Manufacturing" account and credited to "Raw Materials" as illustrated by monthly journal entry No. 7.*

At the close of each month all requisitions applicable to a particular job should be charged to that job on the cost sheet, and all requisitions applicable to standing shop orders should be charged accordingly by means of a monthly journal entry similar to No. 4.* This monthly journal entry also provides for the cost of fuel used, as reported by the engineer.

§ 117. (3) Manufacturing Expenses.

Each job having been charged with the cost of productive labor and raw materials used during a month, it now becomes necessary to apportion the manufacturing expenses over all jobs which have been active. There are various ways of doing this. If labor costs invariably exceed by a large margin the cost of raw materials, it is customary to use the total cost of productive labor as a basis for distributing manufacturing expenses. If the cost of raw materials forms an important part of the total production costs, it is advisable to use the combined cost of productive labor and raw materials as a basis. There are other methods used, but one of the two explained above

See Cut No. 18 in Chap. XV

will usually afford an equitable basis for apportioning indirect charges.

By means of the monthly journal entries, Nos. 2, 3, 4 and 6* and of charges made during a month, the "Manufacturing Expenses" account in the general ledger will have been charged at the close of each month with the cost of indirect labor, factory supplies and fuel used; net maintenance of real estate; monthly reserve for depreciation of machinery and equipment; monthly proportion of insurance premiums applicable to machinery, raw materials, etc.; and sundry items during a month which are chargeable direct to the account.

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The monthly journal entries should be posted as fast as they are made. In distributing the balance of “ Manufacturing Expenses" account per general ledger, it is advisable to have paper specially ruled with four columns headed as follows: Job No.," "Productive Labor," "Raw Materials," and "Manufacturing Expenses."

Step No. I is as follows: The total cost of productive labor charged to each job during a month is entered in the "Productive Labor" column on a line with the proper job number; and the total cost of raw materials charged to each job during a month is entered in the " Raw Materials" column opposite the proper job numbers. The footing of the "Productive Labor" column should agree with the amount used in monthly journal entry No. 1;* and the footing of the "Raw Materials" column should agree with the amount used in monthly journal entry No. 7.*

Step No. 2 is accomplished by dividing the manufacturing expenses for the month by the cost of productive labor, as shown by the footings of the "Productive Labor " column referred to in the foregoing paragraph. The quotient should be carried to at least four places, and represents the relation which manufacturing expenses bear to productive labor, this latter being used here as a basis for distributing indirect charges

instead of using productive labor and raw materials combined. Step No. 3 consists of multiplying the cost of productive labor applicable to each job by the quotient, referred to above. The separate results should represent the proportion of manufacturing expenses chargeable to each job, and should be recorded in the "Manufacturing Expenses" column of the sheet explained in step No. 1. The footing of that column should equal the balance of the "Manufacturing Expenses" column per general ledger. If a small difference exists it may be arbitrarily added to one of the jobs. Monthly journal entry No. 9* should then be made and posted, thus causing the "Manufacturing Expenses " account to balance.

Step No. 4, the final one, consists of posting all items in the "Manufacturing Expenses" column to the proper cost ledger sheets (Cut No. 14), which will then show the cost of any job up to and including the last day of the month. The total cost of all jobs completed during a month should be listed and the footing of that list should be used in making monthly journal entry No. 10.*

(2) THE PROCESS METHOD.

§ 118. When Applicable.

The "Production Order" method can be operated only in cases where a particular job can be so identified from start to finish that workmen can report the time devoted thereto. Companies engaged in the manufacture of beer, ales, liquors, flour, chemicals, etc., are therefore unable to apply the method in arriving at production costs, since one lot cannot be distinguished from another and the reporting of workmen's time on each is impossible. One batch follows another and at times. several batches are combined in one inseparable mass. In such cases it is necessary to employ the "Process Method," which

* See Cut No. 18 in Chap. XV.

consists of classifying the processes in accordance with the methods of production. The processes may be designated by numerals, letters of the alphabet, or by their technical name.

In some cases either the production order or the process method may be used;-the production order method is then the preferable and should be employed.

119. (1) Productive Labor.

It is necessary for the bookkeeping department to be furnished with a record of all time devoted to each process during a month. This may be accomplished by means of having the different processes printed on a time ticket made to fit the particular time recording device employed in the establishment. Each workman should "ring-up" in the morning so that the time will show opposite the process he is working on. He should continue to record his time "in" and "out opposite the same process until he is put on another one at which time he should " ring-up" opposite that process.

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The time of each workman should be classified by the