WESLEY A. FINK

I

T is a pretty stiff dose for the plumber to swallow, to be told that he is not charging enough for his work, in the face of conditions as he sees them, and to be repeatedly advised that the facts revealed by a cost system will prove this to him.

He knows of no way, and it does not seem reasonable to him, that he can improve his business and increase his sales by increasing his price. This is the main argument that is presented to him, and can you blame Mr. Plumber for being prejudiced? Further, this prejudice has been strengthened in his mind, because it is often that the authors of the numerous articles on cost, overhead expenses and efficiency are not plumbers nor business men, but cost experts, accountants, "business doctors." etc., knowing nothing about the technical end of the business and having no records of personal achievements under conditions that they advocate, and unable to meet him. on his own ground and answer and explain by a convincing knowledge of every detail of the plumbing business the statements that they so positively assert.

It is not a question of first convincing the plumber that confronts the speaker, it is a task of breaking down prejudice that later he may be convinced. Right here comes the real issue. What the plumber wants explained more than anything else is the intermediate facts, and to be able to do this requires that we first consider and start with Mr. Plumber at the time he became an employing plumber and began to assemble his present point of view, against which every writer on cost attacks and attempts to change.

The Craftsman Plumber.

Let us consider a craftsman plumber who is possessed of ambition and determination to go ahead, who is ever desirous and at all times seeking an opportunity to better his condition by learning in every way possible more about the trade or craft by which he earns his livelihood, that he may be capable and competent to fill positions calling for a greater knowledge and requiring and demanding a larger responsibility. If he has made the most of his opportunities and been reasonably successful as a craftsman and executive there is sure to come a time when he believes that the one thing left for him to do is to "go in business for himself."

The change from employe to employer is the real turning point in his career, and he enters upon a field of endeavor of which he understands very little. Possessing as he does the necessary knowledge of a plumbing executive, he is convinced that an understanding of the business end is something he can easily acquire, regarding it a secondary consideration, or at best an adjunct, anyway. He starts to get his business knowledge and experience in the same way that most of us got ours-in a school of never-ending business worries and hazards

-without the help of any real, definite business viewpoint.

If he could be made to realize and understand some of the principles, facts and conditions that are part of and go to make up the plumbing business, and the influences that bear upon them, he would have saved himself worry and money a thousand times. It is only in the past few years, by reason of the chaotic condition in the plumbing business brought about mainly by the piratical business methods of the plumber himself through lack of mutual association and an ignorance of costs, that he has begun to realize that there is something in modern business methods that he has not noticed and could possibly apply successfully to his own business methods. In the main, the plumber all the while has been more of a craftsman than a business man. The initial business point of view of the plumber generally has been gained through his experience as craftsman, and this point of view is really of minor importance compared to a thorough business training and a knowledge of costs and sales. It is surprising, the magnitude of the barriers that this lack of knowledge has built up around him against all arguments in favor of his adopting and introducing into his business the principles of cost determining and sales organization.

There are too many plumbing shops. Everyone admits and deplores it, but no one seems to know just how to reduce their number. Meanwhile the ranks of the ambitious journeymen who push valiantly forward to the field of battle in the plumbing business are steadily recruited, although the mortality is known to be excessive. Since by far the greater number of shops are those coming within the class usually termed "small shops," any marked change in the total number must affect chiefly that class.

The small shop is as efficient as it ever was, but the big fellow is running away from it. Time was when both had the same kind of tools and the same kind of methods, the difference being that the large shop had more tools and its methods were necessarily more complicated. Under these conditions the delusive notion became prevalent in the craft that the small shop could do work more cheaply than the large one and make money. The cost system has shown this idea to be fallacious; but. had it been true in the past, the changing conditions in the industry are making it impossible for the future.

The big fellow is getting wonderful, rapid, highly specialized tools; he is applying acid tests to his methods and processes, and he is strengthening his selling methods, all to such extent that the little plumber cannot follow him. One of these days we will face the actual conditions and the would-be proprietor will temper his ambition with caution.

There is a change taking place between present-day workingmen, and the most of them who will start in business for themselves which is a laudable thing—will get on a different basis than those who did the same thing a few years ago. This great future is in the new shops starting on the right basis and using a cost system from the very beginning. Young men starting in business this way will make a success. How many of us to-day wish we had had this great chance?

Competition.

