cost of the material is obtained from the weaving and
knitting department cost sheets. Labor and expense are
apportioned on a yardage basis, as shown.
388
REPRESENTATIVE SYSTEMS
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392 REPRESENTATIVE SYSTEMS
6. Finished Cloth Account
This account is charged with the production shown
in Cloth in Process (Wet and Dry Finishing) account.
The closing balance in this account represents the cost of
goods sold. The manner of operating the account is
shown on page 391.
REVIEW QUESTIONS
What is the general procedure followed in calculating the cost
of a woven fabric?
How are the labor and expense of the finishing department
apportioned over the output?
To what account is the finished fabric charged?
CHAPTER XXIX
TEXTILE COSTS GENERAL EXPENSE
1. Expense Accounts
In addition to the operating department accounts
referred to in the preceding chapter, various expense
accounts are opened to distribute the charges for heat,
light, power, depreciation, taxes, etc., to departments.
The schedules of distribution are given when required,
to show the basis on which the charges are computed.
With the exception of Shipping Expense which is
closed out to Cost of Sales account, all the other expense
accounts are closed out to the various manufacturing
departments and to Shipping Expense.
SHIPPING DEPARTMENT EXPENSE
31 Pay-Roil $500.00
Supplies 200.00
Repairs
Misc. Expense
Fixed Charges:
Depreciation 50 . 00
Insurance 20 . 00
Taxes 10.00
Transfers:
Light, Heat, and
Power 50.00
Maintenance and Up-
Keep of Building. . . 25.00
General Expense 20.00
Boarding House 10.00
Office Expense 10.00
$895.00
31 Cost of Goods Sold.
$895.00
$895.00
393
394
REPRESENTATIVE SYSTEMS
LIGHT, HEAT, AND POWER
31 Purchases . .
Depreciation
$1,350.00
500.00
$1,850.00
31 Stock in Process
(Dye House) $ 200.00
Mixes in Process
(Picker Room) 200.00
Yarn in Process
(Carding and Spin-
ning) 300.00
Cloth in Process
(Weaving) 500.00
Cloth in Process
(Knitting) 100.00
Cloth in Process
(Wet and Dry Fin-
ishing) 500.00
Shipping Department
Expense 50.00
$1,850.00
The distribution of horse-power in the mill is re-
ported to be as follows :
H. P.
Dyeing 45
Picking 70
Carding 160
Spinning 125
Weaving 123
Knitting 45
Finishing 420
Total H. P.
988
This is the basis to use for apportioning all power
purchased if each department in the mill runs the same
number of hours. If otherwise, the distribution of
power must be in proportion to the product of the horse-
power and hours run.
TEXTILE COSTS GENERAL EXPENSE 395
MAINTENANCE AND UP-KEEP OF BUILDINGS
31 Purchases $ 25.00
Pay-Roll 500.00
Depreciation 800.00
Insurance 50.00
Taxes . 50.00
$1,425.00
31 Stock in Process
(Dye House) $ 100.00
Mixes in Process
(Picker Room) 100.00
Yarn in Process
(Carding and Spin-
ning) 200.00
Cloth in Process
(Weaving) 500.00
Cloth in Process
(Knitting) 100.00
Cloth in Process
(Wet and Dry Fin-
ishing) 400.00
Shipping Department
Expense 25.00
$1,425.00
The floor space used by productive departments is as
follows :
Sq. Ft
Dye House 5,892
Picking 5,440
Carding 25,210
Spinning 25,440
Weaving 16,880
Knitting 4,840
Wet Finishing 9,385
Dry Finishing 6,600
Shipping 3,460
Total Sq. Ft 103,147
In the foregoing tabulation all non-productive area
is omitted, such as space used for entrance halls, super-
intendent's office, elevator shafts, stairways, etc.
396
REPRESENTATIVE SYSTEMS
GENERAL EXPENSE ACCOUNT
31 Purchases . . ,
Pay-Roil ....
Depreciation
$270.00
400.00
200.00
$870.00
31 Stock in Process
(Dye House) $100.00
Mixes in Process
(Picker Room) 100.00
Yarn in Process
(Carding and Spin-
ning) 100.00
Cloth in Process
(Weaving) 300 . 00
Cloth in Process
(Knitting) 50.00
Cloth in Process
(Wet and Dry Finish-
ing) 200.00
Shipping Department
Expense 20.00
$870.00
This account is closed out on the basis of the pro-
ductive labor pay-roll.
