January 25. 1917 



HARDWOOD RECORD 



41 



Machine Shop 



The machine shop, if owned and. operated, should also be carried 

 as a separate institution, and it should be charged with the labor, 

 machinery, repairs, insurance on the plant, oils and waste, etc., 

 the same as any other part of the plant. Included in this depart- 

 ment should be the blacksmiths, the machinists and millwrights. 

 A daily report should be made by the millwright and master me- 

 chanic of the time put in at the different parts of the general 

 plant, including the railroad, and a charge made to these divisions 

 suiEcient to cover the machine shop expenses and the machine shop 

 account credited with the amount. These reports should be con- 

 secutively numbered and kept filed until the end of the month and 

 the whole amount included in one entry. 



It is our theory and recommendation, that the cost system should 

 not be kept separately from the general books. By keeping a 

 voucher system and a voucher record, these different subdivisions 

 can be easily and accurately kept as a part of the general account- 

 ing system, and before trial balances, etc., can be made from the 

 cost or general ledger these accounts must be up in shape. In this 

 manner you do not have to depend upon clerks to keep an indi- 

 vidual cost record, and the only chance for anything to be over- 

 looked is the fact that it has not been entered on the books. 



In conformance with the above recommendations we submit as a 

 part of this report statement forms to be used in compiling log 

 cost, lumber cost and overhead expense which, if adopted by the 

 association, will require in connection therewith a schedule of 

 accounts. By that we mean a brief description of how the entries 

 of each item of cost are to be made. 



We also submit a statement form for arriving at the cost of 

 each kind of lumber manufactured, and recommend the keeping 

 of costs separatel}' on each different kind of wood. 



If several different kinds of wood are manufactured at the same 

 plant, it, of course, must be known that the manufacture of oak 

 and the cost of oak lumber will exceed the cost of gum lumber, 

 or cypress, etc. The question of determining the actual manufac- 

 turing cost is one to be considered. As accurate a method as we 

 think of is to time the production of the different kinds of lumber 

 through the mill for a given period, and then take the cost per 

 hour of the plant and in this method determine the percentage of 

 cost of each different kind of wood manufactured during a certain 

 period of operation and use this information for obtaining separate 

 costs. 



Unless this method is followed, we do not feel that we are pre- 

 pared to submit at this time a scheme of accounts which will 

 enable you to figure the actual cost of manufacturing each kind 

 of lumber, and we would then propose, for the present, taking 

 the average cost of producing all lumber and adding the stumpage 

 value of each kind to this average price. We have given this 

 matter considerable thought and have arrived at no other con- 

 clusion which we can recommend to you at this time. We recom- 

 mend this separation of the cost of each wood to be made both in 

 the manufacturing department and in the sales department so the 

 .profit or loss can be determined on each kind of wood manufac- 

 tured. We do not think it would be wise at this time to attempt 

 to ascertain the cost of each different grade or thickness of lumber, 

 It might be argued that this can be accomplished and that it will 

 cost less to manufacture low-grade stuff than it will cost to manu- 

 facture high-grade stuff. If you are sawing for grades, we believe 

 it will cost as much to saw up a low-grade log as it will a high- 

 grade log, because the sawyer must be watching the low-grade log 

 in order to get just as high grade of lumber as possible just as 

 closely as he watches the high-grade log. 



Our recommendations, therefore, for the present, in this respect 

 is that we consider the cost of production of each different kind 

 of wood and ascertain the correct selling price when it is shipped, 

 so that the cost and selling values should be based on the product 

 as a whole and not as to grades. 



It might also be argued that it will cost less per thousand feet, 

 board measure, to produce thick lumber than thin lumber. We are 

 willing to agree to this theory. But we think it is impractical 

 at this time to carry the costs in the lumber industry to such an 

 extent that the cost of the different grades and thicknesses of the 

 lumber can be obtained accurately. We prefer to feel our way and 

 overcome the difficulties as they arise. It is a different operation 

 to where a particular product is turned out by a particular ma- 

 chine, and in our opinion the only thing feasible to begin with is to 

 determine the output of your mill as a whole, basing it on board 

 measure, whether thicker than one inch or thinner than one inch. 



The question of supplies is one that deserves the attention of 

 every one. A well-regulated plant should maintain a supply de- 

 partment for supplies of every kind which cannot be charged 

 direct to some particular department. A capable man should be 

 kept in charge of this department, and no supplies should be de- 

 livered to any department except upon a written requisition of 

 the foreman of the department needing the supplies, or of the 

 superintendent. The storekeeper should be provided with books 



__aud blanks so as to keep a continuous or running inventory of all 

 stock on hand. 



