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The A'B'G ofCOST ENGINEERING

DENHAM


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ROBERT S. DENHAMChief Engineer

THE DENHAM COSTFINDING COMPANYCleveland


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The ABCCost Engineering

By

ROBERT S. DENHAM

Author of

The Fundamentals of Cost and Profit CalculationA Manual of Cost Engineering and Estimating

The Science of CostfindingPractical Cost Engineering

Etc., Etc., Etc.

Published by

THE DENHAM COSTFINDING COMPANYCLEVELAND


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Copyrighted 1919, by

The Denham Costfinding CompanyCleveland, Ohio

Printed by

The Caxton Company

Binding by

Forest City Bookbinding CompanyCleveland


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FOREWORD

The author's object is to make it possiblefor the busy executives of American manu-facturing enterprises to grasp in minimumtime, at least in outline, the principles and

advantages of the newest and most practi-

cable methods of determining the cost ofproducing and selling the products of theirfactories.

It is an unfortunate fact that at thepresent time a great majority of manu-facturers, following traditional practices,

are confidently leaning upon cost account-ing methods which delude them into thebelief that they are more successful than isactually the case. Not infrequently it ismade to appear that their businesses arebeing profitably conducted when as amatter of fact they are losing money.

It is a demonstrable fact that, once

financed and established, a factory can be


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\ ;'';dl&E'A-6'C OF COST ENGINEERING

operated at a loss of ten per cent of itscapital per year, and remain in activeoperation for fifteen years. During muchof this time its directors may authorize andpay dividends, and according to common

erroneous accounting practices, it mayseem to be reasonably successful. Fre-

quently these conditions exist without even

a suspicion on the part of the managingexecutive, much less his knowledge.

The fact that in normal pre-war timesthe life of the average manufacturing con-

cern was less than fifteen years, proves con-clusively that there was, and is, somethingradically wrong with the business methodsin common use.

Such conditions warrant the plainest

language on the part of the author, and hisstatements deserve the most thoughtful

consideration and investigation on the partof the reader, particularly if he is the

managing executive of a factory.

Every statement proffered, no matter

how exaggerated it may appear on its face,

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THE A-B-C OF COST ENGINEERING

is subject for proof. Each of the factspresented represents a phase of the con-

crete results of many years of investigationand practice on the part of an organization

of capable Cost Engineers whose expe-

rience covers the planning, installation andoperation of Cost Engineering systems in

approximately seven hundred factories.

The executive who, because he has beensuccessful, or having studied the works of

so-called authorities on cost accounting

believes himself fully informed, dismisses

the subject of Cost Engineering without

careful thought, may thereby forfeit his

opportunity to greatly increase the profit-ableness of his efforts.

Cost Engineering makes it possible toincrease profits, not so much by advancingprices as by revealing the weak points inthe making and selling effort, so that specialattention may be given to strengtheningthem, thereby decreasing existent unseen

losses which absorb part or all of the

normal profits.

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The author hopes that the executive whoreads this book will derive both pleasureand profit from its perusal, whether ornot he avails himself of the services ofthis company.

Respectfully submitted,

The Denham Costfinding CompanyBy Robert S. Denham, Chief Engineer


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**Some ships sail East, and some sail West,In the selfsame winds that blow;

' Tis the setof

the sails, and not the gales,That takes them ivhere they go,**

Selected,

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CHAPTER ITHE MYSTERIES OF COST

Mystery is always coexistent withignorance.

Nothing is mysterious to those whoknow the truth.

There are no mysteries in cost tothose who know the principles ofCost Engineering, and how to applythem.

Cost of production is a mystery tomost manufacturers because theyeither do not know how to correctly

determine the cost, or have notapplied their knowledge.The most unfortunate condition

confronting American industries to-day is the almost universal preva-

lence of erroneous teachings in regardto methods of determining cost.

The great mystery of business isthe so-called ''Overhead Expense or Burden of cost accounting.

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Whyall this wasted effort, con-

fusion of thought, and uncertaintyof result?

Simply because traditional costaccounting depends upon the opin-ions of persons to whom the funda-mental principles of expense andexpense distribution are unknown.In the absence of knowledge of suchprinciples every man tried out hisown theory according to his oppor-tunity.

The real difficulty antedates ma-chine production.

There was a time when all workwas done by hand. Factories weresmall, often in a room of the em-ployer's house, sometimes in hiscellar, or in the attic of his barn.Expenses were few. Practically allthat he required, besides the shelter,was a few crude benches and suffi-cient capital to provide materials andpay for his helpers. The workmenusually preferred to own the tools

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with which they worked and keepthem in condition.

The manufacturer made no seriouseffort to determine cost beyond thecomputation of the outlay for mate-rials and direct wages on designatedlots. To the total of these he addeda percentage large enough to coverhis living expenses and a margin ofprofit. His customers paid the priceshe asked, or went without the goods.There was often no competition. Ifany existed, it was local, becausethere were no such transportationfacilities as have since been developed.There were no traveling salesmen.

With the advent of machine pro-duction conditions changed. Theemployer was compelled to providethe equipment. He faced the neces-sity for a larger investment, andadded expenses for power, suppliesand repairs.

With the application of powercame the railroad, and the advan-

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tages that it offered for a larger fieldof action. His horizon was enlarged,facilities were rapidly increased, andthese in turn developed greater prob-lems.

His old price-making formulas wereoutgrown, and required modificationto meet the new conditions. Inhis calculation he now recognizeda new factor, for want of a better

term he called it overhead expense.The cost of his product consisted ofthree factors: materials, wages, andoverhead. To the total of these headded a margin for profit.

Sometimes he included in the overhead a salary for himself, oftenhe took the position that he got hisliving from the profits. Depreciationwas rarely thought of, and more

rarely included. Interest on invest-ment as an item of expense was neverdreamed of. It was taken for grantedthat a man in business should furnishthe capital required to serve his cus-

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tomers and carry their accountswithout remuneration other than theprofits. If he owned the building inwhich his factory was located heboasted that he had no rent to pay,and its use was provided withoutcharge to his customers.

To this day many manufacturersbelieve that the inclusion of salaryfor the owner, rent of the ownedbuilding, depreciation and intereston the investment is optional withthe concern. Many accountants,because of ignorance of fundamentalprinciples, accept the manufacturer'sviewpoint. Assuming that these arematters of opinion is responsible forthe lack of uniformity and the end-less discussions which befog the prac-tice of cost accounting.