BOARDING HOUSE ACCOUNT
31 Purchases . .
Depreciation
$180.00
200.00
$380.00
31 Stock in Process
(Dye House) $ 50.00
Mixes in Process
(Picker Room) 50.00
Yarn in Process (Card-
ing and Spinning) 50.00
Cloth in Process
(Weaving) 100.00
Cloth in Process
(Knitting) 20.00
Cloth in Process
(Wet and Dry Finish-
ing) 100.00
Shipping Department
Expense 10.00
$380.00
TEXTILE COSTS GENERAL EXPENSE 397
OFFICE EXPENSE ACCOUNT
31 Purchases . .
Pay-Roll ...
Depreciation
5 40.00
100.00
100.00
$240.00
31 Stock in Process
(Dye House) $ 50.00
Mixes in Process
(Picker Room) 50.00
Yarn in Process (Card-
ing and Spinning) . . . 50.00
Cloth in Process
(Weaving) 50.00
Cloth in Process
(Knitting) 10.00
Cloth in Process
(Wet and Dry Finish-
ing) 20.00
Shipping Department
Expense 10.00
$240.00
This account is closed out on the basis of the pro-
ductive labor pay-roll.
TABLE SHOWING APPORTIONMENT OF
DEPRECIATION BY PERIODS
Annual
Depreciation
4 Weeks
5 Weeks
13 Weeks
Dye House
Picker Room
Carding
Spinning
Weaving
Knitting
Finishing
ShipDiner .
General
:
Building and Per-
manent Fixtures. .
NOTE: The five-week periods are December, March, June, and Septem-
ber. The other periods are four weeks each. Each quarter has thirteen
weeks (one five-week and two four-week periods).
398
REPRESENTATIVE SYSTEMS
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TEXTILE COSTS GENERAL EXPENSE
399
INSURANCE PREPAID ACCOUNT
31 Purchases $2,470.00
$2,470.00
31 Stock in Process
(Dye House) $ 100.00
Mixes in Process
(Picker Room) 100.00
Yarn in Process (Card-
ing and Spinning) 500.00
Yarn in Process
(Weaving) 500.00
Cloth in Process
(Knitting) 100.00
Cloth in Process
(Wet and Dry Fin-
ishing) 100.00
Shipping Department
Expense 20.00
Maintenance and Up-
keep of Buildings. 50.00
Balance 1,000.00
$2,470.00
TAXES ACCRUED ACCOUNT
31 Purchases
Balance ..
$ 60.00
400.00
$460.00
31 Stock in Process
(Dye House) $ 50.00
Mixes in Process
(Picker Room) 50.00
Yarn in Process (Card-
ing and Spinning) .... 100.00
Yarn in Process
(Weaving) 100.00
Cloth in Process
(Knitting) 50.00
Cloth in Process
(Wet and Dry Fin-
ishing) 50.00
Shipping Department
Expense 10.00
Maintenance and Up-
keep of Buildings 50.00
$460.00
400
REPRESENTATIVE SYSTEMS
PAY-ROLL ACCOUNT
7 Cash
14 Cash
21 Cash
28 Cash
7,000.00 31 Stock in Process
7,000.00 (Dye House) .... $ 2,000.00
7,000.00 Mixes in Process
9,200.00 (Picker Room).. 2,000.00
Yarn in Process:
1. Carding 4,000.00
2. Spinning 5,000.00
Cloth in Process
(Weaving) :
1. Spooling 1,000.00
2. Dressing 1,000.00
3. Drawing-in 1,000.00
4. Weaving Day . 3,000.00
5. Weaving P. W. 5,000.00
6. Burling 500.00
Cloth in Process
(Knitting):
1. Winding 500.00
2. Knitting Spring
Needle 1,000.00
3. Knitting Latch
Needle 1,000.00
4. Mending 500.00
Cloth in Process
(Wet and Dry
Finishing) :
1. Wet Finishing.. 500.00
2. Dry Finishing. .. 500.00
3. Sewing 200.00
Maintenance and Up-
Keep of Building 500.00
General Expense 400.00
Office Expense 100.00
Shipping Dept. Ex-
pense 500.00
$30,200.00
$30,200.00
TEXTILE COSTS GENERAL EXPENSE 401
REVIEW QUESTIONS
What is the best basis for apportioning power to the various
departments ?
