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in these prices, that is they are not fixed by actual bargain between two parties. The first necessity is of course to establish distinctly what constitutes each of the grades that are to be produced by the sorting process,—that is to define as clearly as possible the standard of the quality of each. The next thing is to fix relatively fair prices for these different grades; that is to say, if the value of the highest grade is represented by 100, the value of the second grade we will say will be represented by 90, and the value of the third grade by 75. I am explaining that in the first place the matter to be determined is simply the relationship between the values attaching to the qualities represented by the different grades. They must in the first place be relatively fair to each other as far as it is possible for them to be made by the judgment of people expert in the business, and knowing the exact uses and values of the different grades for the purpose of making their own product. When this relationship is established, the next thing is to adopt a level at which these values will correspond to the existing market, and then the highest price may perhaps be 25 cents, and the next one 10 per cent. less than that, and the third 25 per cent. less than the first. When this is done, the concern is ready to sort its upper leathers as received, and price the products, and determine whether the particular lot of leather sorted is giving them a somewhat better or a somewhat worse result than the standard established for the existing market, and exactly by what percentage the result is better or worse. The sorting and its result are recorded on a form that is called a Sorting Report. On the debit side of the sorting report is put the quantity and the cost price of the leather sorted, and next the sorting labor, and next a charge to cover the general expenses of the storeroom in which the sorting is done, and this is very properly calculated at such a price per dozen as, according to the annual expenses of the department, and the number of dozens of skins annually handled, will suffice to take up these expenses. On the other side of the sorting report are stated the products of the sorting. Then the gain or loss is determined. Now the gain or loss that is shown by these means comes from one of two possible causes, supposing that in the first place the work of fixing the relative values of the grades of leather produced from sorting has been satisfactorily done. These two possible causes are: 1, That the level of prices in use is not in accordance with the market, that is, it is either too high or too low. If this is the case, it will of course be apparent by there being continually a surplus or continually a deficiency shown in the sortings, and the indication would be that the level of prices needed to be raised or lowered. The second cause would be that the particular lot of leather was either an unusually good lot, or an unusually poor lot, and it may be stated that there is no such thing as absolute evenness in lots of leather. This is a condition that probably attaches to all materials in as nearly a natural state as are even skins which have gone through the manufacturing processes prior to their purchase by a shoe factory. If in the sortings the resulting surpluses or deficiencies are pretty equal, it proves that the level of the prices is all right, and that surplus or deficiency comes from the second cause stated, namely, the natural variation in the materials. And it may not be natural variation merely. One manufacturer may either constantly or occasionally be furnishing grades of leather that are below the average, the purchases from him being consequently disadvantageous; and another manufacturer may either constantly or occasionally be furnishing grades that are better than the average. The importance of bringing out these facts must be immediately apparent. One use of the accounts is to enable the shoe manufacturer to avoid disadvantageous buying through his immediate knowledge of the actual results obtained in sorting the various purchases. I will presently explain to you how this information is stated in a very simple and convenient form for use.

If now the sorting has resulted in an excess of credits over debits on the sorting report, then the figure necessary to complete the balance is placed on the debit side of the sorting report as a surplus, and its percentage upon the products of the sorting is calculated, so that we have in this case a surplus of say I per cent. or 2 per cent.; and if the sorting has resulted in an excess of debits over credits, the figure required to balance is placed on the credit side of the sorting report as a deficiency, and this is similarly calculated as a percentage on the products of the sorting, and is stated as a deficiency of say I per cent. or 2 per cent.

There is at this point a question which may be considered carefully. The actual cost of the products is in every case higher or lower by the percentage of surplus or deficiency, than the prices fixed for the different grades of leather. It is very simple to adjust these prices to actual cost by adding or deducting that percentage, and then, as far as the accounts go, the surplus or deficiency feature would disappear, and the prices placed on the products of the sorting would have exactly absorbed the cost of those products. As one grade of leather is produced from many sortings, there would then be a stock of that leather consisting of a number of lots at different prices. This is not unlike a condition which will occur in any storehouse, and which I mentioned in connection with machine shop storehouses, namely, that there may at any time be a stock of materials which does not consist of a single purchase, and that the different purchases may be at different prices, the date of the purchases and the markets on those dates having been different. Under these circumstances and in the case of machine shop accounts, some people think it a good plan to exhaust the earliest purchase at its own price first, and then proceed to the later purchases at their respective prices. I have never done this, and I do not think that it is the best way. I think that the stock of the same goods is best treated at any time as a unit and its price averaged. I believe I stated my reasons for this fully when I was talking of the issues from machine shop storehouses.

