12. Tracing progress of work.—Where the prod ucts of the factory are varied, and where many finished parts are made for the stores, it is often very impor tant to ascertain the state of fabrication in the case of all production orders. Thus if the supply of a cer tain kind of finished parts were low, and a large number were just nearing completion and were about to be delivered to the stores by the production de partment, it would not be good manufacturing policy to place a rush order for a large number of these parts. To obviate the difficulty involved a stock-tracing ledger, so-called, is sometimes em ployed. This ledger is usually of the loose-leaf type or else it is a card system; a single leaf or card is used to record the movements of one lot of material from the time it leaves the storeroom until it is de livered as finished parts. This record is in reality a continuous-progress report of the particular lot of ma terial the movements of which it records as it passes thru the factory. In simple systems these ledger sheets may also record the cost of the material as well as the labor accruing on it, thus combining the func tions of a cost ledger with those of a stock-tracing ledger. In general, however, it will undoubtedly be better to keep these two functions separate, using a cost ledger only for financial summaries of costs.
Stock tracing, so-called, grew out of a logical need of knowing the progress of all jobs and of insuring that required deliveries would be met. From stock tracing have grown more advanced systems, which should be noted, since they tend to change cost-finding methods.
13. Routing and scheduling.—The stock-tracing ledger and the stock-tracing methods just discussed record the progress of the material thru the several processes. It will be noted that the entries are made on the ledger after successive operations have been performed. Under more advanced methods of fac tory administration; the previous planning of pro ductive processes and the scheduling of all movements of material and of time operations, are becoming important features. Such methods aim not only to plan in advance the route or sequence of machines and processes that the material is to follow but also, often, to fix the time that shall be consumed by each operation. In some very advanced schemes of this character, this analysis of procedure and the schedul ing of the time element are made in great detail. Clearly, if the time element can be predicted the cost can also be predicted; as a matter of fact, there is a decided tendency to attempt to do this, even where advanced methods of administration have not been in stalled. Such ideas not only tend to affect cost-find ing methods but, as will be seen, they strongly influ ence the methods of rewarding labor.
Even a brief discussion of these stock-dispatching methods is beyond the scope of this book, but the accountant who is installing a cost-keeping system will do well to inform himself regarding them, since they are so closely related to cost-finding meth ods. Aside from the question of any direct assistance
which these methods may render in finding costs, their indirect effects upon the reduction or increase of costs are of great importance. The introduction of such methods and systems may be justifiable even tho they do not reduce prime cost. Thus, if they suc ceed in increasing the rate of production without changing the prime cost of production, an increase in profits is made possible. Again, if the time of de livery of product can be hastened and made more certain a gain may be accomplished for which the factory can afford to pay something; but none of these results should be taken for granted, and each and every item of this kind should be judged with the financial facts in hand, and not in the light merely of superficial evidence or personal opinion. The extent to which these advanced methods of administration may come into use is not at present very clear; never theless, as has been noted, they should be carefully considered by students of cost-finding methods.
14. Value of finished product and stock.—When a product is made to order it is usually shipped to the customer when completed, the factory cost is sum marized from the cost ledger or corresponding record, the necessary additions for general expense, selling expense, and profit are added and the transaction is closed except for the collection of payment. Where the product is made in anticipation of the market, and especially where production necessarily is in large lots, the finished product must be held in storage till sold. A large factory may have not only a large stock of finished goods in the central stock room at the factory, but also branch offices which carry such finished product. The amount of money so tied up may be very great.
The general and selling expenses are usually dis tributed over the product as a percentage on the fac tory cost. It is no longer necessary to keep the labor and material components of cost separated. The cost-ledger account may therefore be closed, and the finished product may be listed on the stock records at factory cost. The methods of distributing general and selling expenses will be discussed in a later section.
It should be carefully noted that the factory cost placed upon the product when it is deposited in the storeroom is not necessarily the permanent value of the article in question. The factory cost represents the investment in labor and material up to this point and, like any other investment, it may change in value. Theoretically, if the article should lie in the storeroom for a year, its actual cost to the factory management would be increased by the interest on the investment and the cost of storage. Practically, however, most product begins to deteriorate from the moment of its production, either from the action of the elements or because of progress or change in the methods by which the product is manufactured. A full discussion of this phase of material values may be found in Chap ter XII.