Of the reports depending on the cost system none is more important than the so-called monthly state ment (Figure 3), which is a concise statement of the condition of the business at the time considered. The sources of some of the items are, of course, found in the general books, but unless a good cost-finding sys tem is in use the items of material, work in progress and finished product cannot be evaluated on short no tice. The methods of evaluating these items have been fully explained in previous chapters and will not be further discussed, except to note that these values are always available from the several ledgers of the cost system and the ledger accounts of the general books.
5. Labor reports.—Reports such as those just men tioned can be abstracted from the general books and the subsidiary ledgers without special effort, but there are other reports that are exceedingly useful which, in most cases, must be specially compiled. One of the most important of these is the labor report, which is usually compiled weekly. Referring to Section 6, Chapter XVII, it will be seen that the work cards were sorted, first by workmen's numbers so as to make up, or to check, the payroll, and resorted afterward by production numbers so as to distribute the wages against production orders. If they are now sorted by classes of labor, a report such as illustrated in Figure 25 results. This last sorting process can be greatly facilitated by giving distinctive colors to the several classes of work cards so that they can be sorted readily. This is especially true since, in this case, total results only are desired. The labor report is a classified statement of all expenditures for labor; it enables the manager to see at a glance where money that has been paid out in salaries has gone, and to keep a check upon all such expenditures. Such a report is made more valuable if compiled in a com parative manner. Thus, if the record of preceding weeks is shown as indicated in Figure 25, or if the average of former records, or the records of corre sponding periods of the preceding year are given, the general tendency is made much clearer.
6. Interpreting labor reports.—Care should be taken, however, in drawing conclusions concerning dif ferent classes of labor on the same report and at the same period. Thus, the ratio of indirect labor to di rect labor is often taken as a criterion of efficiency of production. While indirect labor must always be carefully watched, and while the ratio is often an im portant indication of tendencies, it is not always a criterion of increasing or decreasing efficiency. Sup
pose, for instance, that certain operations are being performed on cheap standard tools by high-priced men in such a manner that the direct-labor cost is large but can be accurately allocated to production orders. Suppose, now, that because of increased quantity it has become possible to transfer this work to high-priced automatic machines, located in the auto matic-machine department where, because of the na ture of the work, all labor is indirect. The direct labor formerly charged against this class of product is now replaced entirely by an indirect labor charge, and perhaps a heavier machine-rate charge is imposed be cause of the more valuable equipment. Yet the cost of the product may be very greatly reduced because of this change in manufacturing method, tho the ratio of direct to indirect labor would give no indication of the fact.
7. Lost time.—It was shown in Section 3, Chapter XI, that lost time, either of men or of machines, is not a just charge against specific-job costs. It was also shown in Chapter XIV that by the production-center method of cost finding, lost time is accounted for and can be used as a measure of the activity of the enter prise. Even' where such advanced methods of ac counting are not in operation, it is an excellent plan to have all idle time reported regularly and syste matically. A good workman who is absent a large portion of the time may not be as valuable as a medi ocre man who is faithful to his work. A machine that is idle a large part of the time, either from lack of work or because it is constantly breaking down, should be the object of a careful investigation.
8. Material purchase-analysis sheet, Figure 7 (page 72) , gives the manager a clear exposi tion of all materials purchased, as well as the general disposition of this material. This may or may not be sufficient for his purpose; it may be necessary to see that this disposition is correct and is faithfully carried out. Other reports may therefore be needed.
Material may be wasted as a result of several causes as, for instance, faulty design; changes in design, which leave on hand special material that cannot be used; and the spoiling of material by poor workman ship or bad storage. There is also an unavoidable loss due to fabrication in the form of cuttings, scraps from punching, remnants, etc., which may represent more value than the manager realizes.