To questions such as these therecan be but one correct answer. Thatanswer is given in Cost Engineering.For the first time in the history ofmanufacture the principles of expense

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analysis and distribution have beenformulated. They have been triedout in hundreds of factories. If asingle instance had been found, orcould be imagined, where these prin-

ciples did not prove true there wouldbe reason to believe that they wereincorrectly formulated; but large ex-perience has failed to find themmisstated.

Cost accounting authorities arepractically unanimous in their pre-sentation of the traditional theorythat the cost of production consistsof the three elements: materials,

direct wages, and overhead. Theyagree as to charges for materials anddirect wages, but indulge in endlessand unconvincing discussions as tomethods of distributing the over-

head.The mystery still remains unsolvedand so long as accountants create the overhead just so long will it remainunsolved.

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The whole theory of ''overheadexpense is wrong. There are no overhead expenses in manufacture.The ''overhead expense account isthe cesspool of business. It is the

catch-all for every item that theaccountant does not know how toproperly charge to the product. That does not know'' spells ignorance. Theextent of the overhead account in

a cost accounting system indicatesthe extent to which the accountant isignorant of correct methods of ex-pense distribution.

Mystery and ignorance are alwayscoexistent.

Learnthe truth

andmystery will disappear. There areno mysteries in cost to those whounderstand the principles of CostEngineering and know how to applythem.

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CHAPTER IIWHAT IS A COST SYSTEM?

What is a Cost System?Every man engaged in manufac-

ture is confident that he can answerthis question inteUigently, but asidefrom the irrelevant reply, ''A CostSystem is a system for finding thecost of production, it is not likelythat two men out of a thousandwould agree.

At the same time practically everyone of these men would confidentlyexpress

theopinion

thatif

he had thenecessary time, and set about it, hecould plan and install a thoroughlyaccurate cost system.

Thousands of men have tried it,

and failed. Accountants, employedspecifically for this purpose, withample time and facilities, during longperiods, covering months and inmany instances years, have failed.

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Results must be provable.According to the recognized author-

ities upon the subject of cost account-ing, a cost system is an establishedclerical routine whereby records arekept and each order, or lot ofproduct, charged directly with thematerials required for its production,with the wages of the workers en-gaged directly in its production, anda share of the overhead burden,which supposedly includes all of theother expenses involved in the opera-tion of the factory.

In more than nine-tenths of thecost accounting systems in use, the overhead is distributed to thefactory orders on the basis of directwages. In a relatively small propor-tion the expenditures for materials

and direct wages are combined todetermine the so-called prime costwhich is used as a basis for the dis-tribution. In still fewer instances theoverhead is averaged over estimated

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productive hours of machines. Inthese cases the result is found bycombining the expenditures for mate-rials and direct wages with the pre-determined machine hour rate for

such hours as were required.The three methods cited in the fore-going paragraph comprise practicallythe range of methods offered in thebooks on cost accounting. They are

constantly referred to in the currentliterature of the accounting profes-sion. Accountants engaged in estab-lishing cost systems are advised tochoose the method in their opinion

most practicable for the case in hand.In rare instances, as in the case ofcement factories, or others making asingle item measurable by a singleunit, as the barrel, such a system

might prove practicable. But infactories making product in anyvariety, or different sizes of the samearticle, these methods will be foundgrossly inaccurate. The greater the

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variety the less likely are the resultsto be dependable.

If it could be shown that theexpenses of operating the factory,

aside from the direct wages, were

involved in the various processes inthe same proportion as the rates ofwages paid, there would be someexcuse for the theories advanced.

If it could be shown that the

expenses of materials had any rela-tion to the expenses involved in the

processes, materials might be said toconstitute a basis for the distributionof the overhead expenses.

Examination of the expenses ofprocessing operations will reveal to

the casual observer that there is nota single expense item which has anydirect relation either to the wages

paid or to the expenditure for mate-rials used. There is not a single itemof operating expense that increasesproportionately with the increase ofwages, or decreases with a decrease

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1. Any system that deserves theconfidence of the user should beprovable.

2. Any system the results of whichare materially influenced by the per-

sonal opinion of its author or user isworthless.

3. Any system which depends forresults upon the distribution of an overhead,'' burden/' or general

expense account is erroneous andmisleading.

4. Any system in which one or moreexpenses are assumed to constitutea basis for the distribution of other

expenses will not stand the test ofanalysis.

5. There is not a single expense,much less a mass of expenses, thatincreases proportionately as wagesare advanced, or decreases as wagesare reduced.

6. There is not a single operatingexpense that has any definite relation

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to the cost of the materials of whichthe product is composed.

7. Neither direct labor, nor mate-rial, nor both combined, will serve asa basis for the distribution of any or

all of the operating expenses.8. The fact that all expenses have

been considered and included in thecost is not an evidence that the costof individual orders or items has been

correctly determined.9. Neither the fact that a certain

method has been used for a long termof years, nor that during the periodof its use the concern has enlarged

and paid dividends, can be admittedas evidence that either the methodsor the results are correct.

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The day of haphazard and makeshift

methods has passed. The manufacturer whowishes to stay in business must fix his prices

upon provable facts, otherwise he is notdeserving of the confidence of his customers

or of the community.

Selling prices are fairest when they includenot only a reasonable profit above cost of

manufacture, but the elements of Efficiency

of production and Management which assurethe buyer that the cost has not been inflated

through careless or extravagant business

methods.

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CHAPTER IIICOST ENGINEERING

Cost Engineering is the science ofcostfinding by analysis of the proces-

ses and expenses of production, andthe charging of particularized ex-pense factors, through process unitrates, in the exact ratio of utilization.

The objects of Cost Engineering

are five in number:1. To determine by analysis the

cost per unit of the various processesinvolved in the manufacture of prod-uct.

2. To determine in a provablemanner the cost of each lot of productmanufactured.

3. To determine the relative profit-ableness of the several articles or linescomprising the range of product.

4. To show in analytical form thecost of each lot, that unprofitableitems may be isolated and studied

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with a view to changing methods ofproduction, specifications, or prices,so that the sale of each will yield afair profit.

5. To show the relative cost ofdifferent lots of the same article, forthe purpose of revealing the mosteconomical methods of production,as a means of efficiency and economy.

In Cost Engineering Cost'' isalways considered as the sum or totalof all expense elements involved inthe production and distribution ofthe items on which cost is being con-sidered up to the moment at whichcost is being determined. The ele-ments of cost are ''expenses.

This is in striking contrast withcost accounting, in which such termsas ''direct labor cost, material cost,

prime cost, actual cost, factorycost, gross cost, net cost, etc.,confuse and mystify to a degree thatrenders discussion almost if not quiteunintelligible.

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To be understood, the participantsin a discussion must use a commonterminology. In other words theymust speak the same language.

