of COST A C C O U N T A N T S Official Publications · should have a system of account numbers, and...

NA T I ON AL A SS OC IA T I ON

of

COST A C C O U N T A N T S

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Offi c i a l Publ i ca t i on s

Vol. II October 1920 No. 3

Cost Accounting for Braesand Bronze Foundries

WOOLWORTH BUILDING233 BROADWAY NEW YORK CITY

N A T I O N A L A S S O C I A T I O N O FC O S T A C C O U N T A N T S

Official Publications

Vol. II No. 3 October 1920

Cost Accounting for Brassand Bronze Foundries

A. H . BAR RE T TCost Accountant,

Manning, Maxwell & Moore, Inc.,Boston, Mass.

WOOLWORT H BUILDING233 BRO AD WAY , N E W Y O RK CITY

The National Association of Cost Account-

ants does not stand sponsor for views

expressed by the writers of articles issued

as Publications. All articles are examined

by the Committee on Publications and when

they are believed to contain ideas of value

they are published regardless of whether or

not the then members of the Committee

agree with those ideas.

COPYRIGHTED BY

NATIONAL ASSOCIATION OFCOST ACCOUNTANTS

OCTOBER 1920

National Association of Cost Accountants

COST ACCOUNTING FOR BRASS AND

BRONZE FOUNDRIES

SCOPE OF ARTICLE.

Cost accoun t ing l i ter a ture on foundry cost systems has deal tparticularly with iron foundries. Little has been writ ten aboutthe application of correct principles of cost accounting to brassand bronze foundries.

While there are similari ties in practice between iron foundr iesand brass and bronze foundr ies, there are enough important di ffer-ences between them to war ran t separate consideration of theproper cost account ing r equiremen ts of the lat ter type of foundry.In i ron foundries metal i s melted in cupolas, the formulas or mix-tur es i n the m et a l s cas t ar e few, an d in m any cases t he ca st in gsproduced are of a high average weight. In brass and bronzefoundries meta ls are mel ted in crucibles in pi t or ot her t ypes offur na ces, an d th e wei gh t of ea ch m el t i s much less than in ironfoundries. Many different formulas or mixtures of metals aremelted; melting losses are grea ter ; and in many cases cast ingsavera ge l ow in wei gh t a nd a re more i n t r ica te than i ron castings.

Differences in practice also exist between brass and bronzefoundries producing billets in iron moulds which are rolled intorods and bar s and those producing cast ings from a var iety of pat -terns in sand moulds. The following discussion pertains to thela t ter type of foun dr y.

INADEQUATE FOUNDRY COST SYSTEMS.

It seems almost unnecessary to asser t that a reliable costaccounting system is just as important in foundries as in otherdivisions of industry, but many foundries are in operation inwhich a cost accoun ting system which yields proper cost informa-tion is conspicuous by i t s absence. Th is i s t rue not on ly of job-

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bang foundries, but also of foundries operated in conjunction withmachine shops which finish the foundry output. There are in-stances of concerns which manufacture machines under the direc-tion of managements who insist on having a well developed costaccounting system in the machine shops but give little considera-tion to such a system in the foundry. Inasmuch as the accumulationof value of the product originates in the foundry, the same careshould be taken to ascer tain accurate costs in the foundry as inthe machine shops.

Some foundries have accounting systems which determine theaverage cost per pound of all product, regardless of size, form, orother characteristics of the castings; or of the formula or mixtureof the metals cast. All expenditures in connection with the opera-tion of the foundry are included in the total from which the aver-age cost per pound is determined, with the result that each poundof product is charged with a portion of all expenses, yielding coststoo high for some castings and too low for others. In fixingselling prices for castings which are manifestly difficult to makeor are manufactured from special compositions, an adjustment ofthe average cost per pound is made by the addition of an amountsupposedly sufficient to cover the extra cost, but the adjustmentis usually an arbitrary figure. Obviously, as castings vary insize, shape, or composit ion of metals from which they are madethe cost of their production must vary. An average cost perpound can never be equitable unless the product of the foundryis absolutely uniform as to the characteristics already enumerated.It would be difficult to find a foundry which has such a product.

AN ADEQUATE FOUNDRY COST SYSTEM.The brass and bronze foundry which produces cast ings of a

variety of weights and shapes, both cored and solid, made from anumber of different compositions, should have a cost accountingsystem that shows individual job costs (i. e., costs by individualpatterns) and includes all cost factors fairly distributed. Thesecosts as completed are used in cost of shipment reports for com-parison with selling prices and are best recorded finally in com-parative form with supporting details readily accessible. In thisform they are of great value in estimating new work and inplanning improvements in operating and production methods.Daily, weekly, and monthly schedules, and reports recording andsummarizing in classified form the costs and results of operation

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and product ion should supplemen t the individual job cost recordswhich provide t he means of ful ly in forming the managemen t ofthe condi t ion and progress of the affa i r s of the concern , thus a id-ing i t in the admin ist ra t ion of the business.

Th e job cost records, schedules, and reports will be reliableand the most useful on ly i f accuracy and promptness in presen ta-tion are observed. The managemen t must have correct and liveinformation upon which to act most effect ively. The fulfillment ofthese requirements depends upon a correct classification of ac-coun ts; cor rect i n terpreta t ion an d r ecording of charges for mate-rial, labor, and expenses; reconciliation of all cost data withcontrolling accounts in the general books and cooperation of thepersonnel of the business. The ar rangemen t and orderliness ofthe foundry i t sel f and the product ion rout ine a lso have a bear ingon t he a ccuracy and pr ompt ness of cos t da ta . Loose methods ofstorage, and lack of dispatch in handling materials and productare hindrances to be avoided. These inefficiencies are indicated byan adequate cost system.

The fol lowing paragraphs deal wi th a plan and procedure forthe opera t ion of an adequate cos t accoun t i ng system for the typeof foundry under consideration. As every foundry has its ownpecul iar condi tions, it i s pract icable to lay down only fundamentalprinciples which m a y be adapted t o t h e special needs of specificcases. The l imi ta t ions of th is ar t icle do not permit the presen ta-tion of a complete classification of accounts nor illustrations ofnecessary records and forms, but these will be refer red to anddescribed.

