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practically the inventory of stores, and the actual count at the close of the year should corroborate to within a very small percentage of difference.

It of course follows that when material receives labor and comes back into stock for sale, the individual tickets cover all the movements so that it is charged out and taken back into stock under its unit designation, thus assuring the addition of the labor cost and its proper proportion of the overhead cost according to the time that it consumed of the shop, machine and man.

The inventory of the fixed plant can be kept in no way so well as in individual units, card indices, or loose leaf books affording a convenient means for so doing; upon these may be recorded the original cost, the yearly interest, the term of life to be used as the divisor, and the improvements, from which the yearly depreciation may be deduced and shown. In case of accidents, or other conditions, which may affect the depreciation or entirely wipe out the value of the unit, there is no other than the individual record which affords so good an opportunity to show the facts.

In payment of wages there are two plans for the individual record, the piece-work and the individual effort plans. The former is open to several objections, among which are the following:

First; the absolute impossibility of fixing upon a price that will be entirely fair to both employer and employee under all the fluctuations in conditions and it must either be expensive or discouraging. In a small shop this is not prohibitive, but in large establishments, where the errors are multiplied in the number of the men, it should not be adopted.

Second; it does not offer any real inducement to the men to suggest or adopt improved methods, as such improvements must lead to the cutting down of the price, after which the workman is no better off and may be worse off.

Third; the impossibility of rearranging prices without creating more or less dissatisfaction among the workmen, and restraining them from making any effort to produce the maximum outturn.

Fourth; the difficulty of securing competent and conscientious inspectors who will at all times be fair in deciding between the two parties in interest.

Fifth; the impracticability of putting all of the work upon the piece-work basis and the complexities which arise through the conflict between the two different systems.

The individual effort plan is not open to these objections, while with the addition of the premium, or bonus, for all production above the average it affords all the incentive of the piece-work plan.

To secure the full benefit of this method there must be issued individual tickets for each operation, whether it be productive, or non-productive, such tickets being prepared for the workmen by the foremen ahead of the time when they will be needed; they can be issued from convenient stations, stamped or punched to show the commencing time, and returned for similar marking of the finishing time, or the tickets may be put into a receptacle for the men to take and stamp with a time stamp to show the same information. When the workman is ready for a job he does not have to hunt up the foreman, or wait until he comes around, but as he knows that he will receive pay for only the time that shows upon his job ticket, and that he will be called down if he shows too much time upon any operation, he is naturally anxious to stamp the finishing time, and the commencing time upon the new ticket as quickly as he can. This feature is also a check upon the foreman, for the men will make it very uncomfortable for that man who does not keep his work sufficiently well in hand to provide the job tickets ahead of the time when they will be needed by the men.

The ticket thus completed gives the complete record so far as that operation goes and it is only necessary to assort and accumulate by mechanical means to cheaply arrive at the cost of the several operations, the same affording a comparison between the work of different men and different machines, but what is more important, the true average cost of each operation upon which to base the premium payments; those who have performed the work at less than the average cost to be rewarded by a proportional premium, and those who persistently fail to approach that average to be otherwise placed where their natural ability has better scope, or failing in all to suffer a reduction in rate.

A subsequent sorting of the tickets by workmen secures an accurate record of the amount of time and consequently of pay due each, exclusive of the premium, as that should never be mixed with the regular payment, but be handled entirely as a separate and individual amount. It is clear that the total of this pay-roll and the total of the classification of charges to production must be equal and furnishes absolute assurance that no time has been paid for that is not represented in the amount charged to product.

No other timekeeping, or recording, should be permitted, the non-productive work being handled upon the same lines and thus affording a comparison between performance in this particularly liable-to-abuse portion of the labor expense so that it can be kept in hand equally as well as that of the productive effort.

The totalling of the different classifications shows the amounts against each definite unit and makes them as easy to understand and compare as does the case above referred to, only that it is the average of a great many men, and a great many individual jobs, with an infinitude of units of time; if the unit records are properly secured the resulting totals may be obtained by a comparatively simple and inexpensive operation.

Such a system may be made to take the place of much of the cumbersomeness of the present unwieldy book methods, it being possible by mechanical means to arrive at totals en bloc for balance-sheet purposes .