Cost accounting has never had a

definite terminology. Its terms meandifferent things to different individ-uals. Practically no two accountantswould give definitions of the impor-tant term cost which could be

harmonized. Cost accountingstarts

with mystery and ends in mist.

Cost Engineering has a definiteterminology.

Cost Engineering is governed byfundamental principles as definiteand understandable as the principlesof mathematics or physics.

The application of these principlesand their concomitant rules to thefactors of production develop resultsas definite, logical, and provable asthe results of other mathematicalcalculations.

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Definiteness is the keynote of Cost

Engineering.Every expense element is definite.

It is definite in amount or it could notbe recorded. It is definite in purposeor it would not be authorized. Itspurpose is always the procurement ofa definite service or commodity moreadvantageous than the amount ofmoney involved, otherwise the ex-change would not be made. Theadvantage gained by the expenditureimparts a definite degree of benefitwherever purchased item is utilized.

Correct distribution of an expenseitem demands that the charge shall

always be made against the productbenefited, and if more than one itemor process be benefited the^^chargesmust be in the ratio of benefit oradvantage conferred.

In manufacture, product alwaysconsists of definite materials, to whichhave been applied the time of definiteformative processes.

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Materials are measurable.The expenses involved in the pur-

chase, transportation, storage, andhandling of materials can be definitelydetermined.

With definite specifications for ma-terials, definite information as toexpenses involved, there should beno question about the possibility ofdetermining the cost of materials

required for any given lot of product.Processes are definite.A capable engineer can in a short

time make a complete list of theprocesses which any given factory is

equipped to perform.The expenses required for the

operation of processes are definite.The purposes for which the expend-

itures are made are definite.

Expenses always have one of twoqualities: they are either direct orindirect.

Direct expenses are items having asingle beneficiary, to which they are

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chargeable in total.No act

of dis-

tribution is required.

Indirect expenses are items havingtwo or more beneficiaries to whichthey must be charged in the ratio ofbenefit conferred.

Indirect expenses may be groupedfor simultaneous distribution onlywhen the beneficiaries are identical,the ratio of benefit the same, and theirbenefits are measurable by a commonunit. (Ignorance of this principle hasbeen the most serious obstacle in thepath of those who tried to solve theproblem of overhead distributionin cost accounting. Having violatedthis principle practical distribution

becomes impossible.)None of the operating expenses

have any relation to, or are involved in,the ratio of wages paid to workmen.

Practically every expense involvedin the operation of manufacturingprocesses has a definite relation to theelement of time.

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Rent is paid on a time basis, or ifthe building is owned the items ofdepreciation and insurance on thebuilding, and interest and taxes onthe investment in building and land

are calculated on a time basis.As between the processing divi-

sions of a factory the expenses ofproviding the housing facilities arecalculated by the use of the factors

of area and time.The expenses incident to the equip-

ment investment, e. g. depreciation,insurance, interest and taxes, are allrelated to time. The amount of

investment and the element of timeare the important factors.

The expenses of the power plant,or for purchased mechanical energyare related to time. Horsepower

required for operating the machinesand the time of operation providethe means of determining the pro-portions of power expense chargeableto processing divisions.

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Thesuperintendent supervises

theactive time of productive processes,while the foremen supervise the timeof the individual employes whetherclassed as productive or nonproduc-tive.

Water, soap, towels, and toiletfacilities are required for the con-venience of every individual, duringthe time that he is in the factory oroffice. These items are related topersonal time.

Supplies consumed in the operationof the processes are required practi-cally in proportion to the activeoperating time.

Records of the activities of manu-facturing processes and individualsrequire the use of supplies relativelyin the proportions of the active timeof the processes. Activity, not idle-ness, creates the necessity for theexpenses of such supplies and theservices of time-recording and cost-computing clerks.

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The normal unit of time measure-ment is the hour.

The logical unit of process meas-urement is the process hour.

The cost of process hours will varywith the expense elements involvedand the number of process hours overwhich the process expenses must beaveraged to get the average cost ofthe process hour.

The cost of a process hour is acomplete cost. Every element in-volved in the process having beenincluded, there is nothing to add orsubtract.

The total of the expenses involvedin a given process during a givenperiod of time, divided by the charge-able (revenue producing) hours ofthat process actually charged against

the production orders during thesame period, determines the rate atwhich such hours must be chargedto determine the cost of that processas applied to the order.

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It follows that the total chargesagainst all production orders duringa given period must practically bal-ance with the total of the expendi-tures of the same period. (These

totals are almost invariably withinone-quarter of one per cent of anexact balance.)

Wages may or may not be includedin the process hour cost rate, at the

choice of the engineer.Wages comprise simply one ele-

ment in cost.Wages have no relation to the

total of the process hour cost.

Wages are always related to time.They are computed on the basis oftime worked, or pieces processed orassembled. Piecework rates are seton a time basis.

Where no special reason exists fora separate consideration of wagesthey should always be included asone of the elements of the processhour cost. Inclusion within the hour

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rate materially reduces the clericaleffort required for the operation ofthe cost system.

In replacing a cost accounting sys-tem, by the planning and installationof a Cost Engineering system, it isusual to find that the clerical effortis lessened.

Cost Engineering corrects all of theinaccuracies of cost accounting.

In Cost Engineering there is no overhead expense. All expenseelements are definite.

Cost Engineering is analytical. Itanalyzes and particularizes where

cost accounting amalgamates andgeneralizes.

Cost Engineering is practical whilecost accounting is theoretical.

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*' Business will not be on a sound economic

basis until prices rise and fall with costs.

''The word 'fair' in connection with prices

lacks virility; it not only admits but invites

debate; it suggests possibilities of variations.

A fair price is a right price y and the rightprice depends upon conditions that are sus-ceptible to scientific investigation.

''Price is fundamentally a scientific propo-sition.

As the problem of cost, which is of firstand fundamental importance, is worked out,

the question of price naturally follows.

Whether a man shall be permitted to addlittle or much to his cost by way of profit, onething is certain, the right price never falls

below cost.''' Arthur Jerome Eddy.

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CHAPTER IVGETTING THE COST OF THE LOT,

OR ORDERThe cost of the order, whether it

specifies a single article, as a machine,or a lot of identical articles, is the chiefobjective of Cost Engineering effort.

The cost of the order includes the ex-penditures for materials, the expenses

of merchandising insofar as they applyto the materials specified; the cost ofthe process units required; and, if theorder is for articles already sold, itshould include the expenses of selling.

Because the plan of the systemmust conform to the particular con-ditions that exist in the individualfactory for which it is designed, it isimpractical to present the forms of a

system in this chapter. An outlineof general features however may beof practical use.