Several decades ago a wonderful slogan went forth that "competition is the life of trade," and we went in for competition to such an extent that we had no time at all to consider cost, because we were pushing for output, and we entered this life as a warfare until we began to find out that competition was "the death of trade," and as a consequence were placing burdens upon our employes which were unbearable. At this point the employe who had been suffering from our foolhardy policies did a little thinking for himself, came to the conclusion that he "could not make bricks without straw." and conspired with his colaborers to compel the boss to favor him with an advance in wages, hence the labor unions. All that the employe saw was that he must support his family and "then some," and he did not give a thought to the question except that the "boss" must furnish the money for that purpose, and, having put the employer at his wits' end in dealing with this question, he (the eployer) began searching out the methods by which this very important adjunct, the employe, to the plumbing business might be satisfied, and tried ineffectively to get it out of his customer.

But there again was another problem. If he did not take the job for a given price his neighbor across the street, a most despicable and unprincipled contractor in plumbing, would take it at even a lower price, and as a consequence he must be losing more money than the respectable first party. It is needless to say that the man across the street has an equally “good” opinion of his neighbor. The "competition" basis has gone merrily along and the master plumbers went on slashing prices until they merely made enough to pay their employes, while the supply men and jobbers were made the goat for the plumber.

Then began the eye-opening of the fallacy of "competition being the life of trade." and many employers-at first singly, and then by twos and threes-began to find out what was the matter with the plumbing business. As time went on they began to fraternize, and only within a few years the plumbers' employers in any large number commenced to look at home for the remedy. Then in consultation they, with a few others, attempted to make an examination

into the scarcity of profit in the plumbing business.

All at once in some great mind the fact became apparent that, owing to the numerous eccentricities of the business, there was a lot of time that he paid for that was not charged to the customer, and, talking this over with others, found that they had the same experience; so they determined to make a serious examination as to why they should not charge to the customer all of the time for which they paid.

These conditions have aroused the different associations of master plumbers to consider how to mitigate the difficulties of the employing plumber; and this getting together brought before them the one main problem of business, that they were buying at too high a price and selling at too low.

The plumber knows, however, without the help of a knowledge of costs, that to sell a commodity at a profit he must know what it costs him to produce, and right here is the great mystery. As conditions of costs can only be arrived at by the aid of actual, detailed records, and as labor is one of the principal factors that go to make up the cost of product, we must have an exact accounting of labor.

Overhead Expenses.

Overhead expenses may be distributed in many different ways, and the right way can be arrived at only after a study has been made of the conditions where a cost system is to be installed. The following methods of distributing overhead expenses are most commonly used:

1. The direct labor and material method. 2. The direct labor cost method.

3. The direct labor hours method; or, as it is called, the new hour-rate method.

The first method of prorating overhead expenses on labor and material combined is not accurate enough to be safe in practice.

On a job where large quantities of expensive materials are used it would be burdened with more of overhead expenses than it ought to bear, and on a job with cheaper materials it would be reduced too much. It is, therefore, evident that this plan is open to very serious objections.

The second method, or the direct labor cost method, is one of the most generally used on account of its simplicity.

The method of obtaining the percentage of expense to labor cost is very simple. You take the total amount of overhead expenses for a period of, say, six months or a year, and divide it by the total amount paid for labor during the same period of time.

Up to a few years ago the writers in the plumbing trade journals stated that the overhead expenses amounted to about 40 per cent. of productive labor. On this basis, if you are paying 45 cents an hour to a journeyman plumber you add 40 per cent. (or 18 cents) to this for overhead expenses, which makes the shop cost of labor for journeyman 63 cents per hour. Now add 20 per cent profit to this shop cost and you have as your selling price 75 cents per hour for journeyman's work, which is the usual charge per hour for a journeyman working in the majority of plumbing shops. R. H. Pflugfelder, secretary of the Phila

delphia Association of Master Plumbers, stated to the speaker that he made an investigation four or five years ago, and that he found that the average cost for overhe d expenses ran about 17 or 18 cents per hour, which seems to agree with the above percentage.

If you are paying an apprentice 15 cents an hour add 40 per cent. (or six cents per hour) to this, and you have 21 cents as the shop cost per hour for the apprentice's labor. Now add 20 per cent. profit to this shop cost, and you will have 25 cents as the selling price per hour for the apprentice's labor in the average plumbing shop.

However, within the past two or three years investigations by Mr. Pflugfelder, Henry F. Baillet, secretary of the New Jersey State Association; J. Selwin Hil and Robert Robertson, president of the Massachusetts State Association of Master Plumbers, have shown that this percentage runs much higher than 40 per cent.

In a folder issued by the Massachusetts State Association Robert Robertson states that the average overhead expenses in the average plumbing shop doing a business of about $15,000 a year run about 65 per cent. of productive labor.