I t i s assum ed t h at p roper m et h ods an d records are used forcommercial accoun ting; and that proper control accounts for allpurchases and sales are established, leaving for discussion onlythose fea tures of account ing di rectly connected with opera ting and

product costs.

CLASSIFICATION OF ACCOUNTS.

If a class i fica t ion of accoun ts i s to be of th e most service, i tshould have a system of accoun t numbers, and an ar r angemen t ofaccounts that will permit the addition of new accounts a t anypoint as the necessity arises without disturbing the generalscheme or order . The Dewey system of numbering, or a combina-t ion of numbers and let t er s, permits the greatest flexibility, pro-

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vided tabulating machinery is not used. The classification shouldcontain only those accounts most essential for the proper interpre-tation of the affairs of the concern, and an effort should be madeto avoid a multiplicity of accounts which will exhibit only pettyitems, particularly in departmental expense accounts, thus reduc-ing clerical labor to some extent.

The majority of essential "balance sheet" accounts are notunlike those for other lines of business. The divisions of assetsshould be Current, Deferred Charges, Funds, Permanent, andContingent; and the Liabilities and Capital accounts should bedivided into Current Liabilities, Operating Reserves, ContingentLiabilities, Capital Stock, Surplus, Surplus Reserves, and CurrentProfit and Loss.

INVENTORIES.

The inventory accounts among the current assets should in-clude Work in Progress, Purchased Metals, Foundry Scrap, Fuel,Crucibles, Moulding and Core Sand, and Other Supplies. Theseare the most important items which should appear in the monthlystatements.

Many brass and bronze foundries add tin, lead, zinc, etc., tomolten copper or scrap metals in the crucible in the form of ingotspreviously prepared. In such cases an inventory account forAlloys should be used and the cost of the alloys should include, inaddition to metal cost, proper amounts for labor and overhead con-sumed in their preparation.

Since foundry product is usually shipped as fast as finished,no account is listed for finished castings. If castings are finished,however, and held for future delivery, an account for FinishedCastings should be provided.

DEFERRED CHARGES.

This class of accounts includes prepaid items, such as Taxes,Insurance, Interest and 'Discount, Subscriptions and Memberships,and Miscellaneous Expenses. Experimental and Development costsare also deferred charges until disposed of.

Since the basis and apportionment of most of these items arerather generally known, they will not be discussed here.

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A br ief r eference to exper imen ta l and development expensesmigh t be m ade. These i tems are a ccoun ted for in several ways.When i ncur r ed for t he benefi t of a cust omer , they should be in-cluded as direct items in the cost of the customer 's order . Ifincurred for the benefi t of the company, they may be immediatelycharged to genera l admin ist r a t ive expenses, or t o t h e account ofthe depar t men t wh ich is to benefi t ; or accumul ated as a defer r edcharge i tem un t i l complet i on of the work, when they may be dis-posed of in the surplus account or tr ansferr ed to a permanentasset account. When the work is done by company labor, theproper overhead should be charged to i ts cost .

PERMANENT ASSETS.

The permanent assets should be classified as Land; Buildings;Light, Heat , and Power Equipmen t ; Machinery and OperatingEqu ipmen t ; Furn i tu re an d Fi xtu res; Fl asks and Pat t er ns (ownedby the concern) . This classification not on ly indicates the valueof perma nen t assets by classes, but also segregates those itemsmost similar in respect to depreciation, maintenance and repaircharges. The fact tha t deprecia t ion r a tes on foundr y proper ty ofvar ious kinds vary widely should be fully recognized.

ACCRUED LIABILITIES.

The Accrued Liability accounts should include Accrued Pay-roll , Taxes, Insurance, Interest, and Miscellaneous Expenses. Theoperat ion of these accoun ts is r a ther wel l known.

OPERATING RESERVES.

Operating Reserve accounts are Reserves for Depreciation,subdivided to agree with the classification of permanent assets;Reserve for Bad Debts; Reserve for Overhead; and Reserve forInven tory Adjustmen ts.

A table of deprecia t ion r a tes should not be used as a mediumfor set t ing r a tes wi thout considera t ion of t he fa ct or s that affectdepreciation. The fol lowing condensed table shows a l i st of r a teswhich are of the most in terest to foundry opera tor s. These r a tesare ca lcula ted by two of the most commonly used methods. Theyare h er e p resen ted to gi ve a genera l i dea of th e r a t es fr equen t lyused for various classes of assets.

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DEPRECIATION FACTORS AND RATES

Ratio of Rate Rate

A S S E T SProbab le Scrap Value % o n % onYears of to Or ig inal Orig inal Dec l in ing

Brick or Steel Frame Buildings,L i f e Value Cos t Value

Easy service ......... ............................... 40 0.10 2.25 5.5Severe service ....... ............................... 20 0.10 4.5 11.

Good Wooden Buildings,Easy service ......... ............................... 30 0.10 3. 7.5Severe service ....... ............................... 15 0.10 6. 14.

Sprinkler, Heating and Ventilat ing sys-tems, Water and Sewer piping andSanitary Fixtures .... ............................... 20 0.10 4.5 11.

Pavements, sidewalks, fences, retainingwalls, roadways, tracks, yard drain-age, general conduits, tunnels, vaults,etc

. ............................... ............................... 20 0.10 4.5 11.Boilers, pumps, feedwater, heaters, air

compressors, engines and dynamos...... 15 -30 0.10 6.-3. 14-7.5Power piping, valves and fittings, en-

gine room instruments and gauges,electric switchboard, instruments andmain wiring .................. _._........................ 10-15 0.05 9.5 -6.3 26. -18.

Heavy machinery, motors, travelingcranes, elevators, etc ............................... 20-30 0.10 4.5-3. 11. -7.5

Light machinery ......... ............................... 15 -20 0.10 6.-4.5 14. -11.Shafting, hangers and pulleys .................. 10 -15 0.05 9.5 -6.3 26. -18.Melting furnaces, heating ovens and

accessories ................. ............................... 15 -20 0.10 6.-4.5 14. -11.Motor trucks ...............