There are five steps in the opera-tion of a Cost Engineering system:

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1. Making the initial records ofmaterials and process time.2. Recording chargeable and non-

chargeable time of processes.3. Assembling the records of ma-

terialsand process time applied toindividual production orders.

4. Distribution and summarizationof operating and selling expenses.

5. Calculating the order cost.

Thefirst

three of these steps aredaily routine. The first is accom-plished by the persons in charge ofmaterial stocks, and those in directcharge of processing units. Thesecond and third are included in

theduties of the cost clerk.The fourth step is taken monthly,

and is usually included in the dutiesof the accountant. The time for thisdistribution and summarization isimmediately after the completion ofthe trial balance of the regularaccounting system in use.

The fifth step is taken immediately

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after finishing the processes of theproduction order. The cost of eachorder or lot should be known notlater than the day following thecompletion of the work, so that if

necessary, or advisable, billing maybe done on the basis of known cost.In making records of materials

chargeable to orders a requisitionsystem will be found advantageous.

This provides a double check on thematerials, as one person makes arecord to which another attaches hissignature or initials, in confirmationof the receipt of the specified items.

Records of process time (not wages)are made by the persons in charge ofactive processing units. The timereport carries the data necessaryregarding date, machine, operator,

timeof

operation,quantity

output, orother items as the conditions demand.The record of chargeable and non-

chargeable time, made daily andclosed up monthly, provides valuable

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datafor

the management, as well asdeveloping the number of processhours to which the process expensesare chargeable.

The assembling of records of mate-rials and time applied to individualproduction orders, is part of the dutyof the cost clerk. In fact, this is thechief duty of that individual. It isusually found advisable to tran-scribe the items from the reports ofthe operatives to the order costmemorandum, a special form ofrecord, designed in every case tomeet the requirements of the factoryin which the records are made. Othermethods of assembling this data maybe used where there is special reasontherefor.

The author feels that at this pointhe should warn the reader against apossible misunderstanding.

To clearly grasp an outline ofCost Engineering methods the sub-ject should be approached with an

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form to his own impression of whatthey should be.

He must remember that a costsystem is not a price-making system.Cost is a fact, the definite sum ofcertain definite expense factors. Thecost system is simply the plan andmeans by which the expense factorsare determined and charged. Sellingprices are purely arbitrary, and while acost system serves as a guide for mak-ing profitable selling prices, the cost is

to be honestly determined on the basisof facts. The cost remains the sameregardless of price. Giving the productaway has no influence on the cost.

Each expense element must be soapplied that each process will becharged with the proportion which,by measurement, represents the pro-portion of the advantage or benefitaccruing from the expenditure.

That this may be properly accom-plished the accountant should bethoroughly instructed by a compe-

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tent and experiencedcost engineer.

Too many accountants, because ofthe latitude permitted in cost ac-counting practice, think that theyare competent to pass judgment asto where certain expenses should beapphed. A desire to please the ''bossby making unprofitable items appearprofitable, adds to the temptation.Even the boss himself sometimesyields to the temptation to hide ineffi-ciencies by influencing the results.

Any deviation from the positiveapplication of principles and rules isbound to be reflected in the results.One cent per unit improperly appliedin the summarization destroys theaccuracy of the result. Where acent is omitted the goods may bepriced too low, attracting sales at aloss of normal profits. The amountof expense being definite in total theomission at one point places an addedburden at another, with the result ofhindering sales of profitable business.

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The manufacturer may give awayhis product, or his profits, and enjoythe reward of the philanthropist, butif he juggles the figures of his costsystem, he is on a par with the man

who arbitrarily changes the figuresin a mathematical problem, and pro-claims himself a fool.

Finally, with records of items ofmaterials charged to production

orders at cost (not purchase price,for cost includes the expenses in-

volved in transportation, investmentand handling merchandise) ; with thedefinite time of factory processes

charged at definite, proven costrates;

and with the expenses of sellingincluded where goods are alreadysold, the total cost of the productionorder is found by simply adding

together theitems involved.

There is nothing to add to the costexcept profit. There is no mysterious overhead burden, no element of a percentage for contingencies.

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Cost found under the Cost Engi-neering methods provides for thereplacement of equipment worn outin the service of the customers. Itprovides for replacements made neces-

sary by new inventions and theinutility of machines, caused bychanges in the character of the out-put. It provides, before profit is cal-

culated, for payment to the stock-

holders, of interest on the moneyborrowed from them for the conductof the business, the evidence of whichis the stock certificate.

Cost Engineering in its entirety isa symmetrical structure, balanced inevery part. It requires the reader totake nothing for granted, but de-mands proof at every step. Its find-ings will prove as accurate as thework of the persons entrusted withits operation. Cost Engineering hasmade costfinding practically an exactscience.

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CHAPTER VCOST RECORDS AS A BASIS

FOR ESTIMATING

In the preceding chapters thereader has been shown the necessityfor discarding old and adopting newmethods; a comparison of the costaccounting fallacy with cost engi-neering practicability ; how all expensefactors are related to the time ele-ment, and the modus operandi ofCost Engineering.

He has been shown that cost is theresult of conditions and can beinfluenced only by changing condi-tions, not by schemes of figuring;that when production of an item isonce accomplished, no influence underthe sun can change the amount ofits cost.

We have no means of knowing thefuture except by predicting its proba-bilities upon the past. We know thatrecords of the past are safer than

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under the same conditions of equip-ment and supervision, work nextweek at the same rates of speed asthey worked last week; next monththey will produce as much in thesame hours as they did last month.The average rate of production perhour for one period of six months, ora year, will be about the same as foranother.

Now, if records are kept con-tinuously, and the average for twelvemonths used for one month; and atits close, the new month's recordadded, dropping off the twelfth monthpreceding; thus making a new aver-age, eleven-twelfths of the data beingthe same as in the previously usedaverage, there can be little change inresult. The only influence for changewill be the difference between thedata of the month added and that ofthe month omitted.

Output records will show even lessvariations. Machines are driven by

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the same power, at the same speed,throughout busy seasons, and dull.

If, then, we have known rates ofoutput per hour for the various proc-esses, under the circumstances andconditions which prevail in a givenfactory; and also have known costper hour of operation of the sameprocesses; we have unquestionablythe safest possible basis for predicting,or estimating, future performanceand costs.

It is not safe for one factory to usethe records of another factory inmaking estimates. The atmospherein different factories varies greatly.

