G. F Wetzel.

Machine hour rate method of distribution of factory indirect expense online

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batteries, motors, etc., will be done under 960.


, 970, Hand Cars and Trucks, Re pairs, re-
placements and maintenance on the trucks and
cars used in transferring forgings about the
plant and shops, charged under 970.

996» Inspection & Inspection supplies,
except tools and gauges. Includes chalk, paint,
flash lights, etc. Inspection labor will also
"be assembled under 996.

998, Office Supplies. All requisitions
for stationery, drafting supplies, printing, etc.,
used by main factory office , engineering &
drafting, time office, employment office, etc.,
charged to factory administration.

999. Waste, Oil, Grease, Stationary and
Miscellajieous department supplies not chargeable
to another number. These will be drawn from the
store room and charged as drawn. This will be a
department charge, distributed on the basis of
machine hours.

1001. Building repairs and Maintenance.
CoYers labor and material coming under that head.


» 'i

Bote:- The following is an explanation
of the items appearing on the "Machine Rate
Data" form:

Floor Sioace. Ho. of sq. feet of floor space
occupied by machine, plus, average space
occupied by operator and auxiliary equipment,
tool stand, etc#

Auxil. Bqui-p. Auxiliary equipment, i. e.,
pumps, boilers, blowers, motors not driving
main machine, accumulators, valves, hoists, etc.
which serve directly the machine in question.
Bst. Life« Estimated life. Life of the mach-
ine, during which settisfactory and- accurate
work may be done without excessive renewals
or repairs. Use this as a basis for figuring

Jlote:- As these machines will be used for
20 to E4 hours per day, the actual depreciation
will be higher than the standard for machines
used on but one shift.


, Hote : - The following items include the
details which contrihute to make up the amount
of the charge per unit period, as per month or
per year, which will have to be carried hy the
machine in order to pay the indirect esrpenses
incidental to running the business? Machine
is taken to mean any equipment used in direct
production, such as furnaces, hammers, presses,
lathes, etc. Where there is more than one
machine of a kind and •size, these will be treat-
ed as one "machine" or production center, each
unit of which will have the same Machine Hour
Rate •

Depreciation, Amount charged to operation of
machine which will equal cost of machine, less
scrap value, at the end of the estimated life
of the machine. This item is not to include
the auxiliary apparatus which will be taken
care of under "Axixil. Equip.).
Eleo. Power. All electrical power charged to
machine, including machine lights and portion


of total electrical cost including direct power
cost, generator house, labor and charges, main-
tenance of motors including repairs to motors,
new "brushes, fuses, bui:;.ding lights, electrical
department charges. This is not to include
power chargeable to auxiliary equipment, which
will be taken care of in one sum under item
"Auxil. Equip." The total of these costs is to
be divided amont the productive machines on the
basis of direct electricity consumption compared
to direct accounted for shop electricity con-
sumption, i. e., machine watt hours divided by
total machine watt hours for the department.
Fuel. Includes direct cost of gas, coal (pur-
chase price, transportation, handling, storage)
fuel oil (purchase price, transportation, stor-
age, pumping.)

Steam. Steam which can be directly charged to
machine si^ch as steam hammers, hydraulic presses
with steam pull backs, steam intensifiers


(steam intensifiers to be considered part of
machine). Steam used by heating system to be
included in "Bldg. Charge". Steam charge to be
based on steam cost, including all items which
enter into its production, i. e. fuel, repairs
to boilers and furnaces, labor, maintenance, de-
preciation, on both building and equipment.
Air. Compressed air used which can be charged
directly to machine, as on the hydraulic presses
with air tool slide. Charge based 04 steam
power cost or electric power cost for pump, plus
labor, maintenance, depreciation, housing, etc.,
divided in proportion to the air used on the
machine occupied with the total accounted for,
used by producing machines.
Water. High pressure water used by hydraulic
presses, soft boiler feed water, quenching and
cooling water. Charge includes water purchase
cost, pumping charges, cooling charges, soften-
er charges.

Cutt. Compound. Cutting Compound includes cost

t «


of renewing compound, and share of pumping-
house charge. This is based on fuel, oil,
waste and other supplies, lahor, deprecia-
tion, maintenance and repairs. It is to be
divided in proportion to steam used by the
pumps, taking the average for the month.
Tools. Cutting-machine Tools,, i. e, lathe,
planer, shaper, drills, saws, grinding wheels;
and presing tools, i. e,, punches and dies,
hammer dies and anvils, jigs and fixtures.
These are to be charged (if made in the tool
room) by treating the tool room as a producing
department, with machine loading rates, which
include the same general charges as the main pro-
duction sections. As near as possible the mach-
ine tool charge will take in the direct tool
cost as given by the tool room, though if these
are used by different machines and cannot be
charged to one particular machine or group, this
item will be charged to the department and pro-
rated among the machines in that department.