At an open meeting of the master plumbers' association at Wilmington, Del., on Saturday, March 7, 1914, Henry F. Baillet gave an interesting talk on actual experience in relation to percentage of overhead expenses, and stated that the overhead expenses in three plumbing shops ran 79.97 per cent., 80.26 per cent. and 65.11 per cent. of productive labor. This shows that the cost of doing business in the plumbing trade has advanced considerably and that higher prices will have to be asked if the plumber is to make any profit. In the manufacturing business and in other lines it has been found that overhead expense often runs 100 per cent. or more of productive labor and that the plumber, instead of charging 75 cents for a journeyman's labor, will have to charge $1 or $1.25 per hour, as is now being done in many lines. When expensive machinery is used a charge of $1.50 is not exorbitant.

This method of prorating overhead expense on productive labor shows the increased cost of doing business probably clearer than any other method.

The third method, or the direct laborhour method, is similar to the second, or direct labor-cost method. This method is based on workmen's time instead of labor cost, the hour being taken as the unit of time.

The modern cost system is based upon the hours sold, and to-day all are getting ready to adopt the new idea.

The total number of productive hours worked by all the workmen on jobs or contracts during a given period is divided into the overhead expenses for the same time, and the amount found is used as an hourly rate to be added to the wages paid per hour to get the average shop cost per hour. That is if the average wage paid journeyman is 45 cents per hour and the average rate of overhead expense is 18 cents per hour, the shop cost per hour for journeyman's work should be 63 cents per hour, the same as in the direct labor cost method. The rate of 63 cents per hour

should be used in all estimates as the rate of shop cost for journeyman's labor, and profit added to that.

It is self-evident that the hours we sel (or productive time) must bring a price sufficiently high to take care of the cost of the hours we do not sell (or non-productive time) as well as the cost in the shop other than wages, and the business office cost. Now, inasmuch as the hours we sell must provide the revenue to pay all these costs and expenses, it follows that "the unit of work" not only shall be, but in the nature of things must be, the sold hour.

We sell time divided into hours; certain expenses are engendered in preparing this time for the market. The selling price of the time must pay all the expenses and return a profit besides. In short, we do with the time we sell just as the merchant does with the goods he sells.

The National Association of Master Plumbers of the United States should do as the master printers have done, and that is, to appoint a commission of its members to investigate the average cost per hour of doing business in the plumbing line in different sections of the country, so that the trade as a whole, both large and small shops, can have a reliable average "hour cost" for the guidance of all who are engaged in this business and furnish a safe hour cost to use in all estimating and for comparison in the cost of conducting his own business.

Blackboard Illustrations Showing Percentage of Overhead Expense to Labor.

M

ECHANICS' LIEN.-Where a sub-contractor sued to foreclose his lien, a demurrer to the separate defense of one defendant, a contractor on the job, was properly sustained, where such defense, though setting up that defendant had a claim against plaintiff on another job for $3,356.30, did not allege that such sum equaled or exceeded the amount due to plaintiff on the job concerned in the suit, nor deny that any balance at all was due from defendant to plaintiff when the lien was filed, nor that such facts were pleaded as a partial defense.-Geo. F. Root Co. vs. N. Y. Cent. & H. R. R. Co., Supreme Court of New York, 151 N. Y. Supp. 702.

Scaffolding.-Gen. Code Ohio, Sec. 12593, which provides that whoever, employing another to labor "in erecting, repairing, altering or painting a house, building or other structure, knowingly or negligently furnishes, erects or causes to be furnished for erection * * * unsuitable or improper scaffolding, hoists, stays, ladders or other mechanical contrivances which will not give proper protection to the life and limb of a person so employed," shall be subject to a fine, is broad enough to apply to any "structure" in the erection of which it is necessary to use scaffolding, hoists, etc., and includes within its scope an iron tank, in erecting which a derrick was used to hoist the plates into position.-Standard Boiler & Plate Iron Co. vs. McWeeny, U. S. Circuit Court of Appeals, 218 Federal 361.

Liquidated Damages for Delay.—Where a contract for the building of a church provided that, on failure to complete within the time specified, the builder should pay the sum of $10 per day, which the other party should deduct out of the contract price, if sufficient funds remained in its hands, otherwise the builder would pay the sum, such sum might be treated as liquidated damages, as being fixed because of the difficulty in ascertaining the damages. In determining whether a stipulation for payment of $10 per day for delay by a builder of church was liquidated damages or penalty, testimony that the church society used a courthouse and a church building of another denomination without paying anything for the use, and thereby sustained no damages, was irrelevant.Walsh vs. M. E. Church, South, of Paducah, Court of Civil Appeals of Texas, 173 Southwestern 241.