A community of interest is the most valuable asset of any large establishment and this can better be secured under this individual effort system than under any other thus far advanced. Employees should be encouraged to co-operate in advancing the interests of the establishment and urged to make suggestions for betterments, not only through the participation in the resulting economies, but by prizes offered for the best thought advanced during limited periods.

Such a system converts foremen and supervisors from taskmasters into helpers and advisers and the records will soon show who of them are the most helpful and therefore most valuable to the industry.

F. LINCOLN HUTCHINS. Boston, Mass.

A Statement of Affairs.

New YORK, April 24, 1906. TO THE EDITORS :-Permit me to take exception to the "Statement of Affairs" published in the April number as a solution of problem one, set in practical accounting at the January C. P. A. Examination.

Passing over the incorrect handling of the securities which results in a difference of $1,000 on both sides of the account, the principal (and principle) error in the statement as published is that the mortgagee and the sureties on contracts are placed on a footing with unsecured creditors, and all are ranked for a dividend of about .74 per cent., whereas the two former are fully secured, respectively, by “Land and Buildings” and “Contract Price,” while the latter can only realize a dividend of about 59 per cent.

F. A. STEVENS, C. P. A.

Guaranteed Stock.

MILWAUKEE, Wis., 1906. To the EDITORS :-Is there not enough distinction between the term “Guaranteed Stock" and "Cumulative Preferred Stock" to warrant a separate definition ?

The undersigned has two or three late text-books in his possession, but notice that the definition of these terms appears to be one and the same. From recent discussions on this subject, however, I am led to believe that there is a decided distinction between the two terms, in that “Guaranteed Stock" is a much more safer investment than “Cumulative Preferred Stock," as with the former the stock has to be guaranteed by some outside interest, as for instance, a holding company guarantees the payments of dividends of the stock held in their subsidiary companies, and the like.

Kindly let me have a lucid explanation of the term “Guaranteed Stock," and oblige,

Very truly yours,

W. A. THOMPSON. The distinction between guaranteed stock and cumulative preferred stock is sufficiently plain to need but little explanation. Guaranteed stock is stock whose dividend, at a fixed rate, is guaranteed usually by a second company, although there is no reason why a company should not guarantee dividends on its own stock. The value of the guaranteed stock depends not only on the surplus earnings of the company issuing the stock, but also on the surplus earnings of the guarantor, that is the liability is the same as the endorser of a promissory note.

Cumulative preferred stock is what its name signifies—stock whose dividends, at a fixed rate per cent., are to be paid before inferior stock issued, such as second or third preferred or common stock, receives any dividends, and whose dividends moreover accumulate to the credit of the holder of the stock and must be paid before the inferior stock receives any payment. The accumulative feature is a strong argument in favor of these securities from the standpoint of the investor, since, unless the company desires to postpone indefinitely the payment of dividends on the common stock, it will ,when earnings permit, pay a dividend on its cumulative preferred stock. The recent experience in the large industrial corporations shows that the requirements of the property, which would ordinarily be taken care of out of income, have either been sacrificed or funds have been provided by the issue of bonds rather than to allow the dividends on the preferred stock to accumulate.

Pennsylvania Institute of Certified Public Accountants.

The regular quarterly meeting of the Pennsylvania Institute of Certified Public Accountants was held at the rooms of the Business and Professional Club, 1232 Chancellor Street, Philadelphia, on the evening of October 15th at 8 o'clock, President Adam A. Ross, Jr., in the chair.

There were present: active members, Adam A. Ross, Jr., Wm. M. Lybrand, Joseph M. Pugh, Charles Lewer, Alfred L. Sellers, John F. Steenson, Wm. E. Montelius and William W. Rorer; non-resident members, Henry C. Magee and George Wilkinson.

The Institute formally extended its greetings to the newly formed organization of Penna. C. P. A. assistants.

The Committee on Meetings was requested to arrange for addresses by prominent speakers and papers to be read on the third Monday evening of each month during the winter, these meetings to be open also to the associate staff of the several accountants' offices.

Arrangements were made for the attendance of delegates to the convention at Columbus. Delegates signifying their intention to be present were Messrs. J. E. Sterrett and Robert H. Montgomery and Charles Lewer, alternate.

Dinner was served at the Club House prior to the meeting.

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