_ ................._ ..... _..... 5 0.10 18. 37.For items below a single write -off at

the rates specified is made and thebalance is carried as part of the in-ventory without further reduction, re-newals to be charged to expense.

Belting, hand tools, chains, ropes, foun-dry flasks, core - driers, etc., net addi-ditions ...

_ ..... .............. ............................... 50.Patterns and core -boxes (standard),

Metal, net additions ............................ 75.Wood, net additions ..._.__ .................... 100.All patterns, flasks or special equip-

ment required for a particularorder or contract to be chargedto the job.

Miscellaneous furniture, fixtures, andequipment,

Mechanical appliances, departmentalwiring and electric fixtures, etc.,net additions ... ............................... 60.

Miscellaneous items (wood), netadditions ............ ............................... 70.

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RESERVE FOR OVERHEAD.

No cost accounting system can be justified unless it showsaccurate costs. This means that , so far as is possible, the un it costof each product should include not only an accurate division ofmateria l and labor charges but a lso i ts equi table share of expensecharges; and that the sums of material , labor , and expense chargesincluded in the aggregate of product unit costs for any periodmust prove up to the total expenditures for these items dur ingsuch period. Reference to the accurate accounting for directmaterial and labor charges will be made later .

Accurate charges for expenses, or overhead, because they areindirect charges, cannot be ascertained with reference to unitcosts as easily as direct material and labor charges, but musten ter those costs on predetermined bases. These will be consid-ered in connect ion wi th depar tmenta l expense accounts.

Overhead distr ibutions as ma de t o p roduct costs in Work inProgress are to be credi ted to Reserve for Overhead accoun t , andthe tota ls of depar tmen tal expense accoun ts are to be per iodical lyclosed into the same account. Thus the Reserve for Overheadaccoun t becomes a col lecting accoun t , and it s balance at the closeof any period will indicate whether overhead is being under -absorbed or over - absorbed. Ei ther one of these condi t ions may becorrected, i f war ranted, by changes in overhead dist r ibut ion r ates.

I t should not be inferred that overhead distr ibution ra tesmust be changed each time the Reserve for Overhead accountshows a difference between overhead absorbed and actual over-head. The r eal value of the overhead r eserve accoun t i s obta inedwhen i t serves a s a stabi lizer of costs. I t should be t he aim toestablish overhead distr ibution ra tes so nearly correct that theymay remain constant as long as possible. But in spi te of the mostcareful work in predetermin ing r a tes it will be found that therewill always be some difference between the amount of overheadtaken into costs and actual overhead; and that when the ratesare near ly cor rect , a debi t ba l ance in the reserve accoun t a t thecl ose of a mon t h m a y eas i ly be offse t by a cred i t ba la n ce a t th eclose of some other mon th during the year . The causes of under -or over- absorption of overhead should be carefully watched, andif t h e fac t or s responsible are likely to continue in the future, achange in distr ibut ion rates should be made. Some of these causes

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ma y be var yi ng vol um e and character of product ion ; and an in-crease or decrease of operat ing economy and efficiency somewherein the plan t .

While a large credi t ba lance in the Overhead Reserve accoun tindicates th at more than actual overhead is being charged intocosts, it is bet ter t o er r in this direction than conversely, as areserve is then avai lable to take care of sl igh t increases in actualoverhead which cannot be foreseen and provided for . Any balancein the Overhead Reserve accoun t a t the end of the year should beclosed in to the Profi t and Loss accoun t .

RESERVE FOR INVENTORY ADJUSTMENTS.

The inven tory r ecords should be maintained carefully in orderth at inventory valuations may represent actual facts, and thatcharges to costs m a y be correct. Nevertheless, discrepancies be-tween actual and recorded quant ities of stocks on hand of theseveral inventories, due to clerical er ror s or natural wastes, will

occur.

Inventor ies should be checked and inven tory records correctedas often as oppor tun i ty is presented dur i ng the year. When allnecessary corrections which can be made by righ ting clericaler rors are taken care of, any r emain ing di fferences should be car -ried to the Reserve for Inven tory Adjustments account and leftto accumulate there un t i l t h e en d of t h e yea r , when t he balancein that account is closed into the Profit and Loss account. Byfol lowing th is pract ice the data in th e Reserve for Inven tory Ad-justmen ts accoun t provide a valuable index of the efficiency of theinventory r ecords.

REVENUE AND COST ACCOUNTS.

In the mon th ly r even ue and cos t accoun ts , wh ich ar e simi larto those of other industr ies, the profits on each month 's salesare expressed. The revenue accounts consist of Sales account,which is credited with amounts charged to customers for goodssold; Returns and Allowances account, which is debited withvalues credited to customers for allowances and sales value ofcast ings r eturned; Freigh t on Sales accoun t, wh ich is debi ted withprepaid t ransportation charges on sa les, and credi ted with amoun tscharged to customers.

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The cost accounts are Cost of Shipments account, which isdebi ted wi th am oun ts credi ted to inven tory accoun t s for cast ingssold; Returns and Al lowances account , which is credited wi th costvalues charged to inven tory or depar tmenta l expense accoun ts forscrap values and losses on cast ings returned.

The r emain ing r evenue and cost accoun ts, In terest Received,Cash Discoun ts on Purchases, Other Income, In terest Paid, CashDiscoun t s on Sal es, and Other Ch arges, a r e t r ea t ed exact ly as inother businesses.

Revenue and cost accounts ma y be subdivided by productclassification, if desired, to faci li tate comparison of revenues andcosts of each l ine of product .

To guard against intermingling of the transact ions of onemon th wi th a nother , t he revenue and cost accoun ts may wel l berepeated under the headings "Previous Months of Cur ren t Yea r "and "Pr ior Year." Any adjustmen ts of costs previously takeninto account or tr ansact ions cover ing r eturns of castings sold inprevious periods should be recorded in these accounts. The bal-ances in these accounts a t the end of the year are tr ea ted asadjustmen ts of profi t and loss.

