Part 8

Usually the production orders of one factory will be confined to one class, though there are some exceptions. In the first class, we find shops manufacturing special machinery, jobbing foundries, and mills manufacturing underwear and hosiery. In the latter business the goods are sold in advance, from samples, and only the quantities or

## particular styles required to fill orders are manufactured.

The second class includes furniture factories, typewriter factories, the manufacture of tools, and numberless similar industries in which a stock of standard goods is manufactured for future sale.

An example of the third class is found in a harness factory. In this business, a certain number of sides of leather are issued to the cutting room to be cut. Since the leather is not uniform in weight or texture, it is not possible to cut an entire side of leather into pieces of the same size, or the same parts of a harness──as lines or traces. The cutter must use his best judgment, so cutting the leather that it will produce the largest possible volume of usable stock, with the least waste. The definite factor is the side of leather which is to be converted into an indefinite quantity of finished, or semi─finished product.

The last class is illustrated in the manufacture of salt. The brine──raw material──is pumped from the wells into storage tanks, from which it is drawn into evaporating pans or grainers. An order may be issued to make what is known as _common fine salt_ in three of these evaporators. Evaporating processes are influenced by atmospheric conditions──the same heat will evaporate the brine much more rapidly one day than another. Also, the brine is of different degrees of strength──the same quantity does not always contain the same amount of salt. The only definite factor is time──an indefinite quantity of brine is converted, in a given time, into an indefinite quantity of salt and, it might be added, of an indefinite quality.

When all these conditions are considered, together with the fact that each manufacturer has his individual methods of conducting the business──methods probably different from those of his competitors in the same line──it will be seen that the variety of forms of production orders is almost without number. But the important thing is to have an order of some kind──to provide a record.

If there is one essential feature to be incorporated in the production order, it can be expressed in two words──definite instructions. The order should be made perfectly clear, leaving no room for doubt, as to what is desired. When No. 3 dining─room chairs are wanted, the order should state the fact very clearly, and not read _chairs_, leaving the superintendent to guess the style and size.

[Illustration: Fig. 39. Production Order to Superintendent]

[Illustration: Fig. 40. Production Order Which is an Exact Copy of the Customer's Order]

The form of the production order need not be complicated; indeed, a simple form will serve the purpose much better, an illustration of which is shown in Fig. 39. The heading of this order shows the number and date, with instructions to the superintendent to carry out the work as specified. The body of the order is blank, providing space for entering such details as may be necessary. The blank at the bottom, which is filled in by the superintendent's clerk, shows the date received, date started, the shop order number, and the date finished.

[Illustration: Fig. 41. Sub─production or Shop Order]

This form is suitable for almost any kind of business or class of order. The production order should always be made in duplicate, a copy to be kept in the office. The office copy will be used to follow up the manufacturing order.

In many lines of business, goods are manufactured only as required to fill customers' orders. The order to manufacture should, in such cases, be an exact copy of the customer's order as entered. With the modern method of entering all orders in manifold──with a copy for each record required──one blank should be included for the factory, this becoming the production order. A form of this kind is shown in Fig. 40. This is an exact copy of the order as entered, the instructions in the heading taking the place of the name and address of the manufacturer. The particulars include the number, date received, and date to be shipped. The body of the order contains the necessary instructions; in the column at the extreme left──quantity ordered, quantity shipped, size, and description. This is one of a set of blanks that include the invoice, office copy, cost department copy, and copy for the shipping department.

=24. Shop Orders.= The shop order is the written instruction of the superintendent to the foreman to do certain work or to manufacture certain articles. The order may call for the manufacture of a certain article complete, or it may be for parts to be later assembled into a complete article. Shop orders are as varied in form as production orders.

[Illustration: Fig. 42. Shop Order Showing Total Work Cards]

When a superintendent desires to start work on a stated production order, he lays out the work and issues the necessary shop orders to the foremen of the different departments in which the work is to be done. A shop order is issued for each shop──usually these are exact copies. If work on an order requires work to be done in four shops, the four copies are made on the typewriter, at one writing, by means of carbon paper.