Suppose now that in the case of sorted leathers, the prices put on the products of the sorting should always be adjusted according to the percentage of surplus or deficiency, and these products should be carried into their respective accounts at these exact prices, and then in issuing these prices should be averaged in accordance with the practice that I described in connection with machine shop storehouses. We should probably come back in our issues to the standard prices put upon the different grades, or very close to them. This would in my opinion have two disadvantages. First, it would be considerable clerical labor with no corresponding gain; and second, while the result of averaging the different prices for the stock actually on hand would probably result in again approximating in the issues the standard prices first established for the grades, there would still be a variation which would be purely accidental, and which would be in the cost price of every finished shoe, and would need to be watched in connection with the cost prices of finished shoes for any significance that it might have in that connection. In other words, by this method there is clerical work created, and simplicity in the accounts is lost.

The other way of dealing with this matter, and the way that I believe is the best, is to carry the products of the sortings in stock and to issue them at the standard prices in use, and to carry in a separate account the surpluses obtained on the sorting reports, and either on the other side of the same account or in still another account, the deficiencies similarly obtained. For it is to be borne in mind that as long as there is no change in the market that necessitates a change in the level of the prices put upon the products of sorting, the cost figures for shoes are based upon a known price for upper leathers, and the same is true as will presently be seen in regard to sole leathers. Under the circumstances the use of the cost figures is both simpler and safer than if every cost price depended upon whether the particular lot of upper leather used had sorted advantageously, or the particular lot of sole leather had cut up advantageously.

I will now review the procedure in regard to this matter and carry it a little further. Upper leathers having been received in stock, they are, as quickly as possible thereafter, sorted. Either the whole of the lot of leather or any part of it may be taken for sorting. Whatever is taken is entered on the debit side of a sorting report, and in due course the expenses attaching to those leathers in the storeroom, which is also the sorting room, are added on the debit side. On the credit side are stated the products of the sorting at standard prices, which are calculated to be relatively fair to each other according to the qualities of the products, and are calculated to be on such a level that for all purchases on a given market they will as closely as possible take up the actual cost. Then the surplus or deficiency is filled in as I have described. The products of the sorting are then placed in stock as graded leathers ready to issue for shoe making purposes. The sorting report is then taken by the clerk keeping the storeroom ledger, and everything on the debit side is posted to the credit of the proper accounts, that is, to the credit of the accounts to which the leather when it was purchased and received was debited, and to the credit of the sorting labor account, and to the credit of general expense account, and to the credit of surplus account. And everything on the credit side is posted to the debit of the proper accounts, that is, the products of the sorting are posted to the debit of the accounts for the grades of leather produced, and the deficiency is posted to the debit of the deficiency account. It will be seen that this leaves the ledger in balance. No entry whatever is made in the general books in connection with this sorting operation.

In the accounts in the storehouse ledger for the products of sorting there are between the debit and the credit sides of the account two columns, the first headed “surplus " and the second "deficiency,” and when the products are posted from the sorting reports to the debit of these accounts, the percentage of surplus or deficiency on the sorting report is entered in one of these columns. It will now be seen that reference to these accounts will show all the variations in the cost of obtaining a given grade of leather throughout a period of time. There can be very quickly seen for a considerable period where the highest cost has been, and where the lowest cost has been; and whether the shipments of a single manufacturer are of even quality; whether they are steadily of high quality, or steadily of low quality, or variable. This is information of the utmost value to the buyer and it is here, in the ordinary course of the bookkeeping, stated in its most concise and clear form.

Proceeding now to the general ledger in order to complete the description of the bookkeeping routine in regard to the upper leather storeroom. The upper leather storeroom controlling account in the general ledger will be conveniently divided into four, the four accounts being ultimately closed into one. To the first will be charged all purchases of upper leathers; to the second will be charged the pay-roll of the storeroom; to the third, all sundry expenses of the storeroom; and to the fourth will be credited the issues of leather from storeroom to factory. This group of accounts will control and will be in agreement with the upper leather storeroom ledger. It follows that the pay-roll and general expense items will be brought into the storeroom ledger. It will now be seen that the credits of labor posted from the sorting reports are, in the storeroom ledger, set against the actual payrolls; and the credits of general expenses posted from sorting reports are set against the debits of actual general expenses incurred; and that the storehouse ledger covers the receipt of upper leathers at the purchase prices, the handling and sorting operations at their cost, and the storage and issue of the products of sorting; and that the general ledger controlling account divided into four sections-Ist, materials; 2d, labor; 3d, general expense; and 4th, issues of leather, is kept in agreement with the storehouse ledger which it controls. The issues are made in the ordinary storeroom way, upon requisitions for leather to manufacture the shoes covered by a shoe manufacturing order. In shoe factory language, they are issued in accordance with the

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