DEPARTMENTAL EXPENSE ACCOUNTS.

As depar tmen ta l lines in a foundry are well defined, a depart -mental classification of opera ting expenses can be planned andused with pract ica l ly no t rouble, and with much advantage in col -lect ing operat ing cost information in the best form for compar isonand control. When proper a llocations of expenses are made, eachdepartment is placed squarely on its own feet , and its efficiencycan be measured by compar ison of i t s operat ing expenses with theresults produced.

Foundry productive depar tments are Melting, Coremaking,Moulding, and Clean ing; auxi liary depar tments are Inspection andShipping, Pat tern , Power, and General Maintenance, the la t terincluding carpenters, masons, millwrights, painters, blacksmiths,jani tors, watchmen , etc. If, however, the establ ishmen t is largeenough t o main ta in carpen ter and blacksmith shops, etc., as dis-tinct depar tments, individual depar tmental expense accountsshould be kept and separ a ted from the General Maintenance de-par tmen t grouping.

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General Administrative Expenses according to this classifica-tion includes selling, trucking and teaming, and receiving andstores expenses. If the organization and equipment of each ofthese several facilities are large enough to constitute separatedepartments, they should be represented by separate expense ac-counts. If auto trucks or teaming equipment are a par t of theproperty of the concern, fixed asset and depreciation reserveaccounts should be set up for them.

INTERDEPARTMENTAL CHARGES.Any transfers of labor or mater ials from one depar tment to

another should be given full effect in the accounts, charging thedepartment served and crediting that giving the service, thustending to reduce the amounts of expenses which must be pro-rated on arbitrary bases.

Particular care should be taken to exclude from GeneralMaintenance and General Administrative accounts all expenseswhich can be charged definitely to other departmental expenseaccounts or to costs of shipments, thus avoiding further arbitraryexpense distributions.

EXPENSE ITEMIZATION.Expenses in all departments can be basically grouped for com-

parative purposes under the headings Labor, Supplies, Tools andMiscellaneous, Maintenance and Repairs, and Apportioned Charges.In the subdivision of these groups, or itemization of expenses inthe accounts and cost reports, the magnitude of the business andthe wishes of the management should be considered. The itemiza-tion suitable and necessary for a large plant for purposes of com-parison and control of expenses would be needless detail for asmall plant. In general, individual items which "run into money"should be featured as separate items rather than included withother items in any one account. If further itemization is desiredat any t ime after the classification of accounts has been estab-lished, new accounts may be inserted at any point without diffi-culty, if the proper system of account numbering and arrange-ment is used.

The itemization in the following departmental expense ac-counts emphasizes the expense factors of importance in each de-partment of a brass and bronze foundry. Accounts are symbol-ized by a combination of numbers and letters. Reserving thenumbers from one to fifteen for balance sheet, and revenue and

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cost accounts, the numbers appl ied to the severa l depar tmen ts wil lcommence with sixteen.

16

17

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M E L T I N G D E P A R T M E N T .161 LABOR

A Melt e rs a n d h e lp e rsP Fo re m e n an d c le rksR Allo wan ces fo r o v er t im eS Sp ec ia l lab o r a llo wan cesT Tr u c k in g , h a n d lin g an d miscel-

lan eo u s lab o r162 SUPPLIES, TOOLS AND MISCELLANEOUS

EXPENSESA Fu e lB Cru c ib lesC C h ar co a l a n d fluxD S k im m e r s sh ovels a n d s m all toolsE W a t e rN Te s t in g an d an a ly z in gP S ick n es s an d acc id e n t ex p e n s eR Lo s ses d u e to e r r o r s an d d efec t sS Mis ce llan eo u s s u p p li e s an d ex -

p en s es163 MAINTENANCE AND REPAIRS

A Bu i ld in gsB F u r n a c e sC Ele va to r s , co n vey o rs a n d cr a n e sD Blo w ersE C in d er mill an d m eta l reco very

eq u ip m en tL Lig h t , h e a t an d p o w er eq u ip m en tS Ot h e r eq u ip m en t

164 APPORTIONED CHARGESA Ta x e sB I n s u r a n c eC Lig h t , h ea t an d p o w erD De p r ec ia t i o nE Gen er a l ad m in i s t r a t i v e ex p e n s esF Ot h e r

A L L O Y M E L T I N G R E P A R T M E N T . (As u it ab le it em iz a t io n fo llows fo r th i s de -p a r t m e n t wh en s e p a ra t e d f r o m ab o ve . )

C O R E M A K I N G D E P A R T M E N T181 LABOR

C Tr i m m i n g , in s p ec t i n g an d re p a i r -

Din g co res

Oven te n d er sP Fo re m e n a n d c le rksR Allo wan ces fo r o v er t im eS Sp ec ia l lab o r a llo w an cesT Tr u c k in g , h a n d l in g an d mis ce l-


ExPENSESA Fu e lB C o re s a n d an d b in d er sC Ro ds , wires , na ils , et c .D Malle t s a n d s m all too lsE W a t e rP S ic kn e s s an d acc id en t ex p e n s eR Lo ss es d u e to e r r o r s a n d d efec t sS Mis ce llan eo u s s u p p lie s a n d ex -


A Bu i ld in gsB Sa n d m ix er sD C o re o ven sE Co re box re p a i r s an d ren ewa lsF C o re fo r m e r s a n d p la t esL Lig h t , h e a t a n d p o w er eq u ip m e n tS Ot h e r eq u ip m en t

184 APPORTIONED CHARGES ( S a m e as fo rMe l t i n g D e p a r t m e n t )

19 (R es e rved f o r Ma c h in e C o r e m ak in g De-p a r t m e n t wh en ab o ve is us ed fo r h a n dco r e m ak in g on ly . )

20 M O UL D I N G D E P A R T M E N T201 LABOR

C P o u r in g a n d s h a k in g o u tD Id le t im eP Fo r em e n an d c l e r ksR Allo wan ces fo r o v er t im eS Sp ec ia l lab o r a llo wan cesT Tr u c k in g , h a n d l in g an d miscel-