Fig. 41 shows a convenient form of shop order. This form includes the shop order number, piece number, drawing number, material, date to be completed, date of order, production order number on which the shop order applies, and the date completed. The body of the order is left blank for a description of the work and the necessary instructions. Explicit instructions must be given on every shop order──the order should leave nothing for granted.

[Illustration: Fig. 43. Shop Order with Name of Shop]

[Illustration: Fig. 44. Shop Order Showing Progress of the Work]

The special feature of the shop order shown in Fig. 42 is the space for _card number_ and _total cards_. When an order is made out, as many copies are made as there are shops or departments through which the work must pass. The number of the copies of the order is entered under the heading _total cards_──that is, if the work is to pass through four shops, the figure 4 is entered in the space provided for total cards. The copies are numbered in the order in which the work will be done──that is, the order for the shop that does the first work is given No. 1, the second shop No. 2, etc.

There are two special advantages in having the shop orders numbered. Each foreman knows, when he receives his order, how many operations are ahead of his own and how many follow, and can lay out his work accordingly. It does not always follow, however, that because one foreman receives order No. 3, two other operations must be completed before his own can be started. Each shop order may call for the manufacture of a different part, to be sent to the assembly shop, but if one of these parts is in stock, no order is issued. The foreman receiving order No. 2, when his number naturally would be 3, knows that one of the parts is in stock and that his operation must be hurried accordingly.

The employes in the cost department find the numbering system invaluable, for it enables them to tell how many operations there are on a job; also operations which have been completed. This information is of considerable assistance in tracing orders through the shop.

The shop order shown in Fig. 43 answers the same purpose as the form shown in Fig. 42. Instead of the system of numbering the order copies, the plan of inserting the names of all shops is followed. Following the name of each shop is the name of the operation to be performed. This also enables the shop foreman to so lay out his work that the order can be handled promptly when it reaches his shop.

=25. Work Orders.= The work order is the written instruction of the foreman to the workman to do certain work. As a rule, this order is made on the production time card, as shown in preceding pages. Sometimes, however, it is unnecessary to give more explicit directions than can be written on a small card, which makes it advisable to issue a special order.

In certain classes of work, also, it is advisable to use one work order for a job which is to pass through the hands of several men. Such a work order is shown in Fig. 44. This order shows the numbers of the men and machines to which the work is to go. Another class of work for which special orders should be issued is outside repair work──as plumbing, steam fitting, electrical repairs, etc.

=26. Standing Orders.= Manufacturing is fast developing into a system of producing standard parts to be assembled into complete machines and appliances. Every part that goes into a machine is made from a standard pattern and is interchangeable with the same part in every other machine of the same style made in the same shop. It is no longer necessary to design each machine, and each part required to fill an order──the parts are manufactured in large quantities and carried in stock till needed. An order from a customer may require the manufacture of one special part, the balance consisting of parts to be assembled.

The manufacture of parts as standard units is not an accounting problem, but the accounting department and the manufacturing departments must coöperate in maintaining proper records of the manufacture of those parts. The manufacture of one lot of standard units involves the same operations whenever the same unit is made. Adopting this principle to accounting, it is advisable to establish standards in respect to orders. Whenever the same standard part is needed, the order should be for the same quantity; this, of course, after a standard quantity has been established. When units and quantities have been standardized, order numbers should be made standard──whenever the same work is to be done the _same order number_ should be used. If this plan is followed, orders are soon recognized by number──and the order number informs the foreman as to the work required.

Series of order numbers should be assigned for different classes of work. Numbers 1 to 100 might represent regular plant maintenance and repair orders; numbers 101 to 200, plant construction and special repair orders; numbers 201 to 400, the manufacture of special tools; numbers 401 to 1000, the manufacture of parts; numbers 1001 to 1500, assembling or production orders for complete machines. Shop orders can be distinguished by a second series of numbers starting at, say 5000.

Illustrating the above, the superintendent of a typewriter factory might receive order number 1007, meaning that he is to assemble 1000 No. 7 typewriters. His assembling order to the foreman would bear the same number. After the parts have been drawn from the parts storeroom, it may be found that the stock of certain parts is running low. Production orders are issued for parts, No. 417 being the number for frames for No. 7 machine. The shop orders may bear the numbers 5060─_a_, 5060─_b_, and 5060─_c_, _a_ being the order for the foundry, _b_, the order for the machine shop, and _c_, the order for the finishing department.

