EXPENSE OR BURDEN 1. Character of expense.—It was shown in Chap ter II that many items of labor and material that are essential to the operation of the enterprise cannot be directly connected with any particular piece of prod uct. An examination of Figure 2 (page 21), and also of the expense accounts listed in Section 1, Chap ter IV, will make this fact clearer. It holds true of practically all enterprises of any magnitude, and fol lows directly as a result of division of labor. It will be remembered, also (see Section 8, Chapter III), that it is always desirable to segregate the shop costs from •the selling and other costs, if for no other reason than to render it possible to hold the proper individuals re sponsible for these costs. Under the general name of "factory expense," or "burden," is included, therefore, all labor, all material, and all other items of manufac turing cost that cannot be charged directly to some particular piece of production. It will be noted that while, in general, all such material and labor are of the indirect kind, certain expense material may go directly into the product. Thus, nails, screws, glue, and similar items, may be used in such small quanti ties on each piece of product as to make direct ac counting difficult, if not impossible. Items of this kind are therefore carried to an expense account and distributed with other expense items.
The general character of selling expense and office, or administrative, expense is shown in Section 1, Chapter IV, and it should again be carefully noted that, while these two classes of expense are often gath ered up under the one head "general expense," they are essentially independent quantities. In fact, if the selling expense is of any consequence it should be seg regated. Moreover, as will be shown, it is often de sirable, as the enterprise increases in size, to subdivide shop, administrative and selling expense so as to hold each department of these activities responsible for its own just share of the expenditures.
Many items of expense do not naturally attach themselves quantitatively to machines or processes, but gather like clouds, of greater or less density, over the entire enterprise. There is no great difficulty,
as has been shown, in finding the cost of the direct labor and the direct material that enter into a product. Nor is it a matter of great difficulty to classify the many items entering into the expense and to find the ,total amount of such classes for any given length of time. The charging off of this total' expense over the total product for any particular period of time pre sents, also, a simple problem. But it is exceedingly difficult, except in very simple cases, to assign to each shop order its own share of expense with any great de gree of accuracy. The principal problem of cost find ing is so to assign the expense, or burden, that each article shall bear its own share, and only its own share. This problem may be made a little clearer by a fur ther consideration of the characteristics of expense.
2. Expense fluctuation with volume of business.— An examination of the expense items of any enter prise will show that while some are fairly constant in amount, others go up and down with the volume of the business, tho according to different laws. In a gen eral way the items that are constant include all ex pense incident to the existence of the enterprise, irre spective of productive operations. Thus, such items as rent, taxes, insurance, depreciation of buildings, and the like, do not vary materially, whether the en terprise is active or not; or, if they do vary, the change is likely to be occasional and by large amounts. Otherwise, they remain fairly fixed for long periods. Such expense, furthermore, can never become zero, no matter what the volume of business may be. The salaries of permanent officials are of this character and are not affected, in general, by changes in the volume of business. Depreciation, it should be noted, may be even greater when the factory is idle than when it is in operation, since then many ordinary measures for preventing depreciation are not active.