EXPENSESAB Mo u ld in g s an d an d b in d e rsC C o re ch ap le t s , Bag ger s , na ils , e t c .D Sm a ll too ls an d eq u ip m en tE W a t e rP S ic kn e s s an d acc id en t ex p e n s eR Lo s ses d u e to e r r o r s an d d efec t sS Mis ce llan eo u s s u p p li e s an d ex -


A Bu i ld in gsB Mo u ld in g m a ch in esC R id d lin g m a ch in esE P a t t e r n re p a i r s a n d re n e wa lsF F la s k sL Lig h t , h e a t a n d p o w er eq u ip m en tS Ot h e r eq u ip m en t

204 APPORTIONED CHARGES ( S a m e a s fo rMe lt in g D e p a r t m e n t )

21 (R es e rved fo r Ma c h in e Mo u ld in g De p a r t -m e n t wh en ab o ve is used fo r h an dm o u ld in g on ly . )

22 C L E A N I N G D E P A R T M E N T221 LABOR

A Pu l l i n g co resB C u t t i n g off ga t e s an d s p ru esC Gr in d in g lab o rD R a t t l e r t en d e rsE H a n d ch ip p in g an d filin gF Sa n d b la s t i n gP Fo r em e n an d c le rksR Allo wan ces f o r o v er t im eS Sp ec ia l lab o r a llo w an cesT Tr u c k in g , h a n d lin g a n d mis ce l-


EXPENSESA Sa n d b las t s u p p lie sB Gr in d in g wh ee ls a n d s u p p lie sC Met a l s a w s a n d cu t t i n g s u p p lie sD Bru s h es , files a n d s m all too lsE W a t e rP S ick n es s an d acc id e n t ex p e n s eR Lo s ses d u e to e r r o r s an d d efec t sS Mis ce llan eo u s s u p p lie s a n d ex -


A Bu i ld in gsB Sa n d b las t eq u ip m en tC Gr in d in g eq u ip m en tD S a w in g an d cu t t i n g m a ch in esL Ligh t , h ea t a n d Po w er eq u ip m en tS Ot h e r eq u ip m en t

224 APPORTIONED CHARGES ( S a m e as fo rMe lt in g D e p a r t m e n t )

23 -24 (R es e rved fo r a n y d e p a r t m e n t s wh ichm ay be divo rced f r o m ab o ve , su ch asSa n d Blas t in g. )

Th e b lan k s p aces in th is co de a r e res e rved fo r th e in s e r t io n of n ew acc o u n t s t h a t m a y beo p en ed u p in o rd er to m a k e th e s y s t em clas t ic .

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26 I N S P E C T I O N A N D S H I P P I N G D E -P A R T M E N T

26

27

28

29-3

31

261 LABORA In s p ec t io n lab o rB -C S h ip p in g lab o rP Fo r em e n a n d c le rksR Allo w an ces fo r o v er t im eS Sp ec ia l lab o r a ll o w an c esT Tr u c k in g , h a n d l in g an d mis ce l-


EXPENSESA St a t i o n e r y a n d p r in t i n gB P a c k in g m a t e r i a l sr rD Sm a ll too ls a n d eq u ip m en tE W a t e rP S ic kn e s s a n d ac c id e n t ex p en s eR Lo s ses d u e to e r r o r s an d defS Mis ce llan eo u s s u p p lie s a n d


A Bu ild in g sL Ligh t , h ea t a n d p o we r eq u ipS Ot h e r eq u ip m en t

264 APPORTIONED CHARGES ( S a m e a sMe l t i n g D e p a r t m e n t )

(R es e rved fo r S h ip p in g D e p a r t m e n ts ep ar a t ed f r o m ab o ve . )

(R es e rved fo r Tr u c k in g a n d Te a m i n gp en s es if au t o t r u c k s o r t e am sm a in t a in e d . )

ec t sex -

m e n t

f o r

ex -a r e

P A T T E R N D E P A R T M E N T (I n c lu d in gp a t t e r n s t o r a g e ) .

281 LABORA P a t t e r n sh o p lab o rC P a t t e r n s t o ra g e lab o rP Fo r em e n an d c le rksR Allo w an ces f o r o v er t im eS Sp ec ia l lab o r a llo wan cesT Tr u c k in g , h a n d lin g a n d mis ce l-


EXPENSESA Mis ce llan eo u s lu m b erB Scr ew s , bo lt s an d s m all s u p p lie sD Sm a ll to ols a n d eq u ip m en tE W a t e rN P a t t e r n s t o ra g e ex p e n s eP S ick n es s an d ac c id e n t ex p en s eR Lo s ses d u e to e r r o r s an d d efec t sS Mis ce llan eo u s s u p p lie s a n d ex -


A Bu i ld in gsB W o o d w o r k in g m a ch in e r yC Met a l w o r k in g m a c h in e r yL Ligh t , h ea t an d p o we r eq u ip m en tS Ot h e r eq u ip m en t

234 APPORTIONED CHARGES ( S a m e a s fo rMe lt in g D e p a r t m e n t )

0 (R es e rved f o r Met a l P a t t e r n D e p a r t -m e n t an d P a t t e r n S t o r a g e wh en ab o veis us ed fo r Wo od P a t t e r n D e p a r t m e n to n ly . )

P O W E R D E P A R T M E N T311 LABOR

A Bo ile r ro o m lab o rB E n g in e ro o m lab o rP Fo r em e n an d c l e r ksR Allo w an ces fo r o v er t im eS Sp ec ia l lab o r a llo w an cesT Tr u c k in g , h a n d lin g an d mis ce l-

lan eo u s lab o r312 SUPPLIES, TOOLS AND MISCELLANEOUD

EXPENSESA Fu e lC Oils, gr e as e a n d wa s t eD Sm a ll too ls a n d eq u ip m en tE W a t e r

P S ic kn e s s an d acc id e n t ex p e n s eS Mis ce llan eo u s s u p p lie s an d ex -


A Bu i ld in gsB Bo ile rs a n d a p p u r t e n a n c e sC En gin es , a i r co m p res s o rs , d y n a-

mo s, e t c .L Ligh t , h ea t a n d p o we r eq u ip m e n tS Ot h e r eq u ip m en t

314 APPORTIONED CHARGES (Sam e a s Me lt -in g D e p a r t m e n t , o m i t t i n g C )

32 -33 -34 (R es e rved fo r an y d e p a r t m e n t sg r o w in g o u t of ab o ve . )

36 G E N E R A L M A I N T E N A N C E361 LABOR

A O p e r a t i n g lab o r , ca r p e n t e r s , m a -son s, m i llwr ig h t s , p a in t e rs ,b lac ks m i th s , j an it o rs , w a t c h -m en , be lt , power - line a n d elec-t r ic a l re p a i r m e n .