[Illustration: Fig. 45. Manufacturing Order Register, Showing Location of Work in the Shop]

As to expense orders and construction orders, it is very necessary that the work to be charged against each order number be clearly specified. When the expenditure involved exceeds a certain amount, or where the work is of a special nature, a special order should be required. Explicit instructions for charging all expense items should be given to each foreman, preferably in printed form──or in typewritten form when the number of foremen is small. Many concerns issue printed instruction books containing the order numbers and specifications, with any rules that may be in force governing the conduct of employes, for general distribution among employes.

RECORDS OF MANUFACTURING ORDERS

=27.= An essential record in any system of cost or factory accounting, is a record of manufacturing orders. A system of records shouldbe maintained, which will show the exact number and nature of the orders issued to the shop or factory, and from which it will be possible to locate every order──to determine in what stage each order is, and to estimate closely the date of completion.

[Illustration: Fig. 46. Front and Reverse of Card Showing Total Production and Progress of Orders.]

Such records are equal in importance to records of material, both raw and partly finished, in store at all times. Without them, it is impossible to obtain authentic information about work in process. Orders are certain to be side─tracked, and it is extremely difficult to estimate, with any degree of accuracy, delivery dates for either new or old orders.

The records should be so complete that it will be literally possible to run the business from the office──without calling foremen from the shops, who must return and investigate the condition of an order before an intelligent answer can be given. The manager who can conduct his business from the office is following modern ideas; he is far─seeing──not lucky──for this condition is the result of carefully made plans to insure records that will show him exactly what he wants to know.

Along the line of running the business from the office, Mr. F. E. Webner, in an article in the _Engineering Magazine_, cites an apt illustration. Two very large corporations with a common line of product were concerned. Each of these in turn was asked verbally by an executive officer of a concern which is a large user of the product, as to what delivery could be made on a stated quantity of goods. One concern used the long─distance telephone to a number of its plants; the other concern consulted records within its office and was able to give a decisive reply within half an hour, and to know just which of its works was best able to turn out the goods. The first concern had a number of superintendents on edge looking up data and could not give a positive answer short of two days.

As in every other department of a business, the expense of maintaining an adequate system of order records in the manufacturing departments is infinitesimal, when compared with the results obtained. A single contract lost for the lack of needed information may mean the loss of a valuable customer, the profit on whose business would pay the cost of an adequate system many times over.

=28. Manufacturing Order Register.= The form of the manufacturing order register necessarily depends on the nature of the business, the product, and the number of operations or departments through which an order must pass. It need not be complicated──simple forms always are to be preferred──the main thing is that all orders be so recorded as to be readily located.

[Illustration: Fig. 47. Daily Report of the Transfer Clerk]

[Illustration: Fig. 48. Foreman's Daily Report of Shop Production]

A simple and convenient form for a register of manufacturing orders is shown in Fig. 45. This should be in loose leaf, a sheet being used for each style or size of machine, part or piece manufactured. If, for instance, a typewriter is made in five styles, five sheets would be used──one for each style. Separate sheets would also be used for each part──as many sheets for each as there are sizes.

The sheets should be indexed under the names of the parts and those in each division arranged in the order of sizes. Supposing type bars to be made in ten sizes──numbers 191 to 200──the sheets would be filed in the order of these numbers. Should the industry be one in which orders are issued to assemble parts into complete machines, the sheets on which assembling orders are recorded should be filed with a separate index, but may be kept in the same binder. It is also advisable to use sheets of a different color for these orders.

The heading of this form, Fig. 45, shows the name of the part, the machine on which it is used, the drawing number, pattern number, and style or part number. Orders to manufacture are entered in the columns at the left of the body of the form, giving the date, order number, quantity ordered, and total ordered to date──that is, if 500 parts are ordered on the 10th and 300 on the 25th, the sum of the two, 800, would be entered in the total column. Following the order record columns are columns for the departments, the form illustrated being designed for a furniture business. Under the heading for each department, a daily record is made of the quantity received, quantity delivered to the next department or to stock, and balance in the department, the latter being in an uncompleted state. This form can be adapted to almost any class of manufacture by a proper arrangement of departmental columns.