How should the up-keep and maintenance of buildings be
distributed to the factory departments?
What items should be included under the head of General
Expense, and how should the General Expense account be
distributed to the various departments?
What plan is best adapted to a textile mill for calculating the
amount of depreciation applicable to each period?
Part VIH
Graphic Presentation of Cost Data
CHAPTER XXX
USE OF GRAPHIC CHARTS
1 Graphs vs. Statements
The control of present, and the planning of future,
business activities must to a great extent be based on the
comparison of present with past performances. For this
reason an important part of the work of the cost ac-
countant should be the compiling of cumulative statis-
tics covering the past operations of the business and the
presentation of these statistics in such a way that the
vital facts as to the activities of the business are brought
forcefully to the attention of executives. The more de-
tailed the records, and the more clearly the relation be-
tween costs, expenses, and output are shown, the more
effectively can activities be guided and controlled.
When statistics are presented in the form of state-
ments and tabulated figures, close study and some calcu-
lation are usually required before their significance is
grasped. The columns of figures of one statement must
be carefully scrutinized and cross-reference made to the
corresponding figures of other statements to trace the
causes of increases and decreases. . Some better, clearer
method of presentation is needed. This is found in the
graphic chart when it is required to show clearly the
relation between two sets of figures derived from differ-
ent sources ; or when increases, decreases, and ratios are,
as it were, to be thrown into relief, graphic charts possess
405
406 GRAPHIC PRESENTATION OF COST DATA
many material advantages over statements and tabu-
lated figures.
The great superiority of the chart form over the
statement form for certain kinds of presentation lies in
the ease, the vividness, and the completeness with which
statistical information, comparisons, and results attained
can be shown by the former. The value of the chart
form for such purposes is well known to engineers, who
make use of it, particularly for comparative purposes,
whenever practicable. But the full value of the chart
method of presentation for comparative purposes is not
yet generally realized by accountants, as their experi-
ence has usually been limited to graphs designed to show
differences and not ratios.
2. Difference and Ratio Charts
The charts most commonly employed are termed
"difference" charts and show arithmetical increases or
decreases only. Their function, when used in cost work,
is restricted to showing rises and falls in prices, unit
costs, and so on. Ratio charts show the ratio of increase
or decrease, i.e., the distance upward or downward rep-
resents the percentage of increase or decrease, depend-
ing upon the scale used.
3. Difference Charts
A difference chart is usually drawn on a sheet of
cross-section paper, technically known as "co-ordinate"
paper. When this paper is used, both vertical and hori-
zontal lines mark off the units of measurement. Thus,
for cost work, each division upward may represent one
dollar, ten dollars, a pound, a ton, ten gallons, or any
USE OF GRAPHIC CHARTS 407
other unit ; while the divisions from left to right usually
mark off the daily, monthly, or yearly periods depend-
ing upon the length of time which the chart is intended
to cover. The units of measurement are usually indi-
cated on the left-hand side of the chart, and, to make the
calculation and reading of the figures easy, every tenth
line both vertical and horizontal is frequently more
heavily ruled than the others. The periods of time in-
dicated by the vertical lines are also shown usually
at the bottom of the chart in some distinctive way.
When all this is done, the plotting of data on the charts
is a simple matter. In difference charts, the zero line is
always shown, and is made very heavy.
4. Illustrative Difference Charts
For the purpose of showing the construction and the
field of utility of difference charts, two illustrations are
given on page 408. It should be noted that the base line
is zero and that the charts are read from left to right.
Form 54 is a graph used in actual practice in a silk
mill. The curves show the fluctuations in the labor and
expense per yard of silk woven during the year. The
distances between horizontal lines represent four cents
a yard. The months are read from left to right as in-
dicated. It will be seen that the total labor and expense
per yard has fluctuated during the year between $.82
and $.30 per yard. The high peak culminating in March
was caused by a partial strike which more than doubled
the cost of production. The peak in September was
caused by an increase in general expense due to extraor-
dinary repairs. The chart as a whole shows a marked
drop in the unit cost of labor and expense, especially
408 GRAPHIC PRESENTATION OF COST DATA
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USE OF GRAPHIC CHARTS 409
during the last half of the year, caused mainly by in-
creased production.