HBP AIRS . Includes repair parts and lalbor,
material and labor on replacements due to wear,
packing, belting and all other items whioli can
be charged to repair, and are not charged to
some other account.

Maintenance. Includes lubricating oil (total
department charge, multiplied by floor space
ratio) cotton waste, millwright, pipe fitters,
and all maintenance items except pertaining to
electrical equipment, which are charged under
"Power". Does not include building or indirect
equipment charges.

Amcil. Equip. Auxiliary Equipment. As some
auxiliary equipment serves several units, this
item is a share of charge on this equipment in-
cluding forging furnaces, boilers (for steam
hammers and presses) hydraulic pumps, accumulators,
blowers, hoists, acetylene welding equipment, ex-
cept where used to perform an operation on pro-
duct, shears, indirect harnmers and all equipment
not producing a part of the factory product direct-


ly, but serving onis machine, or one small distinct
tmit whicli does. This charge is to include
power, steam, water and air, since for the pur-
pose of finding costs, auxiliary machines and
equipment will be treated the same as producing
machines and their charges included in the machine
hour rate of the main unit or units,
Bldg. Oharp:e« Includes building maintenance, de-
preciation, repairs on building and indirect
equipment, except piping and other items, already-
provided for, taxes on building and grounds,
janitor service, crane service, locomotive and
locomotive crane service, inside trucking, heating
and ventilating.

Shop Administration. All indirect labor charges,
i. e. foreman, assistant foreman, shop clerks,
general laborers, etc., including all of shop pay-
roll not on direct production work. This charge
is to be determined as one sum for each department.
Added to this will be a charge made up of general
factory expenses as follows: Salaries for General

superintendent, assistants, engineering depart-
ment, cost department, time keeper^, stores de-
partment, paymaster and all other clerks, sten-
ographers, etc. not otherwise oliarged, which
are not chargeable to general administration of
the business. The total charge for general fact-
ory expense to be pro-rated to the production
departments on basis of pay-roll ratio. !Phe de-
partment will be apportioned as a period charge
among the machines in proportion to the machine
hour ratio, and divided later by machine hours
for the period.

General Administration. All expenses, except
sales, not otherwise accounted for, which can
be charged to the operation of the business,
includes officer's salaries, clerical help, not
chargeable to factory, office rent, taxes other
than real estate of works, stationery, etc..
It will be apportioned as a percentage of the
burden to be written off by means of the main


lotal Oharg:es, Sum of the period charges, under
the foregoing items, which will make up the sum
of loading or hurden to "be charged to the mach-

Ave, Mach. Hrs, per day. Average machine hours
per day - the numher of hours per day the machine
will he occupied by the product under normal con-
ditions. This figure will be corrected as nec-
essary to approzimate as closely as possible the
actual average per day as shown by figures for
the proceeding period. However, if the machines
are idle for lack of work, the figure taken should
not be changed, but should remain the normal num-
ber of working and the uneared burden charged to
profit and loss, or other appropriate account.
Mach. Hr. per Pd. Machine hours per period, used
as basis of computation:- number of hours per
period that one machine is occupied by factory

Mach, Er,

Dept, Mach, Hr. Machine hours per period divided

by the sum of the machine hours in the department.


This ratio will be used in apportioning the tot-
al sum of shop administration expense to the
machine to "be divided later by number of machine
hours •

Maoh. gl» Space

Dept, PI, Space Ratio of machine space to sum

of machine spaces for department. To be used in
apportioning building charges for the machine.
Burden Earned. Product of machine hours for the
period and machine hour rate. The sum of these
amounts for all the direct machines in a depart-
ment should equal the total charges against that
department as listed above. The degree to which
these results agree will determine the adjustment
required in the machine hour rates for the next
accounting period.

Machine Hour Rate. The total period charge di-
vided by the period machine hours. This is the
charge which is to be added to the job cost for
each hour the machine is occupied by the work.

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Online LibraryG. F WetzelMachine hour rate method of distribution of factory indirect expense → online text (page 4 of 4)