Employer Liable for Insecure Platform. -In an action by an employe of a building contractor, injured by the tipping of planks resting on beams to form a platform and extending to the wall of the building, to which they appeared to be, but were not, fastened, evidence held to make questions for the jury as to defendant's negligence

and plaintiff's contributory negligence. It is an employer's duty to take all reasonable and proper care to provide as safe a place for the employe's work as the character of the work permits; and the employe may assume, in the absence of anything to the contrary, that the employer has fulfilled his duty.-Jeffries vs. Stuart, U. S. Circuit Court of Appeals, 218 Federal 613.

Operation of Brick Yard.-The operation of a brick manufacturing plant, so as to seriously affect the property and health and enjoyment of persons living in the neighborhood by the escape of smoke and soot, creates a nuisance, which equity may perpetually enjoin, by enjoining the burning of any of the kilns in such a way as to cause dense soot or smoke to fall on the neighboring property, or operating the kilns immediately adjoining the neighboring property with any other than smokeless fuel. E. W. Face & Son vs. Cherry, Supreme Court of Appeals of Virginia, 84 Southeastern 10.

Fraudulent Increase of Lien Claim.Where a material man included in his claim for a lien an item for articles furnished for use in the house, but which were not so used, which item was allowed at the trial as a credit, the item was not fraudulently included in the account, so that the court could not find that the account filed was just and true.-St. Louis Sash & Door Works vs. Tonkins, St. Louis Court of Appeals, Missouri, 173 Southwestern 47.

Mechanics' Lien.-Where the plaintiff contracted to pay defendant for the oil used by him on an elevated railroad painting job, he cannot foreclose a lien against defendant for work on such job, when it appears that the contract price of the work he had actually done, as conclusively shown by the certificate of the engineer in charge, is less than the sum he owes defendant for oil used in the work as provided by the contract.-Richman vs. City of New York, Supreme Court of New York, 151 N. Y. Supp. 744.

Right to Lien.-Under Sec. 3862, Rev. Laws 1910, the right to a materialman's lien depends upon a contract with the owner of the property. The contract for the material may be made either with the owner or his duly authorized agent; but, in the absence of such contract, the lien cannot attach to the property or be enforced against it.-Wm. Cameron & Co. vs. Beach, Supreme Court of Oklahoma, 146 Pacific 29.

Architect's Right to Compensation.— Where plans and specifications for a school building are approved by a school board, conditioned upon the board's letting a con

tract for the erection of the building for a sum. not exceeding $10,000, and the board is unable to let such a contract for that sum or less, the architect preparing such plans is not entitled to compensation.Bair VS. School Dist. No. 141, Smith County, Supreme Court of Kansas, 146 Pacific 347.

Architect's Right to Lien.-An architect who, under contract with the owner of land, furnishes plans and specifications for the construction of a building thereon is entitled to a lien upon the building and land upon which it is constructed, though he does not supervise the construction. If the owner, after the plans are furnished, of his own volition and without fault of the architect, abandons the construction of a building on the land the architect has a lien on the land. An actual improvement is not necessary to a lien.-Lamoreaux vs. Andersch, Supreme Court of Minnesota, 150 Northwestern 908.

Waiver of Lien.-Where the principal contractor for a building abandoned his contract, the waiving by a subcontractor for the plumbing of his right to file a len was sufficient consideration to support a promise by the owner to pay for the plumbing. In an action on an express promise by the owner of a building to pay a subcontractor the contract price for the plumbing, a finding that the owner promised to pay the subcontractor a certain sum, which was the original contract price, and was also the reasonable value of the work and material furnished, is sufficient to support a judgment for the subcontractor; the latter part of the finding being immaterial. -Schade vs. Muller, Supreme Court of Oregon, 146 Pacific 145.

Builder's Bond.-Where a building contractor's bond provided that the owner should make specified payments during the progress of the work, but should retain not less than 10 per cent. of all payments for work performed and materials furnished until the complete performance of the contract, but the owner did not retain the 10 per cent. and prior to the contractor's default he paid $2,000 more than the advance payments, there was a material alteration of the contract, for which the surety was discharged.-Justice vs. Empire State Surety Co., U. S. Circuit Court of Appeals, 218 Federal 802.

Delay in Delivery of Bricks.-On a counterclaim against the seller for delay in the delivery of bricks, where there had already been allowed the excess price paid for bricks purchased elsewhere during the delay, and there was no evidence that any men had been laid off or kept idle or that the buyer had been compelled to pay a penalty for delay in the completion of his contract, but only testimony of a con