Form 55 shows how the average selling price per
pound compares with the average cost of sales per pound
in a silk-throwing mill. The trend of selling prices and
costs is upward and on several occasions costs have
actually exceeded selling prices. This increase was due
to old contracts outstanding and a steadily rising price
for raw silk. Manufacturers sometimes fail to realize
that sales are being made below cost, when such is the
case, until the matter is presented to them in graphic
form.
5. Limitations of Difference Charts
Difference charts are best adapted to the comparison
of unit costs, or for showing the trend in prices over a
period of years. The scale used must, of course, be
adapted to fit the data and the size of paper.
When two or more sets of figures are to be com-
pared, the use of difference charts is limited to the
presentation of figures which have the same unit as their
common base; that is, comparisons must be made be-
tween different quantities of the same unit, as dollars,
or pounds, or tons, and so on. If, for instance, the pro-
duction of a silk mill in pounds is to be compared over a
period of several years, the difference charts are suitable.
When different units are to be compared, these charts
do not give good results. Thus if it is desired to com-
pare the pounds of silk sold with the amount (dollars)
received for them for corresponding periods, the scale
that fits the pounds does not fit the dollars. If two
scales are provided, the presentation becomes complex.
410 GRAPHIC PRESENTATION OF COST DATA
Another limitation of the difference chart is that the
rise and fall of the curves which represent two sets of
figures may convey little meaning when fluctuations in a
relatively small item of cost are compared with the fluc-
tuations of a large item. The curve of the latter may
show pronounced valleys and peaks, while the curve of
the former, though the ratio of differences is quite as
great, may show only slight undulations.
6. Ratio Charts
Ratio charts are constructed by marking off the field
into main divisions, each line in a division representing
a geometrical progression, that is, a multiple of the same
line in the division below. The base number may be
1, 10, 100, and so on. Each main division is the same
height, and the number of the divisions needed depends
upon the lowest and the highest numbers to be com-
pared. Thus, if the lowest number in the table of data
to be plotted is 100, and the highest 1,000,000, the chart
would be divided into four main divisions, as follows,
reading from the bottom up :
1,000,000
100,000
10,000
1,000
100
In a ratio chart the base line is never zero. The dis-
tance between the main divisions may be any number of
inches, the number depending upon the degree of accu-
racy required in measuring the scale.
To illustrate the purpose of dividing the chart in this
USE OF GRAPHIC CHARTS 411
way, assume that the spaces between the divisions repre-
senting the scales 10, 100, 1,000, 10,000, 100,000 are
each one inch. It will be seen that a curve rising from
10 to 100 represents a tenfold increase and moves
upward one inch. Or again, suppose the curve moves
from 10,000 to 100,000. This also represents a tenfold
increase and moves just one inch upward. In the first
case the arithmetical difference is 90, while in the latter
case it is 90,000. Nevertheless, the ratio of increase for
the period is 900% in each case.
7. Use of Ratio Charts
Ratio charts have a wider field of utility than differ-
ence charts in that they make possible the comparison of
large numbers with small numbers and vice versa, so
that the relation between them and the percentage of
increase or decrease can readily be seen. That is, magni-
tudes are usually shown instead of unit prices or costs.
Suppose, for example, it is desired to compare the
total pay-roll disbursements over a period of months
with the total hours worked and the average rate of pay
per hour. When comparisons such as this by means of
ratios are desired, the scale of numbers does not mean
dollars, or hours, or cents, but ratios or percentages, and
so one scale answers for all. An increase in the pay-roll
from $100,000 to $110,000 is a 10% increase and would
be represented by the same increase in the vertical move-
ment as an increase from 50 cents to 55 cents, or 10% in
the wage rate. In order to tell whether the increase in
pay-roll hours is inclined to be greater than that of wage
rates, all that is necessary is to note the angle taken by
the lines. The line which goes up at the sharpest angle
412 GRAPHIC PRESENTATION OF COST DATA
means that the item is increasing at the fastest rate.
Thus an increase in the number of pay-roll hours may be
accompanied by a decrease in wage rates or vice versa.
Many useful comparisons can be made in this way.