One factory is managed by an apa-thetic management and work movesslowly. Every employe feels theinfluence of lethargy and attuneshimself to the slow time of the insti-tution. In another factory, every-thing moves by schedules. They areset with the purpose of accomplishingresults in minimum time. There is in

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this case very little lost motion. Theemploye never has to ask for orders.They are planned for in advance.

It would be ridiculous for one ofthese factories to use either the pro-

duction records or the cost rates of

another. Slow time usually meanslow hourly rates of cost, with highproduction cost, because compara-tively few pieces are finished in thehour. Rapid production, on theother hand, will probably influencehourly rates so that they will seemhigh, yet production costs are likelyto be lower than in the other case.

It follows that the estimates ofcost should, whenever possible, bemade upon the basis of carefullykept records of the performances ofmachines and people in the factory

producing the articles.Under ordinary conditions no two

men make estimates that will standcomparison. Estimates in the ordi-

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nary sense are purely advance guesses,as to how much it will cost to producea certain number of items of givenspecifications.

More or less data are used by someestimators. Others make an out andout guess as to the price that shouldbe charged, without measurements orcalculations. Some of these people(and they are usually men whosework is not checked for errors orlosses) boast that they can tellwithin one per cent of what it willcost to make any article within thescope of the processes the factory isequipped to perform.

As a rule these people stop esti-mating as soon as a cost system hasbeen installed. They do not agreewith the findings of the system.Whenever they can, they either pre-vent or delay the installation of thesystem. It is only natural that theyshould not like to have their guessestested by a mechanically perfect

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system. It is apt to injure their''prestige.

With a Cost Engineering Systemsuch as has been already described,and with complete production recordsfrom the factory divisions, the ele-

ment of guesswork is very largelyeliminated from the estimate.

However much we may like tothink otherwise, it is unquestionablytrue that the only safe measure of

the output of any process is theaverage for the factory or division.We like to think that we have highlyefficient people. We may have them,but their effect is only to raise the

average. The fact remains that theaverage output is the measure ofcapacity.

Estimating is pricemaking. Price-making is one of the most important

functions of management. The profit-ableness or unprofitableness of thebusiness hinges largely upon theselling prices being high enough to

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yield a satisfactory profit. Not toohigh, lest the business be driven tothe competitor. There is a pointwhich insures fairness to all. |^^.

The cost system provides the datafor estimates which will be fair, and,when the product has been made,serve as a test of the correctness ofthe work of the estimator.

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CHAPTER VIAUXILIARIES OF THE

COST SYSTEM

Two important features that, whilenot strictly designed for costfindingpurposes, are recommended as auxil-iaries to the Cost Engineering system,are the Perpetual Inventories, andMachine Records.

These features are establishedsimultaneously with the cost system,without additional fees, wheneverthe client is willing to authorize the

expenditures for supplies and opera-tion.

There are many manufacturerswho have not yet admitted the valueof the perpetual inventory of mer-chandise, including both raw mate-rials and finished product.

Few manufacturers would placeany considerable sum of money in acommon cash drawer, and give a keyto each of his employes, on the tacit

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understanding that he should use itonly in the interest of the employer.

Yet, a large proportion of manu-facturers will, and do, unhesitatinglyinvest thousands of dollars in mate-

rials and merchandise, which is storedin open places, easily accessible toevery employe, without even appoint-ing a custodian whose duty it is tosafeguard the investment.

The manufacturer may have abso-lute confidence in the honesty of hisemployes. They may be as honest ashe is, but under such conditions heplaces before them the temptation to

help themselves to items that theywould otherwise have to purchase.Little leakages may seem unim-

portant, but the habit of pilferinggrows when no effort is made to

checkit,

and the confidence of theemployer in his employes may be-come a curse to them and a source ofgreat loss to himself. The perpetualinventory and requisition system are

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comparable to the bank account andcheck book.The perpetual inventory does more

than stop shrinkages. Properly con-ducted it will prevent shortages, over-stocking, and encourage a dispositionon the part of employes to recognizevalue in material which otherwise isfrequently handled without consider-ation of the investment involved.

If the owner and employer doesnot place a value on his own propertyit is not likely that his employes willdo better than he.

The Machine Record is useful formaking comparisons of the perform-ances of various processing units ofthe same character. It providesrecords of output for the guidance ofthe estimator. It shows the relationbetween output and capacity. Theclerical effort required to keep it upto date is almost negligible.

The man who has never used acost system, with its auxiliary records,

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cannot appreciate how valuable theymay be. The author believes thathesitation to adopt such systems isgenerally due to either a disinclina-tion to apply one's self to the task oflearning and practicing

newmethods,

or to the fear that admitting that onehas something to learn is an admis-sion of weakness.

We are creatures of habit. After

wehave drilled our minds to follow

certain lines of thought we get intomental ruts. If one is inclined tomental laziness the effort to gettingout of the rut and breaking a newchannel for his thought current isdistasteful.

The man who would prefer to workin the dark, rather than in the light,would be considered a subject for alunacy commission, yet there arehundreds of men in this country whopose as business men, who decline toadopt advanced measures in the faceof the indisputable evidence pre-

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sented by those who have learnedthe advantages of their adoption.The excuses they offer are frequentlyridiculous. One says:

The conditions in my factory areso peculiar that it is impossible tofind the cost of the product. My ownjudgment is my cost system.

Such a statement has about asmuch foundation as the claim thatthe rules of multiplication would notapply to 2x4x15 exactly as well asto 9x9x9 because the factors weredifferent. A cost system that de-pends upon the judgment, the pres-ence, or the health of a single indi-vidual, is unsafe. Another says:

My product must be sold atprices which are already establishedby my competitors, so the cost sys-tem would be useless to me.

This is sheer shortsightedness. Invery few industries are prices estab-lished. There can be no establishedprice in industries whose product is

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made to the specifications of thecustomer. Unprofitable prices arealways subject to change. The proofoffered by a practical cost systemprovides the best possible argumentin advancing prices, as well as ameans of convincing competitors thatchanges are necessary. A third says

My old method of cost accountingis satisfactory because it alwaysshows a profit at the end of the year.

This quotation means nothing tothe man who knows that profit andloss statements are notorious fortheir omissions of economic expenses.Hundreds of concerns that are losingmoney are able to present a statementshowing a profitable period by arbi-trarily disregarding the elements ofdepreciation, interest on investment,and not infrequently the item of rent.

It is easy by such methods to hide aloss of ten per cent of the investedcapital per year, and often more. Onthe basis of a ten per cent loss the

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concern would not be insolvent forten years. Insolvency is usuallycovered up for a period after itoccurs, and the bankrupt concernwill usually show liabilities exceedingits assets by fifty per cent. A busi-ness whose accounting system is sohandled can lose ten per cent peryear for fifteen years and fail, withoutthe management knowing the truecause.

