HARDWOOD RECORD 



17 



Motion Study as a Basis of Correct Cost 



By J. C. Bohmker 



Editiir's Foi'i-icortt : I'rrmHinj nrtirUs liii Mr. Ituhnikir nii ••Miititin 

 Sttldjf (is a Jldfiti 0/ t'tni-fft iUi.st," iitlhlisliiit in llAltl'Wooli KKmuii. iDtftji 

 tliorotlj/hll/ (tlKCUsMfd tin mtllnids nf iitiikinii sliidiis of tin wntinft.'^ of 

 trorkris in iHodilcilif/ a fiii-i-it oitivlf. in onii:r to rtthlfv all unvh effort to a 

 minimum. Thr articlcn also adranred tltc piece leork method an the moKt 

 iidaptoble to effinency requiremcnt!< and t<hQieed how ttcalett oj paj/ment 

 and ineaiifi of Jixinf] renpont^ihilitij for the tjualitii of work are to he n<tult- 

 lislied. Hie lo.st of these prei>iGUS aitiel(!< enrried the siibjeet n/i to a 

 deseriiit.on of the method by whieh each letnkman is made an insiieetor 

 of tin- puit Juiiit/ inanitfactiired, l)eeoii.'<e the /o.s-w from defeetlre ivork j.v 

 ehdrged liaek to the workei' teho pas>ied the leork on, and thim permitted 

 flood labor to be put on dcfeetire muteritil. It was explained that defeetire 

 ports or material can. not he reworked under this si/stein inilil a defeetire 

 Work Ifeport is made out, which shoies the department and the operator 

 responsible. This must ijo to the office and correction or sci'appinff of the 

 part damaged ea^n onlij be done on order from the office. In this wap 

 rare in operatinfj as teell as speed is compelled. 



From this point Mr. Bohmker proiouds, as follows: 



Tho foregoing mdicates that much can be accomplished iu keep- 

 ing up the quality of the work, provided the organization is func- 

 tioning properly. In the case of difficult operations where it is not 

 Mitogetlier the fault of the operator, as the case of distortion of 

 steel shapes in tempering, cross grain in wood, etc., in such event 

 quality is used as a basis of piece work paj'ment. It is evident 

 from what has been said that motion study is the foundation of 

 cost; it will indicate the amount of waste in productive labor; can 

 he applied to study of material waste, also a factor in analyzing 

 manufacturing expense. Shop or manufacturing cost is made up 

 of material, labor and expense. The material and labor items are 

 relatively easy to determine, but more or less difficulty arises in 

 the proper distribution of the manufacturing expense. The method 

 most commonly used is by taking the total expense of the previous 

 year, determine what percentage this is of the total productive 

 labor for the same period, using percentage so found for costs on 

 jobs for the ensuing year. 



There is no question but that the percentage of direct lalior 

 method is the easiest, most ready method and answers very well 

 in plants of uniform operation or where one department differs 

 little from the rest; but in plants with departments of entirely 

 different physical make-up, such as a foundry and woodworking 

 department, or a plant operating part day work and part piece 

 work, in such event the productive hour or machine basis of dis- 

 tribution should he used. Manufacturing expense can not properly 

 he distributed on the basis of the general overhead on productive 

 labor, especially so when plant is operating on a piece work basis, 

 since the expense is a function of time and piece work payment of 

 quantity; for this reason we cannot properly apply it. Tlie general 

 overhead is a handy, ready and most easily aiiplied method, and is 

 in use iu many so-called efficient plants; efiicient because they make 

 money, yet making money is no definite sign that a plant is 

 efficient. There arc so many conditions entering into the question 

 that only thorough analysis will reveal them, fop exampb': hiw 

 labor cost, little or no com]Htition; these might make a "money 

 maker" of a plant, but still the plant may not be efficient in its 

 operation. For illustration, we have a man working day work 

 receiving 50 cents per hour, the general overhead is 80 per cent, 

 therefore 40 cents equals manufacturing expense and is added to 

 the .50 cents productive labor. Checking up the time tickets of the 

 man we find that he is producing 100 pieces of a certain article i>er 

 hour, or one-half cent a piece. 



(Irantiog that no time study is made of the job, tln' man is given 



,1 juice of .")0 cents pi i IiiuhIi cd ; liecause of the piece work thi' man 

 speeds up and, instead of producing 100 per hour, ])roduces 17.") at 

 50 cents per hundred, m.iking him .t.S75 instead of 51) cents per 

 hour when working day work, a])iilying our 80 per cent overhead 

 ch.'Mge on the .$.875 productive labor or 70 cents. Had he jiroduced 

 175 pieces per hour while working day work the job would have 

 been charged with only 40 cents expense. 



'I'lir ((uestion natur:illy arises, how much increase in expense 

 obtained in the greater prod\iction is due to piece work ! Rent, 

 insurance, taxes, upkeep of buildings, interest, administration, 

 depreciation, light and heat remain the same; the only items in 

 which slight increase obtains is ])ower, machine and material 

 expense. The difference of charge between day work .md piece 

 work is 30 cents or 75 per cent over the day work chargi. The 

 increase in power, material and machine expense is practically 

 uegligihie. This then proves that piece work productive labor can 

 not projx'rly be used for distributing the expense burden. 



We must necessarily know the time consumed in producing a 

 given article. This can he done by reducing productive labor to 

 hours or apply directly on hours. The base rate alread.v referred 

 to on Time Study Sheet will serve the purpose. We must first of 

 all find out how long it required the man to produce the 175 pieces. 

 It is found to be one hour, applying the overhead of 80 per cent 

 to the 50 cents productive labor on day work or base rate and find 

 that the charge is 40 cents. One will readily appreciate what this 

 will mean when in close competition, whether we add 40 cents or 

 70 cents expense ch.-irge to our productive labor. The refinement 

 of expense distribution can ]>e carried on to departmental over- 

 head machine hour basis, and these in turn subdivided if found 

 profitable or convenient. The following table shows fairly good 

 reason for a departmental overhead. A plant has a total productive 

 pay roll of $750,000 and manufacturing expense of .■ffioo.iioii or a 

 general overhead of 80 per cent. 



Diqiart 

 Depart- mental 



Kx|)euse mental expense 



Direct actually overhead haseil on 



Di'jiartiiii'uts labor obtained percent Hi i per cent 



Mill * 40,000 $ 50,000 125.0 $ .32,000 



Planing 85,000 75,000 88.3 68,000 



Shaping 167,500 1.50,000 89.5 134,000 



Sanding 65,000 5l',00o 80.0 52,000 



Boring 7(1,000 iL'.oOii 17.2 56,000 



Assembly 210,000 UIO.OOO 90.5 168,000 



Paint 112,500 71,000 63.0 90,000 



Total $750,000 $600,000 80.0 $600,000 



It will be seen from Hie table that in only one department does 

 the 80 per cent apply; in all others it differs widely, ranging from 

 17.2 per cent to 125 per cent. 



To establish departmental overhead it is necessary to establish 

 the amount of ])Ower, heat, light, rent; maintenance expense, such 

 as belts, oil, repairs to m.achinery; depreciation of machines; t.-ixes 

 and interest or floor space and contents; in addition to this there 

 will be a small charge or general overhead, known as administra- 

 tive. The waste incurred in manufacturing, such as idle time and 

 waste in material, must also be accounted for and applied either as 

 a flat percentage or contained in the departmental overhead. 



