3. Separate cost records.—When, therefore, the de tails of the cost of the product become too voluminous for the general books some form of independent ac count must be opened for each individual job or order. This series of accounts may be kept by means of a card-index system or they may be kept in a bound volume, but in either case such a set of accounts is usually called a cost ledger. Just when it becomes necessary to open such a ledger cannot be definitely fixed, but depends again on the circumstances of the business. There is a general tendency, however, to separate the cost-finding system from the general books, even in certain kinds of small plants, for rea sons that will presently appear. The extent to which this is necessary is also much affected by the character of the manufacturing processes and the consequent organizations of the enterprise. Manufacturing plants may be divided, broadly speaking, into two kinds, namely: (a) Continuous-process industries.
(b) Intermittent, or interrupted, process indus tries.
4. Continuous-process industries.—In a continu ous-process industry of the extreme type the mate rials are passed in a steady stream thru a process or sequence of processes. The raw material goes in at the receiving end of the plant, is worked continuously, and appears as finished product at the shipping end of the plant. Thus a cement plant is supplied with a constant stream of the necessary ingredients, passes them all thru the same processes and produces a uni form product, so far as appearances, at least, are con cerned. Ore-refining plants, oil refineries, salt works and sawmills are other examples of this kind of in dustry.
Such an industry may be either analytical or syn thetical. That is, it may take some natural product and separate it into component parts, as in the case of ore refining or of industries turning out products made from salt; or it may take raw materials and build them up synthetically into other products, as in the case of a paint works. Usually such factories handle only a few materials and these in very large quantities.
In the extreme case where the processes involved are not numerous, and the quantities handled are vast and of few kinds, the cost finding is very simple. All that is needed is the cost per unit (yard, pound, or ton, as the case may be) and this involves only a rec ord of the output for the period considered and a record of the labor, material and expenses incurred for the same period. If the value of the material in process is not great the unit cost can be ascertained accurately enough by dividing the summarized labor, material and expense by the output for the period se lected. If, however, the value of the material in proc
ess is great, allowance must often be made for this value, especially if the rate of production varies. Clearly the cost finding, even in such cases, need not extend beyond the general books, and in simple cases it is not necessary to keep the expenses of production in any great detail, since these expenses are neces sarily distributed uniformly over the product.
There are often administrative reasons, however, for keeping detailed costs even in these simple cases. Thus, in some continuous industries it is desirable to know the cost of production by departments or proc esses; or the plant may be producing several articles continuously, each article passing thru the same de partments. In such cases simple division of the sum marized cost, as already indicated, may not suffice and cost-finding methods apart from the general books must be resorted to.
5. Intermittent-process inditstries.—At the other extreme are industries that manufacture a variety of products and a comparatively small number of each variety. A plant for the building and repairing of ships is a good example of this extreme type. Here duplication of an order is not frequent and the great est diversity of product is met with, as regards both character and size. Obviously, only cost-finding methods that take account of the labor, Tnaterial and expense that justly belongs to each job are adequate in such cases. The degree of detail into which it is necessary to carry the cost-finding methods will, of course, vary greatly with the character of the work, but, evidently, no simple averaging methods, such as have been discussed, will give even approximate costs in cases like this. The various items of shop expense are chargeable in varying degree to the many articles made, and, while it is not difficult to allocate the material and labor actually used on any contract, the distribution of the indirect expense presents a diffi cult problem.
6. Combined intermittent and continuous factories. —Between these two extremes are found many en terprises that employ both intermittent and continu ous processes to a greater or less degree. Thus a large electrical-machinery factory may build large sized generators, motors or transformers, to order only, and seldom in lots of more than three or four.