While comprehensive, so far as the detail is con cerned into which the production factor idea is car ried, this form is arranged for recording the final values only and does not assist materially in actually computing these values. An examination of Figure 20 may be of service, therefore, in the applica tion of the foregoing methods. Figure 20 shows a hypothetical analysis of this problem, made by Mr. Sterling Bunnell 1 and reproduced from his work on "Cost Keeping," with minor changes to make its dis cussion clearer. The example selected is drawn from a small shop, with one high story housing the larger tools, and an adjoining two-story building housing the smaller tools. The high story is equipped with a traveling crane. Mr. Bunnell illustrates several good approximations and other means by which the detail of the method may be shortened without materially affecting its accuracy. A brief study of this tabu lated statement will make the possibilities of the method more real.
In the table, the first column, reading from left to right, contains the number of the production center. This number may be attached to the production unit in any convenient manner that will make identifica tion sure and easy. The second column contains the name and the size of the unit. The third and fourth columns contain the single-story and two-story floor space allocated to each production center. The fifth column gives the value of the equipment in each cen ter. The sixth column gives the estimated life of the asset, taking obsolescence into account. Column seven gives the estimated average horsepower re quired to operate the unit, while column eight gives the estimated number of hours during which the ma chine or production center will be in use during the month. These latter values must, of course, be es tablished by estimate unless means are provided for measuring the power consumed over a considerable period of time; but if estimated, their total should check with the total power developed. Column nine gives the horsepower hours used by each unit found by multiplying together the corresponding values found in columns seven and eight. Column ten contains the charges for interest, depreciation, and insurance. In Mr. Bunnell's original example, only depreciation is given in this column, interest and insurance apparently not being included in the an alysis. From the discussion, however, it will appear that these and similar items should be included in exactly the same manner as depreciation. The
values given in column ten are those listed by Mr. Bunnell for depreciation alone and would, therefore, be too small if interest, insurance, taxes, etc., Were in cluded. They will serve, however, to illustrate the principle.
The unit space charge, column eleven, is found by dividing the interest on the building and ground, or the rent charge for them (in this case taken at ten, per cent on $18,000, or a total monthly charge of $150) , by the total area, after doubling the area of the high story building. This gives 1.1 cents per month per square foot of space for the low-story floors and 2.2 cents for the high-story. Multiplying the areas in columns three and four by the proper respective rate gives the values shown in column eleven.
Power, heat and light, column twelve, are all con sidered together, and this seems logical in the case of a small shop. The total expense of these items, in cluding space charge, depreciation, etc., divided by the total horsepower hours developed (see bottom of columns nine and twelve) , gives the cost per horse power hour as three cents, nearly, and multiplying the items in column nine by this rate gives the amounts listed in column twelve.
Columns thirteen, fourteen and fifteen list the re spective items of repairs to machinery, repairs to small tools and general labor and supplies that are chargeable against each center. These items can be allocated by judgment until such time as accurate rec ords can be obtained, care being taken that the total of each kind of expense is covered by the allotment. In small shops these items can, no doubt, be apportioned accurately enough by judgment.
The totals of the items in columns ten, eleven, twelve, thirteen, fourteen and fifteen opposite each unit, are then totaled and carried to column sixteen. These totals in column sixteen represent the monthly cost^ of operating each unit. Dividing corresponding items by the estimated number of hours of operation gives the hourly rates listed in column seventeen. All remaining items of expense not provided for are con verted into a monthly total and divided by the total hours worked by all productive units, giving a rate of three cents per hour for every production hour, as indicated in column eighteen. This supplementary amount, added to the corresponding items in column seventeen, gives the total burden rate which should be charged for the use of each productive unit.