The detail in which it is necessary to know the cost of the several parts of a machine will vary with the machine and with the conditions, and the grouping of the several parts under production-order numbers requires good judgment. Furthermore, if best re sults are to be obtained, the order clerk must keep in mind the uses that are to be made of the cost data after they have served to determine the costs of pro duction. If these data are to be used as a basis for managerial reports of a comparative nature, this fact may somewhat influence the issuance of the produc tion orders. Obviously, also, if segregated expense accounts such as are listed in Section 1, Chapter IV, are to be maintained, all expense material must be drawn from stores in such a manner that it will be accurately accounted for. It requires a high-grade man to place production orders so as to get the results desired and yet not waste money on details that are not necessary.
6. Instructions to storekeeper.—The production order and material lists are usually made in multiple. one copy going to the foreman concerned, with all drawings and specifications' connected with the work, and constituting his permanent authority for doing the work. Another copy goes to the storekeeper; it is his authority for issuing the material when it is de manded by the foreman. A copy is, of course, re tained by the order clerk. The storekeeper or his assistant issues the material called for, cancels his copy and corrects his record of material on band, either at the bin, or on the stores ledger, if one is kept. If a stores ledger is kept the record of the transaction may be recorded under "issues" as indicated in Fig ure 8 (page 80). The production order can then be evaluated, the price per pound or piece being filled in, and it can be forwarded to the cost department to be incorporated into the cost of the part to which the particular production number belongs. A simi lar procedure could be followed with the simpler form of requisition issued by the foreman, but the accuracy of the material list as made by a busy foreman is greatly to be doubted.
Theoretically, this method is very accurate. In practice, however, it is difficult to specify with abso lute exactness every item of direct material needed; but, except in the case of very complex work, the errors need not be serious. The chance of error is more than compensated for by the manner in which the method prevents unnecessary withdrawal of direct material, and fixes the proper authority and responsi bility for withdrawal in such a manner that errors and irregularities can be instantly traced to those re sponsible.
7. Emergency requisitions.—A great objection often made to such a system is that it is not flexible under emergencies, and that small jobs always cost more when passed thru such a system than they would if managed by a simpler one. For example, when a serious breakdown in the machinery of production oc curs there is little time to make bills of material and to write requisitions for them; and when repairs are being made while the factory is temporarily idle, a rigid requisition system may be embarrassing and may greatly hamper the progress of the work. Again, in making commercial repairs it may
not pay to make drawings, or even sketches, and write out bills of material based upon them; more over, when this procedure is carried out the cost of such repairs may be excessive.
These defects can be partly obviated, however, by empowering some official to issue emergency requisi tions to take care of these special cases. In such in stances the official possessing this emergency authority would issue the material requisitions that are needed, and have proper production orders assigned as soon as possible thereafter. Provision must always be made for caring for emergencies in any system, or its inflexibility may destroy its usefulness. Many good cost systems and other systems have failed on this account. Some, in fact, have been unable to obtain even a good foothold in shops where they were being introduced, largely because impatient fore men or superintendents, who are being hard pressed for production, fear that a new system will destroy flexibility, even tho, perhaps, it improves other manu facturing conditions.
The foregoing discussion has reference largely to manufacturing enterprises of the intermittent type, tho the principles are general and apply to many other forms of industry. As the enterprise ap proaches more closely the other extreme, or con tinuous operation, the necessity of detail becomes less and less, until finally no production order for direct material may be needed, since all material will be purchased in large quantities and its value will be carried directly to the general books.
8. Requisitioning indirect material.—Indirect ma terial, such as coal, waste, oil, brooms, and the like, is not handled by production order. Usually this class of material is drawn on the foreman's requisi tion. It is still customary in many factories to have the foreman assign the order number to which the supplies drawn are to be charged, this number being, in general, the production-order number on which the workman is at the time employed. As will be ex plained later (see Section 5, Chapter IX) , such sup plies should be charged to standing-order numbers, if intelligent costs are to be obtained, and distributed by one of the methods to be discussed. The storekeeper evaluates the foreman's requisition for indirect ma terial and sends it to the cost department. It should be noted in passing that where supplies are drawn in very small quantities it is difficult in some cases to keep an exact record. Thus it would be difficult to keep an accurate record of lubricating oil; supplies of this kind are often charged in a lump to the proper expense order. But even in such cases it is a useful check on waste to issue the supplies only on a requisi tion.