These remarks hold true with even greater force in regard to the predetermination of costs for the pur pose of setting labor values in the factory in advance of production. accurate cost data, it will be found that piece prices, or in fact any other form of prediction of labor values, are little better than guesses. Furthermore, unless these cost data have been obtained under standardized conditions, and un less they represent not only what has been done but, approximately at least, the best that can be done, the estimator cannot be sure that he has obtained accurate results.
4. Distinction between actual costs and estimated costs.—A careful distinction should be made, there fore, between predicted costs based on actual results, and certain other kinds of estimated costs. Cost esti mates made in advance may be successfully realized in actual productive performances; but it should be re membered that actual cost's must always be based on actual performance, and before estimated costs are used in any way, they should be carefully compared with actual results. Some of the cost systems in corn mon use, based on estimates only, and unchecked by actual records of results, must be considered, at best, entirely inadequate.
Thus, it is often customary to make an estimate of cost based upon estimated values of material, labor and expense, the estimates, for the most part, being based upon empirical information and personal judgment. If the productive operations involved are repeated, this estimate is checked or tested, in a rough way, and such corrections as may appear necessary are made, this procedure being repeated as often as may seem desirable. Clearly, such rough rule-of-thumb meth ods of predicting costs cannot be considered seriously when compared with methods based on any of the cost systems that have been discussed ; yet the amount of estimating made in this manner is surprising.
Similar considerations apply to methods such as the list-percentage plan, so-called, that is sometimes used in continuous-process industries with products such as soap, brick, and cloth. Under this method, the costs of production of each brand or line of products are es timated by a percentage based upon the list prices. These list prices may not be the actual selling prices, but they will be proportional to them. The estimated costs are then checked by actual experience, and cor rections are made where necessary. There may be in stances where such crude methods will suffice, but it would seem that, if these estimated costs could be checked with accuracy by actual performance, it would be easier and more logical to accumulate accurate cost data on which more rational estimates could be made in the first place.
5. Predetermination of material costs.—The pre determination of material costs usually offers little difficulty. The art of designing all manner of manu factured product in advance of production, and of specifying the characteristics of material needed for the work, has been so highly developed that little need be left to chance, so far as direct material is concerned. Material can be weighed, counted, or otherwise meas ured in such a way as to make it possible to issue just what is needed to satisfy the requisitions (see Sections 4 and 5, Chapter VII); and the fixing of the material values in advance of production, so far, at least, as direct material is concerned, can be made with some assurance of realizing the expectation. Losses due to waste and mistakes are unavoidable but, as has been explained (see Section 16, Chapter VII) , these can be minimized, with proper care. The problem of pre dicting expense material is, of course, a part of the problem of predicting expense, or burden.
Obviously, also, if the material lists made for a given article are accurate, they need not be changed, so long as the article is made in that particular form. Such lists, therefore, become standard and may serve as a definite basis of calculating material costs in ad vance.
6. Control of labor costs, day rate.—The control of labor costs is an entirely different matter, especially where the workers are on day rate. Even in the case of conscientious workmen there is a wide variation in the cost of production of similar articles at different periods. This is often due as much to varying condi tions of production as to any remissness on the part of the workers ; but even with the best of workmen the rate of production will vary greatly where the day rate is assured and where, consequently, there is no special incentive for men to do their best. This is very well illustrated in Figure 24 (page 280) , which shows a record of actual production in a well-managed shop. The variation in the productive time of various men and at different times is here clearly shown; and the difference in total cost per piece, shown in the last column, is not unusual. Evidently, the prediction of costs, under such circumstances, must be based on an average of experience, or else a large allowance must be made for possible variation.