In most all industries, it is practical to keep a continuous record of all manufacturing orders; sometimes it is best to keep a record for each order. A form of this class, designed for the use of a machine shop, is shown in Fig. 46. This form shows the progress of a single order through all of the departments. A card is used in this case, both sides being required to accommodate the number of operations, and they are indexed by order numbers.

=29. Tracing the Order.= The system of tracing orders through the shop or factory is very important and should be as nearly automatic in operation as possible. There may be many orders which need not necessarily be traced, but a system that will automatically keep the office informed on the progress of _all_ orders, will pay for itself in the time saved in tracing a single order without proper records. To attempt to find the exact condition of work in progress without a tracing and recording system, is not alone expensive, but unsatisfactory in results; the degree of accuracy is measured by the ability of foreman to make accurate estimates. Practically, foremen should be best able to estimate the time required to complete a job, but their estimates will be found to vary greatly on similar jobs; time standards are more accurately determined by a comparison of the records of past performances.

When practical──and it has been found practical in many industries──a transfer office should be maintained in the works. This office should be in charge of a transfer clerk, who will record all transfers of work in progress from one department to another. Theoretically, all work should pass the transfer office. In the manufacture of small parts, this can be done without loss of time, provided the transfer office is centrally located. When heavy work is the rule, it is not practical to carry out this plan in detail, but such transfers should be conducted under the supervision of the transfer clerk.

The transfer clerk should maintain records of orders in progress, which will be duplicates of the office records, reporting all transfers to the office on the form shown in Fig. 47. This is a simple report form, giving order numbers, part numbers, quantities, and names of the departments between which transfers are made.

When no transfer clerk is employed, it is necessary to obtain reports, in the same form, from the different foremen. This report should provide for an acknowledgment of the receipt of work, as well as a record of deliveries. The form shown in Fig. 48 gives a double check, since the quantities received must agree with the report of deliveries from the department from which the work was received.

From these reports, the order records are made in the office. In addition to their value in maintaining a record of orders, the tracers and reports are used to advantage in compiling an inventory of work in progress.

[Illustration: COST DEPARTMENT, NATIONAL CASH REGISTER CO., DAYTON, OHIO]

GENERAL EXPENSE AND COST SUMMARIES

EXPENSE DISTRIBUTION

=1.= In order to obtain a thorough understanding of a subject, and to gain a clear insight into the various questions involved, so that one may understand not only its underlying principle, but also its operation in detail, it is quite essential to know first, _why_ a thing is done, and second, _how_ to do it. While a general knowledge of a subject is always desirable, and to be commended, it is often found insufficient when put to the test. Special subjects require special consideration and study, especially when the how─to─do─it is involved.

On the subject under consideration this is particularly true, for it seems to be a common confession among those handling factory accounts, that while they know in a general way how their expense accounts should be treated, they seem to be in a maze when it comes to actually doing it. The "knowing how" is the best asset of a good accountant; and in these days when the subject of costs is of vital interest to the manufacturer, the up─to─date accountant has the opportunity to show his value. To make the necessary repairs to a touring car broken down on the country road may take but one dollar's worth of the repairer's actual time, but the "knowing how" may be worth ten dollars to him when rendering his bill, and usually is.

While it is realized that there are differences of opinion among accountants on some of the questions considered in the presentation of this subject, it is the intent of this article to present what is generally conceded by our leading accounting authorities as the best practice in a well─organized, up─to─date, industrial plant, and to so present the subject to the prospective student that he may fully understand and master the "why" and the "how" of this important question in factory accounting.

That the subject may be carefully considered in all its various phases, it will for convenience be developed under the following general divisions in the order in which they are naturally suggested:

(1) Basis of Expense Distribution. (2) Methods of Expense Distribution. (3) Percentage Method Exemplified.

BASIS OF EXPENSE DISTRIBUTION