1 66 PROPOSED SYSTEM. 



3. SHOP EXPENSES. 



The running expenses of a workshop are incurred only to 

 organize its labor for profit. To this end buildings, power,, 

 machinery, etc., are supplied and maintained, and provision made 

 for lighting, warming, and directing the labor employed. Without 

 labor these expenses serve at the best only the negative good of 

 maintaining unchanged material which the workshop has been 

 organized for the express purpose of changing, see page 39. 

 With labor, these expenses bear fruit, and the more labor they 

 can profitably organize, the more will they return on their 

 investment. 



Hence, for the reasons stated pages 74, 97, the running ex- 

 penses for any year are to be distributed among the special 

 expenses by increasing on these the charge for labor; this is 

 done as follows: 



First we make all charges for labor as specific as possible, 

 leaving as little as possible for the standing orders or general ex- 

 pense accounts, see page 142 and Chapter XV. Then, as we can 

 never exactly tell what the general expenses for a year will be till' 

 that year is past, we assume that there will be no great variation 

 from past experience, and divide the total general shop expenses, 

 for last year by the total number of hours' shop-work done in that 

 year ; we thus obtain a load by which to increase the charge for 

 each hour's labor during the present year. 



Correcting annually by inventory and specially for fluctuations 

 as described Chapter XVI, we may apply the average charge 

 of the first two years to the third year, and so on. 



The load will vary in direct ratio to the general expenses, and 

 inversely to the amount of labor in operation at any one time ; it 

 will be affected by many other circumstances, and will depend much 

 upon the management. From the experience of a private manu- 

 facturer I take it for his particular shop as 15 cents per hour. 

 In the examples relating to cost it is arbitrarily assumed as 3 cents 

 per hour. 



In this discussion the additional charge for labor due to the 

 application of this load is known as shop expenses. It relates ex- 