P Fo r em e n an d c l e r ksR Allo wan ces fo r o v e r t im eS Sp ec ia l lab o r a llo w an cesT Tr u c k in g , h a n d l in g a n d mis ce l-


EXPENSESA Mis ce llan eo u s m a t e r i a l sC Oils , gr e as e an d wa s t eD Sm a ll too ls an d eq u ip m en tE W a t e rP S ick n es s an d acc id e n t ex p en s eR Lo s ses du e to e r r o r s an d d efe c t sS Mis ce llan eo u s s u p p lie s a n d ex -


A Bu ild in g sB Ma c h in e r yL Ligh t , h ea t an d p o we r eq u ip m en tS Ot h e r eq u ip m en t

364 APPORTIONED CHARGES ( S a m e a s f o rMe lt in g De p a r t m e n t . )

36 -37 -38 (R es e rved fo r an y d ep a r t m e n t s g r o w -in g o u t Of ab o ve . )

40 G E N E R A L A D M I N I S T R A T I V E401 LABOR

A Sala r i e s , ex e cu t iveB Sa la r i e s , officeC Sa la r i e s , s e llin gD Sel li n g co m m is s io n sR Allo w an ces fo r o ve r t im e .S Sp ec ia l lab o r a llo wan cesT Mis ce llan eo u s lab o r

402 SIPPLIES AND MISCELLANEOUS EX-PENSES

A St a t i o n er y an d p r in t i n gB Telep h o n e an d te l e gr a p h a n d

p o s t a geC Sp ec ia l ex p en s es , ex ecu t iveD Tr a v e l in gE W a t e rF Su b s c r ip t io n s an d m e m b er s h ip sG Le ga l ex p en s esH Ad ve r t is in gJ Ex p e r im e n t a l an d d eve lo p m en tK Tr u c k in g an d t e a m in g ex p en s esL R ec e ivin g a n d s to res ex p e n s esP S ick n es s an d acc id e n t ex p en s esR Lo ss es d u e to e r r o r s an d d efe c t sS Mis ce llan eo u s s u p p li e s a n d ex -

p en s es403 MAINTENANCE AND REPAMS

A Bu ild in g sB Office m a c h in e r yC F u r n i t u r e an d eq u ip m en tS Ot h e r eq u ip m en t

404 APPORTIONED CHARGES ( S a m e a s f o rMe lt in g D e p a r t m e n t ex c lu d in g E )

41 -42 (R e s e r ved fo r Se llin g, an d R e c e iv in ¢an d S t o r es acco u n t s if s e t as id e f r o mab o ve . )

• Th e b l a n k s p aces in th is co d e a r e res e rved f o r th e in s e r t io n of n ew acco u n t s t h a t m a y b eo p en ed u p in o rd er to m a k e th e s y s t em elas t ic .

A

While most of the i tems in the classi fication are self- explana-tory, perhaps some may need explanation. "Special labor allow-ances" is in tended to be charged wi th wages a l lowed for hol idaysor special events. Sickness and accident expense should becharged with wages or any other expense incurred for sick orin jured employees in a ny of the depar tmen ts other than that cov-ered by l iabil i ty in surance. Idle t ime is fr equen t l y an impor tantfactor in the moulding department when moulders are delayedbecause cores or equipmen t are not rea dy for t h em a n d t h e Id l eTime accoun t is provided for charges of tha t nature. Idle t ime isnot usually a factor in the other depar tments, but if it is theaccoun t may be included in t he accoun ts of these depar t men ts.

DISTRIBUTION OF DEPARTMENTAL EXPENSES.

An exhaust ive presen ta t ion of overhead dist r ibut ion methodsan d t he ca ses t o wh i ch t h ey best a ppl y can not be under taken inthis ar t icle for lack of space. The methods given in the followingparagraphs are men tioned only as i llust r at ions which may be usedas approximations until bet ter methods sui t ing the needs of spe-cific cases are evolved.

Mel ting depar tment expenses ar e t o be prora t ed to Work inProgress on the basis of pounds of meta l poured. The weigh t ofcastings in the mould, which includes gates, r isers, and sprues, foreach pat tern worked should be on record. Metal r ecover ies fromfoundry ashes, and melt ing and moulding floor sweepings shouldbe c lean ed up dai ly an d r epor ted for each da y's melt. The t ota lweight of metal poured each da y can be easily calculated fromdata kept for the gross weight of cast ings, da ily moulding repor ts,and meta l r ecovery r epor ts, and accumul ated for the mon th . Thequot ient of each month 's mel ting expenses divided by total poundspoured is the conversion cost per pound on al l metal poured. Thisfactor ca lculated in th is way disregards separate conver sion costsfor va r ious for mul as , but i t i s not feas ibl e t o obta in an accuratemel t in g cost per pound by form ulas. For th ose mi xt ur es knownto r equire appreciably more t ime for mel ting than ordinary formu-las, thus absorbing more melting expense, special observations canbe taken and the melt ing cost per pound therefor can be increasedover the fla t r ate in propor t ion to the extr a t ime r equired.

Melting loss, or the difference between weigh ts of metalcharged and poured, while included in melting costs, should be

15

recorded as sta t i stica l in format ion of wh ich the managemen t maymake use in st r iving to lessen such expense.

