10. Management and supervision factor.—The management and supervision factor will include the wages of superintendents and foremen, cost of in spection, the building factor of such offices as pertain to supervision, and the interest, depreciation and re pairs incident to the equipment involved. Brief re flection will show that there is no fixed or best way for allocating this expense; the method used must vary with the circumstances. In other words, the element of judgment must enter into the distribu tion of this factor. Many of the items can be local ized without trouble, and when this has been accom plished the remainder should be distributed after a careful survey has been made of the relative value of the services which they have rendered.
11. Stores and transportation factor.—The last factor, stores and transportation, is by far the most difficult to apportion. This factor will include the cost of storing, handling, and transporting material during manufacture. It will not include freight and cartage of finished product, or such items as the hand ling of coal and ashes, which belong in the power house accounts.
Mr. Church has pointed out that the storing of materials, moving them from stores to shops, and from machine to machine, constitutes a separate and dis tinct service that should be accounted for separately and charged for in proportion to services rendered. It is true, also, that the efficiency of the fac tory is measured largely by the efficiency of the sys tem of stores and transportation; hence comparative costs on this class of service would be valuable, aside from their use in cost finding. Mr. Church has also noted that this factor is divisible into two parts— the cost of storing materials and the cost of moving materials. It should also be observed that the alloca tion of this item cannot be made on the basis of the value of the materials handled unless the material is all of one kind. It costs no more to handle brass castings than it does to handle wooden articles. Bulk or weight must be the basis for such allotment.
Furthermore, it can be easily seen that there is no fixed rule or method by which this apportioning can be accurately accomplished; it is principally a question of judgment. In a shop doing mixed work in an intermittent manner very accurate allocation of this item is impossible.
In this item, however, if due care is taken, the cost of the general stores can be allocated to departments, the cost of the transportation service can be localized as far as possible, and the items of general utility can also be apportioned as good judgment may dic tate. Even such a disposition of these expenses will be fairer than that obtained by the averaging method, which taxes all activities equally. When the totals
have been allocated to each center, the amount charge able against each can be reduced to an hourly rate and included in the machine rate as before.
12. Individual factors.—In addition to the general factors that have been discussed there will be, as has been noted, certain expenses that are directly con nected with each production center itself, and which have no connection whatever with other centers. Thus, repairs, interest on the value of the machinery, depreciation, insurance, and such supplies as may be necessary for operation, may be mentioned as ex amples of these individual factors. In some cases the cost of tools or attachments might be included in this charge. Obviously, the totals of these items can be reduced to an hourly charge which can be included in the machine rate. The relation between deprecia tion and repairs requires no further comment except to point out that a careful distinction should be made between repairs that add to the producing value of the centers and those that simply replace wear and tear.
13. Controlling accounts.—It will be evident that some means must be provided for insuring that the total cost of each service is properly distributed as the expenses rise and fall, and that the supplemen tary rate absorbs the residue. In all averaging methods the same care must be exercised with regard to the totals of all expenses. To accomplish this, Mr. Church advocates the use of control accounts, an account being kept for each factor. All accruing ex penses of a given kind are carried to the proper con trol account and placed on the debit side. All ex penses distributed are placed on the credit side. The difference, if any, indicates the change which must be made in the machine rate to obviate discrepancies. Clearly, such controlling accounts can be used with advantage for equalizing heavy expenses over definite periods of time.
14. Assembling of production factors.—The fore going discussion of - production factors is based largely on Mr. Church's reasoning, and is intro duced particularly to show the character and the difficulty of the problem rather than to offer specific methods of solution. It may be well, however, to note some methods for collecting these factors into concise and usable form. Evidently the problem is complex and should be undertaken systematically. Figure 19 shows a form suggested by Mr. Church,' and arranged for the convenient collection of these items. A schedule like this may be provided for each shop or department, and there should be a vertical column for every production center in the shop. The total hourly rate then may be found for each center by dividing the total of all charges by the total hours of operation.