This should be kept in such a manner so that he can, at a mo- 

 ment 's notice, tell how much of any particular item of stock he 

 has on hand, what it has cost, and whether the price is inclined 

 to fluctuate. He should also be provided with recapitulation sheets 

 which will enable him to report at the end of each week to the 

 office the supplies furnished each different department, and the 

 supply department will then be credited in the office and the dif- 

 ferent departments charged by voucher. 



Eequisitions on the supply store should be numbered consecu- 

 tively and a record of the number in each foreman's possession 

 should be kept at the office, and these requisitions should be turned 

 into the office by the storekeeper with his recapitulation sheets, 

 which are checked in the accounting department. 



Another item of cost which should be carefully looked after is 

 the lumber manufactured by the concern itself and used in the 

 maintenance of its plant or in new construction. No lumber should 

 be used without a charge being made for it. In this manner only 

 can we determine what the logs are producing, or the cost of the 

 lumber produced. The lumber furnished to different divisions of 

 the plant and furnished to the planing mill should be charged at the 

 regular market price of the lumber f . o. b. cars. There is no reason 

 why the concern itself should pay less for its supplies than it can 

 sell them for to someone else. 



'rt'e have not gone so into detail in the matter of costs that it is 

 impracticable for anyone to keep them. A much more detailed 

 system can be worked out but we have endeavored to show a 

 system that is workable and at the same time we believe will give 

 satisfactory results for the purposes of comparison. 



We submit this report and recommend its adoption, knowing 

 our short-comings, and trust it may lead to a liberal discussion. 

 We strongly urge upon the association, however, whether or not 

 our report is adopted, the necessity of having a recognized uni- 

 form system of accounting and a recognized standard of cost 

 production. 



New Rate Making Opposed 



The special committee of transportation of the National Lum- 

 ber Manufacturers' Association held a special meeting at the La 

 Salle hotel, Chicago, January 16, to take action on a matter of 

 suggested change in determining rates on lumber. The proposal 

 came from Fred Ec-hs, examiner for the Interstate Commerce Com- 

 mission, and those at the meeting regarded the proposed change 

 so radical that caution demanded it be opposed, which was done 

 in a report signed before the adjournment of the meeting. 



It was the proposition to establish a 50,000-pound minimum car, 

 and from that point grade up and down. Among those attending 

 the meeting were attorneys representing different lumber associa- 

 tions: L. C. Boyle, W. A. Wimbish, J. H. Burchmore, and Thomas 

 Jeffreys. Various lumber associations were represented by officers, 

 and they registered the disapproval of their associations to the 

 proposed change. The committee embodied the general disap- 

 proval in the following report: 



The Interests here represented feel constrained to unequivocally oppose 

 the plan suggested ; and, without now setting forth the grounds and reasons 

 in support of their conclusions, submit the following general condis- 

 erations : 



(1) It was announced by the commission in its circular of June 20, 1916, 

 and again at the beginning of this hearing at Chicago, that the matter of 

 rates would be excluded from consideration, and no evidence with reference 

 thereto was to be regarded as pertinent to this inquiry. The plan proposed 

 has direct reference to the matter of rates as based on transportation costs, 

 and only incidentally concerns the classification of lumber and products 

 related in rates to lumber. 



(2) We are convinced, after discussion and consideration, that the plan 

 proposed is unsound in principle, experimental iu character, and incapable 

 of satisfactory practical application. 



(3) The plan proposed, as a basis of rate making to be applied to the 

 great lumber industry and its allied interests, is revolutionary in its nature, 

 uncertain in its effects, and demoralizing to the trade in its tendencies ; and 

 by providing rates that will vary according to the single factor of car- 

 loading threatens to perpetuate and intensify that very lack of uniformity 

 which It is thought was the primary purpose of this investigation to miti- 

 gate or remove. 



(4) Both carriers and shippers generally are satisfied with the present 

 basis of rate construction, subject only to such changes in classification 

 as would promote greater uniformity ; and we therefore suggest that fhe 

 commission should not on this record propose and prescribe a radical 

 change in rates without a finding after full hearing that the present sys- 

 tem or basis is unlawful and in violation of the act to regulate commerce. 

 The interests here represented therefore earnestly request the commission 

 to disapprove this method of arriving at the rates on the sole basis of car- 

 loading, as proposed by the examiner, and to confine its conclusions to 

 the issues defined by the commission at and prior to the hearing. 



E. H. Dowmnan, president of the National Lumber Manufac- 

 turers' Association, will go to Washington to present the matter 

 to the Interstate Commerce Commission. 