In foundries where piece work is not the rule, coremakingexpenses may be dist r ibuted on the basis of coremaking man -hours on each order requir ing cores; moulding expenses on thebasis of moulding man -hours on each order; and cleaning expenseson the basis of combined coremaking and moulding man -hours oneach order. These bases wil l be found to be good approximations,r esul t ing in the dist r ibu t ion of each class of expenses in greaterproportion to cored castings than to plain castings, which islogical. In m an y foun dr ies th e results secured from distr ibut ionof these expen ses in the man ner men t ioned may be found t o varyli t tle from the r esul ts obta ined by other methods.

Piece work methods of wage payment would a l ter the efficacyof the man -hour basis of distribution. The direct -labor costbasis would perhaps serve bet ter in th is case.

The extensive use of coremaking and moulding machinesshould lead to the considera t ion of establ ish ing separa te expenseaccoun ts for the machine departments, and the machine -hourbasis of expense dist r ibution .

In most foundr ies of the class con sidered in t h is ar t i cle, thevaried character of production precludes the t reatmen t of clean inglabor as direct labor accounted for by order numbers, owing tothe difficulty in keeping time for the several opera tions and orders.In such cases the dist r ibut ion method men t ioned above wi l l serveto charge each order wi th clean i ng expenses and labor in greaterproportion in the case of cored castings which need cleaning insideand out, than in the case of pla in cast ings which need cleaningon ly on the outside sur face. Where practicable, time- keeping forcleaning labor may be by order numbers and cleaning expensescan be prora ted thereon more accurately.

Inspection and Shipping expenses may be dist r ibuted to core -making and moulding depar tments on the basis of total direct -labor hours in each departmen t. Th is basis in most cases i s bet terthan a weigh t basis, as the relation of time required to inspectand prepare for shipment specific lots of castings to coremakingand moulding t ime consumed is closer than the weigh t rela tion .

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Pat tern and General Maintenance expenses except pat ternstorage costs, sh ou ld be p rora ted t o th e expense accounts of de-par tments benefi ted on the basis of man -hours spent on wor k ineach depar tmen t. The time and labor cost spent on each jobshould be recorded under proper departmen tal expense accountnumbers, plan t order numbers for new work to be added to capi ta laccoun ts, or product ion order numbers for specia l rigging, equip-men t or work for speci fic customer 's orders. At the end of themonth the man -hours applicable to each job shown by the timerecords form the basis of distr ibution of the entire expense inpat tern and general maintenance depar tments, except patternstorage labor and expenses, which should be charged to core -making and moulding expenses on the basis of service given .

Power department expenses are chargeable to the variousdepar tments served on bases of consumption. If the power de-par tmen t includes, besides an engine for driving machinery, anelectr ic power plant, air compressor, or water pumping stat ion,these severa l un its should bear equi table shares of steam expense,and the expenses of opera t in g and main t a in in g the several unitsshould in turn be borne by the depar tmen ts served. The bases ofdistribution are: measured consumption or est imated horsepowerconsumption of power , wat tage of lamps for l igh t ing, floor spacefor heating, measured or est imated consumption of air andmetered or est imated consumption of water . If exha us t st ea m isused for heating or other purposes, the engine room should becredited therefor . Purchased services of the kinds mentionedabove should be charged in to depar tmenta l expenses di rectly fromaccounts payable vouchers, having no connection with the powerdepar tmen t.

General administ r at ive expenses may be distr ibuted over de-par tments on a basis of total man -hours in each depar tment whichbasis r esul ts in greater charges to the larger depar tmen ts. Truck-ing and teaming expenses are proper ly to be born e by the r eceiv-ing and shipping departments on the basis of services rendered.Receiving and stores expenses are proper ly chargeable to the costof the stores handled so far as practicable, as is the case withfreigh t and express inward. Any parts of such expenses whichcannot be added to the cost of purchased materia ls should be pro-ra ted to departmen ts to wh ich the goods wi l l fina l ly be del ivered.

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STATEMENTS AND EXHIBITS.

The month ly reports will, of course, include a t r i a l balance,balance sheet , and profit and loss sta temen t, wh ich are so commonas to need no descr ipt ion , unless mention should be m a de of t h edesi r abi l i ty of presen t ing them in comparat ive form, showing re-su l t s a s of " t h is m on t h , " "last mon th ," "th is yea r t o date," and"l a s t yea r t o dat e . "

Departmen tal expense exhibits are also in order in a well -regulated system. These should all be in the same comparativeform as the t r ia l ba lance wi th respect to the per iods r eviewed.

The melting cost repor t, summarizing daily heat and metalreports, and melting depar tmen t expenses, is first in the list ofthese exhibits. Melting department expenses are listed in detailjust as they appear in the classi ficat ion of accounts, and the grandtotal of these expenses is shown and named "Total conversioncost." The metals used are then detailed in kind, weight, andvalue, and total led, which, added to the total conversion cost, givesa final total named "Tota l melting cost." The summar ized chargesto work in progress order s a re then sh own in wei gh t poured andvalue, and deducted from the total melting cost, resulting in adebit or credit balance shown in black or red respectively, andnamed `Balance to overhead r eserve accoun t ."

Thus a complete deta i led story of mel t in g depar tmen t act ivi -t ies and r esul ts produced is presen ted. Melting loss is shown inthe di fference between, the weights and values of meta ls used andpoured and may be shown also in percentage of metals used.Wh eth er t h e depar tm en t i s pa yi ng i t s wa y is shown in the bal -ance carried to overhead reserve account.

Exh ibi ts for a l l the ot her depa r tmen ts are con st ructed in thesame way as t he one for th e mel t ing depar tmen t , usi ng, however ,the term s appl i cable in each case for the dis t r ibut ion of th e tota lexpense, and showing the bases used for the dist r ibut ion .

Al l balances to Overhead Reserve accoun t are shown in blackor r ed a s t he am oun t i s a debi t or cr edi t ba la n ce an d t h ei r t ota lmust agree wi th the tota l monthly change in the Overhead Reserveaccount. Other statistical information can be incorporated inthese exh ibits.