Accounting literature is so full oftheories and personal opinions, lack-ing the support of fundamental prin-ciples, that the accountant respon-sible for the conditions in such casescan probably cite an authority forevery move that he has made.

The establishing of a thoroughCost Engineering system, based upondefinite fundamentals, and buttressedby the auxiliaries of perpetual inven-tory, requisition system, and machinerecords, affords the strongest safe-guards against losses of all kinds.

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CHAPTER VIISYSTEM AND RED TAPE

System in business is of com-paratively recent origin. In fact if

one is to judge by the evidences thathave survived a century he will findthat orderliness has become a subjectfor consideration almost within thememory of men now living.

Look at the map of any old city,even on this continent, and you willfind in the irregularity of the streets

evidences of lack of system, or plan,

on the part of the mentalities respon-sible for their arrangement.

A lack of orderliness is character-istic of practically all of the activities

of humanity a hundred years ago.Any man in middle age can recallnumerous instances where radicalsteps have been taken to end theconfusion and disorderliness of ruleof thumb methods.

Street numbering systems have

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been changed inmany

ofthe

largecities within the memory of schoolchildren. Standardization of time isa development of recent years,brought about by the necessities ofrapid transportation schedules.

A few cities cling to their old un-systematic methods of numberingstreets. A few stubborn obstruction-ists still refer to sun time as ''God'stime. A few business houses stilluse single entry records of businesstransactions. A few still keep theiraccounts on spindles or hooks wherethe gentle zephyrs of Summer canblow them out of the window andclean the slate for delinquent debtors.

These, and their ilk, are responsiblefor much of the prejudice that existsagainst modernization of business,for the characterization of all system-atic effort as ''red tape. Only theunthinking, however, listen and lose.

The cash register, the credit regis-ter, the adding machine, the mechan-

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ical calculator, and the cost systemhave come to stay. The systematicbusiness is the progressive, growing,profitable business today.

If you have occasion to visit twofactories, and find one of them housedin a dark, dingy building, the yardabout it strewn with scrap and junk,the manager's desk cluttered with ajumble of correspondence; and theother housed in a modern, well-lightedbuilding, with a grass plot in front, ayard free from scrap, an orderly, well-furnished office, a complete filingsystem making it possible for themanager to place his hand on anypaper required without delay, whilehis own desk is free from all papersexcept such of the current day's workas he still has in hand, which wouldyou say was the most desirable.^

If you were to approach the mana-ger of the disorderly factory with aproposition which would help him tobring order out of chaos, which

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would enable him to greatly increasethe profitableness of his business,while at the same time relieving himof much of the detail and confusionof his daily work, he would probablyrespond

bytelling

youthat thread-

bare story about the factory thatwas so busy trying to keep up anelaborate system that its personnelhad no time to make product.

If you were to refer to the condi-tions in the more systematicallyconducted factory, he would prob-ably tell you that his prosperouscompetitor was a flagrant ''price-cutter, whose only aim in life wasto destroy competition. You wouldhowever know the truth: that sys-tematic methods are economicalmethods; that disorderly methodscost more than all the modern equip-ment required in any business.

No doubt some factories have beenover-systematized. Some people go toextremes in everything, and every-

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clearly-defined track which directsapplied energy toward the goal ofefficiency.

He is an unthinking man who con-fuses system and ''red tape/' Red

tape is useless system the curvesand grades that consume energy outof proportion to the result obtained.

The competent engineer makes acareful survey, and knowing defi-

nitely the desired end, maps out theroute which will get the result withthe least effort. The first cost of agood system may be greater, but itwill prove more economical and

profitable in operation.Denham systems admit no redtape. They are built to get definiteand essential information. Theysucceed because, to our engineers,

costfinding is an exact science. Theyknow by special training and experi-ence what information is essential,and how to obtain it, by the mostdirect methods.

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There is no magic formula thatwill find the cost in all cases. Thereis only the plain facts that the ex-penses of manufacture are definite,in amount, in purpose, and in bene-fit. Product and the operations ofproduction must be analyzed todetermine the elements and propor-tions of the elements of which theyare composed.

Expenses must be analyzed, todetermine their amount, their pur-pose, and the proportions in whichthe operations or items of productionare benefited by each expenditure.

Then each must be applied to theproper item in the exact proportions.Only thus can correct results beobtained.

All of this is governed by certain

fixed and fundamental principleswhich, although until recently un-recognized in cost determination, areas old as justice itself. When therules and principles are known, the

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results are as definite and provable asmathematics. They are mysteriousonly as the unknown is mysterious tothe ignorant. All things are simplewhen known. The better known they

are the simpler they appear.Now, Mr. Manufacturer, isn't it afact that your fear of red tape, yourexcuse for not adopting systems, isnot so much a disbelief in the use

of system as it is a disinclinationto apply yourself to the study ofnew methods, so that you mayadopt that system which will mostefficiently serve your require-

ments; and, further, to the fearthat the system will show you somany weaknesses in your presentmethods that you will be forced tochange your habits of thought and

action.f^

Mental laziness and ignorance areat the bottom of most failures.Mental laziness begets ignorance;ignorance begets fear; fear begets

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inaction, and inaction begets deca-dence; the result is failure.

Knowledge of your business comesthrough a careful analysis of recordsof production and expense. Face the

issue squarely. Know, then act. Sys-tem properly applied is the bestsource of knowledge for the manu-facturer.

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Too much censorship over individualityreduces it to mediocrity^ and this is especiallytrue when a brilliant thought or suggestion ispassed upon by a number.

If the idea is slightly modified by each, it

becomes commonplace, weak and conven-tional, and is doomed to blend with the great

mass of the ordinary, In Office.

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manufactured or upon the basis ofwhat their competitors are charging.While it is true that supply anddemand are the determining factorsin the price of any particular goodsonce they are placed on the market,cost is the fundamental factor towhich every manufacturer who ex-pects to remain permanently in busi-ness must return as the only soundbasis upon which to figure his prices.

The inadequacy of cost account-ing systems in American factories isastonishing. Many of these systemsare worse than none at all becausethey are misleading. Some havebeen built up in the manufacturer'sown ojQSce and applied by a book-keeper who is not familiar with theprinciples which underlie cost ac-counting. Others have been designedby cost accountants who knew theirbusiness but who were so handi-capped by the instructions of themanufacturer that they could not do

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justice to themselves or to theirclient. * * * *

Every article produced shouldbear its equitable share of all ex-penses, including overhead and sell-ing expenses. There are manufac-turers whose line consists of, say,six articles; on three they are makinga profit and on three they are losingmoney, but claim that these threearticles help to take care of theoverhead expense. This method ofdoing business is most detrimental tohealthy business conditions. Fre-quently one of these articles may bethe sole product of an individual whois striving and struggling to existagainst a firm which is placing thesame article on the market as ameans to help take care of its over-head expense. Surely this is not

wholesome competition. An ade-quate cost system would reveal thisunhealthy condition and make aremedy possible.

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Mr. Hurley has gotten the rightperspective of the situation in con-nection with the worst phase ofAmerican business. He reahzes theinadequacy of cost accounting meth-ods. If he were to take the timeand thought necessary to famiharizehimself with the distinctions betweencost accounting and Cost Engineer-ing, contrasting the arbitrary formu-las and uncertain practices of costaccountants with the fundamentalprinciples upon which Cost Engineer-ing is based, his approval wouldwithout doubt be given to the latter.

At any rate the big work that Mr.Hurley has done in the matter ofstirring the American manufacturersto a realization of the need for bettercostfinding methods is fully appre-ciated. It is to be regretted thatMr. Hurley could not have remainedin the position so vital to the welfareof American industries.

Mr. Hurley wanted uniform meth-

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ods of costfinding adopted by manu-facturers, particularly in the sameline, so that comparisons couldreadily be made. He referred to thisas uniform cost systems. He knewwhat he wanted, but again the un-certainty of terminology in costaccounting caused misunderstanding.The majority of manufacturers havea wrong idea of what constitutes acost system. It is commonly sup-posed to mean a collection of forms,ruled and printed alike for the useof all.

The uniform cost system as Mr.Hurley intended it to be understoodwas not a collection of forms identicalin design, but a uniform usage ofdefinite teachable fundamental prin-ciples such as form the basis of ourmathematical system. To expect allmanufacturers to use the same formof records in their factories would beas foolish as to expect that all mathe-matical problems could be worked

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nor practical training in their appli-cation. The committee-made costsystem suffers from the same cause,frequently more, because there isalways opportunity for the individual

committeeman to shift the respon-sibility for failure to the shouldersof other members. Not infrequently,the most ignorant members of thecraft are placed upon the cost com-

mittee in the hope that it willstimulate them to study. The suc-cessful members usually take theattitude that they are all right, butthat it is their duty to prepare a

strong dose for the other fellow.The average business man or manu-

facturer has an inborn dislike for thedrudgery of delving into details. Itseems to him a needless expenditure

of energy. He prefers to accept super-ficial generalities rather than try toassimilate accurate, but detailed, pre-sentations of the facts of his business.

When an organization appoints a84


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committee and commissions it withthe work of devising and recommend-ing a system for cost-finding, it can-not ehminate from the make-up ofthat committee the disincHnation on

the part of its members to drudgerythat has no direct returns, and theirwiUingness to adopt the impractical,in order that they may present areport which will indicate that the

committee has not been idle.The members of the committee,being at sea as to what constitutesreal cost-finding, have a vague ideathat somehow or other there ought

to be a means by which records ofproduct and expenses are gottentogether, so that expense is appliedto product. As a rule they consolethemselves with the oft-repeated

though erroneous statement that any method used is necessarilyarbitrary, and consequently it re-quires simply an agreement uponsome one method, and all will be well.

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Inasmuch as none of the membersof the committee have practicalknowledge of the principles of CostEngineering there is no means ofproving that their conclusions are

either right or wrong, and the so-called ''system is readily adopted.

Rarely, if ever, does a cost com-mittee really devise either methodsor forms. It usually meets about a

table to consider a hodge-podge ofprinted forms and data collected frommany sources, and undertakes topiece together a group of unrelatedforms and methods. Often some

member with a pet hobby insistsupon the inclusion of his idea as acompromise before he will agree withthe rest as to the complete report.The committee having agreed, pre-

sents its report to the organization.The fact that the members of theorganization are not better informedas to principles than was the com-mittee, renders it unlikely that there

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will be any serious objection toadopting and recommending the sys-tem. The situation is not unhke theinstance of a httle girl who, whenmaking strange marks on a piece of

paper, was asked by her mother as totheir purpose. She said, '*I am writinga letter to Lillie Smith. But, mydear, laughed the mother, ''y^^ don'tknow how to write. O, that doesn'tmatter, mother, she replied, Lilliedoesn't know how to read.

It is unfortunate for manufac-turers that their committees are soready to offer them impractical meth-ods, for the organization, generally,has faith in its committee, and backsit up by its unqualified endorsement,and the laymen then assume that thework has been properly done, notonly giving it full credit, but dis-crediting and opposing anyone whodiffers with the conclusions of thecommittee, or the recommendationsof the organization.

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ject is less practical, however compe-tent or successful they may be intheir particular callings.

To those organizations which areinterested in a movement for deter-

mining cost of production in theirparticular field, the author suggeststhat they appoint committees, notto devise cost systems, but to investi-gate the merits of the various meth-

ods alreadyin use,

and insteadof

undertaking to accomplish results bytaking the work in their own handsfoster the competitive developmentof cost-finding methods without ex-pense to their organization, throughdemanding the best possible methodswhich can be devised and installedby commercial concerns.

To such committees is offeredfreely every available means of in-vestigating the merits of DenhamCost Engineering Service and com-paring it with any other which maybe available.

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A vicious cause of inefficiency is indiffer-ence to the necessity for proper equipment.

A director who would not think of demandingthat his workmen produce machine productwithout first providing machines, will thought-

lessly demand efficient results from a managerwhile refusing to authorize the installation of

a modern Cost Engineering system. The

cost system is simply managerial equipment,

without which the manager's efforts are mini-

mized.

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CHAPTER IXSEVENTEEN REASONS WHY

DENHAM COST ENGINEERING SYS-TEMS ARE SUPERIOR TO ALL

OTHERS

1. Because Denham systems areaccurate, comprehensive, elastic,simple, logical, provable, satisfactory

and permanent.2. Because Denham systems em-

brace the solution of the problem ofdistributing the so-called ''overhead

or indirect expenses of manufacture.No other method does this.

3. Because Denham systems donot depend upon personal opinionsor theories, but are the result of theintelligent application of definitely

known principles, as fundamental asthe law of gravitation.

4. Because with a Denham systemone customer or item cannot possiblybe charged with a cent of expenseproperly chargeable to another. Nor

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can a cent be omitted. Justice is itskeynote.5. Because Denham systems are

the result of applying common senseto the cost problem. No other meth-

ods will stand the test of logicalanalysis.