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PRODUCTION ORDERS.As customers' orders are r eceived production orders should be

issued for individual pat terns of cast ings, numbered serially andproviding for the r ecord of date, order number , pat tern number,quan ti ty ordered, formula, description, and sales order number.Six copies can be used advan tageously, one copy for the office orproduction manager having additional provision for record ofcastings made, shipped, and rejected, and the dates. Anothercopy for t he pa t ter n storage is t he a u th or i t y t o del i ver pat tern sand core boxes, and may have provision for description of pat-terns, core boxes, and other equipmen t delivered, and signaturesof r eceipt of th is equipmen t in coremaking and moulding depar t -ments. The s igna tu res ackn owledge t he fac t th a t pat tern s, etc.,a r e r ea dy for use . A t h i rd copy, which goes t o t he corem aki ngdepar tmen t , i s a not i fica t ion of the plac ing of t he order and mayprovide for recording dates, cores made, delivered and rejected.The four th copy, going to the clean ing depar tmen t , not i fies themof the order and ma y provide for record of dates, cast ings re-ceived, delivered, and rejected. These four copies can be of a n yconvenient size, say 4" x 6 ", and can be ar ra nged to be issued inone wr i t ing with the a id of carbon paper .

The fi fth and sixth copies should be larger , say 8" x 10 ", or91/2"x 1211, being expanded for more extensive use, and shouldpreferably be arranged for use in loose -leaf binders. The fifthcopy is for the moulding department. I t is assumed that thefoundry timekeeper 's headquarters are located in this depart-ment, and the copy acts primarily as a notification of the placing ofthe order. This copy provides on its face, in addition to thedescriptive heading, columns for dates, materials charged — detailedas to kind, weight, price, and value— castings delivered — detailed asto good, rejected, weight, price, and value. The rever se of thiscopy is ruled to r ecord coremaking and moulding t ime of directlabor, provision being made for recording dates, worker 's clocknumbers and names, hour s worked (on t he order ) , r a te, day workearnings, pieces made, ra tes, and piece work earnings. Machinenumbers may a lso be shown. Helper s ' as well as principals ' timeand earn ings are here recorded.

The six th copy goes to th e cost depar tmen t , where i t i s fi ledin binders wh ich con ta in the detai led records suppor t ing the workin progress inventory. In addition to the descriptive heading,

19

this copy has provision on its face for a ledger accoun t for th eorder. Under the ca pt i on "Work in Pr ogr ess Accoun t " t her e a reth ree vert ica lly ruled sections headed "Debits, Credits, Balance."The debit columns provide for recording dates and amoun ts formaterials — detailed as to quant ity, kind and weight --- coremakingand moulding hours and labor, coremaking and moulding expense,cleaning charges, and tota l charges. The credit columns providefor r ecord of castings del ivered — detai led as to quan tity good, r e-jected— accounts charged showing cost of shipments of finishedcastings, scrap, and depar tmen ta l defective accounts, and values.The balance columns are for values only.

As dai ly t im e r epor ts com e to t he cost depar tm en t t h ey a r ever ified wi th the t ime clock r ecord for each worker, r ated and ex-tended, and sorted by order and accoun t numbers. A dupl icate ofeach sl ip i s fi led by worker ' s number or name to be la ter ver i fiedwith an abst r act of the payrol l for accuracy of r ecorded earn ings.From the set fi led by order numbers a l l labor charges are car r iedto the cost depar tmen t 's copy of the product ion order , al l relevan tin format ion being obtained from the time slips. Material chargesto product ion order s are obta ined in a simi lar manner from prop-erly priced, extended, and filed material requisitions. Thus thenecessary in format ion is recorded on each order so a s t o permitthe da i ly pr icing of r ecords of cost of shipments, and order s arecredited accordingly, so that the balance in work in progress isalways known. All information except ra tes, prices, and valuesare r ecorded on the copy of the order in the moulding depar tmen tan d wh en th e order i s compl et ed i t i s t hen t ur ned i n t o th e cos tdepartment with all related papers for final verification of allentr ies and final recording of costs on comparative cost records.The fi fth and sixth copies of each order, after checking and theinsert ion of values on the fifth copy, become the permanen t recordof th e or der and car r y a l l th e deta i l s suppor t ing the com para t ivecost record.

COST AND PRODUCTION REPORTS.

A detailed description of all of the cost and production re-por ts used in operat ing an adequate cost accounting system willnot be a ttempted in th is ar t icle, as the numerous references to themany requiremen ts for the successful working of the systemshould be a guide to the nature of the necessary paper s. In foun-

20

dries already operating an accounting system probably most of theforms in use can be continued, perhaps with some modifications.Whenever possible cost and production department requirementsshould be served by the same forms, several copies being writtenif necessary, as the source of information for both departmentsis the same and much clerical labor can be saved by cooperationof the departments.

CONCLUSION.

Description of much of the details necessary for the installa-tion of an adequate cost system such as is described in this paperis omitted, and necessarily so, because the requirements of indi-vidual cases are all different. The main purpose of this discussionis to show that adequate cost accounting for brass and bronzefoundries should and can be accomplished, and to indicate theapplication of correct accounting principles to serve the operatorsof such foundries.

As indicated before, a complete knowledge of cost details pre-sented in all proper relations and at the proper times is essentialto brass and bronze foundry operators if their business is to beconducted intelligently and profitably and with a full realizationof benefits from their equipment and facilities.

The cost system described is planned and based on soundaccounting principles and may be adapted to the needs of anybrass and bronze foundry of the type considered, and it is capableof expansion and improvement in details as the demands upon itbecome greater.

With a few minor changes in the accounts classification thesystem described is suitable for foundries connected with machinemanufacturing concerns, "customers" being replaced by the parentplant, and other changes being made to bring the system into theproper relation with the whole organization. A very careful con-sideration of expenses should be made in such cases in order toinsure that the foundry shall bear its just proportion of expenses.

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