6. Because Denham systems arethe result of many years of special-ized study and experience in thescientific

applicationof

individualexpenses through individual produc-tive operations to individual itemsof product. No other systems ap-proach them in either accuracy orsimplicity.

7. Because in an analytical com-parison of Denham systems with theordinary type of

*

'prime cost andoverhead or percentage system thelatter is proven to be ridiculous inpractice, and its use due to eitherignorance or indifference.

8. Because through Denham sys-tems cost can be determined in a

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provable manner with less clericaleffort than is usually required tooperate the inferior misleading sys-

tems.9. Because Denham systems are

installed by engineers whoare first

selected because of their intimateknowledge of and thorough experi-ence with factory operations and prob-lems; and then trained carefully in theapplication and teaching of the funda-mental principles of cost-finding.

10. Because by solving conclusivelythe problem of expense distribution,costfinding has become practically anexact science. Denham systems leaveno opportunity for doubt as toaccuracy.

11. Because the Denham Cost-finding Company backs up its serviceto the limit. Not only making a com-plete and efficient installation, butkeeping in touch with its clients sothat new problems are easily andcorrectly solved.

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The outlay for installation of a Cost Engi-neering system is of small importance com-pared to the greater profits that will result

from its practical use.

The best is always the most economical.

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CHAPTER XINFORMATION ABOUT DENHAM

COST ENGINEERING SERVICE

Denham Cost Engineering Service

was established in 1908. Installingorganizations, under district man-agers, are maintained at Cleveland,

Philadelphia and Chicago. All con-tracts for service are made with TheDenham Costfinding Company,(Ohio) at Cleveland.

Extent of Service

Installations have been made inapproximately seven hundred fac-tories. The territory served includesall of the industrial states within the

United States, and extends into

Canada. Concerns operating underDenham Systems are located in overone hundred cities, from Boston toSan Francisco.

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Optical Goods

Paper BagsPaper BoxesPaper CansPaper TubesPaper, ToiletPaper, WaxedPhoto AlbumsPhoto EngravingsPinsPiston RingsPrintingPrinting PressesPublishersRubber GoodsRubber Jar Rings

Rubber TiresSales BooksSpectaclesStampingsStationery

Steam CookersSteel and Copper Plate

EngravingSteel and Copper Plate

PrintingSteel FurnitureSteel RangesStep LaddersStovesSurveying InstrumentsToilet PaperToolsTractorsTransmission MachineryVarnishVarnish Stains

Wax PaperWind ShieldsWireWire Screen ClothWoodenware

Period of Service

The period through which CostEngineering Service is required variesfrom three months in small factoriesto six months or more in large fac-tories, depending upon the problemspresented by the individual cases,the class of help employed, and thedegree of co-operation given to theengineers doing the work.

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The term, as expressed in months,does not mean either that the serviceis hmited to that time according tothe calendar, or that the engineerdevotes his time exclusively to thatcontract for the period. For example:

In the case of a three months in-stallation period, the system is to beoperated for three months under thesupervision of our engineer. Theperiod of planning, preceding theactual operation; and the time re-quired to complete the summariza-tion of the records and expenses forthe third month, after the close ofthe third month's records, necessi-tates a total period of approximatelyfifteen weeks. A four, five, or sixmonths installation will require rela-tively longer preliminary and com-pletion periods, so that the actual

time from beginning the plan to thefinished records, on a six months'contract will be approximately sevenmonths.

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THE A-B-c OF COST eng1n: e;ejhng >^

Theengineer's presence : 15 'ajc^t;

required constantly for the full time.

He is permitted to use his discretionas to the time when he shall bepresent, but the Company guaran-tees that the service shall be efficient,and the system installed shall beboth practical and complete.

Fees for Service

A personal inspection of the fac-tory is necessary before a definitequotation can be made. The totalfee is always specified in the contract.We do not make installations at perdiem rates. The Company guaran-tees complete and practical systemsefficiently installed for the fee stipu-lated.

This plan safeguards the client aswell as the standing of the service.

We cannot, by slowing up, increasethe expense of installation, nor canthe client through a mistaken impres-sion, or false economy, stop the in-

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; T HE r^^pr^. OF COST ENGINEERING

stailktion 'in the belief that his par-tially trained employes can completethe service alone. Such action couldonly result in failure and dissatisfac-tion detrimental to both.

A guaranteed service at a stipu-lated fee is the only practicable planfor this type of service. Experiencehas proven it most satisfactory inthe seven hundred cases which we

have served.

How To Get Service

Write to The Denham CostfindingCompany, Cleveland, Ohio, askingthem to have a representative callupon you. This call does not obligateyou to engage the service unless youare convinced that it will proveprofitable.

The representative, either a dis-trict manager or the chief engineer,will visit you, look over your factory,discuss with you the methods of

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made system, or have none, it willpay you in largely increased profitsto avail yourself of this offer.

No Financial Obligation UnlessYou Order

Remember, we will send a repre-sentative to any point within therange of our installing organizations,upon the request of an executive ofany factory employing fifty or morepeople. (In certain localities we canhandle smaller cases.) There is noobligation involved, except to giveour representative a prompt hearingand our proposition earnest consider-ation. Write today.

The Denham Costfinding Co.Cleveland, Ohio

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The Denham Costfinding Co.,Cleveland, Ohio

Please have your representative call onus to discuss the value of a Cost Engineer-

ingSystem

in connection with the opera-

tion of our business.

This request involves no obligation

except to give him an interview promptlyand to seriously consider the advantage of

your proposition.

Time of call preferred

Very truly yours.

Official Title

Should be signed by General Manager orCorporation officer.

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COST ENGINEERING SERVICE The Denham Costfinding Co. of

Cleveland, Ohio, provides Cost

Engineering Service for the plan-

ning and installation of Cost

Engineering Systems in Factories.

Six hundred users in over one

hundred cities of the United States

and Canada attest the practica-

bility and profitableness of theservice. A representative will besent on request.

THE DENHAM COSTFINDING CO.

COST ENGINEERSSLOAN BUILDING, CLEVELAND


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BOOKSBYROBERT S. DENHAM

PRACTICAL COST ENGINEERINGCovers the philosophy of Cost Engineering

with detailed exposition of the application

of the Principles and Rules of Cost Engi-neering Practice. A book for the manufac-turer or student.

Buckram, 300 pages^ $10.00 per copy4f ^ ^

FUNDAMENTALS OF COST ANDPROFIT CALCULATION

A vigorous discussion of the vital elementsof business. A book every man engagedin active business in any capacity can readwith interest and profit.

Cloth, 120 pages, $1.00 per copy


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