THE SHOP-ORDER SYSTEM OF ACCOUNTS. 329 



portional to the benefit expected ; as we would reap, so must 

 we sow. 



2. The Cost of Doing Work. 



The net cost consists of 



1. The specific expenses for labor. 



2. The specific expenses for material. 



These are also called the direct expenses, or those which can 

 be charged directly to any particular job. Added to 



3. A proper proportion of the general annual, or indirect 

 expenses, they make the gross cost. 



It is comparatively easy to compute net costs by any of the 

 usual methods. Their exactness depends upon the scale of 

 trouble adopted, and, excepting errors of omission arising from 

 unbalanced data, they may be assumed to be fairly accurate. 



The main difficulty lies in apportioning these general or in- 

 direct expenses which cannot be referred to any special product. 

 I therefore give special attention to this subject, as follows: 



Apportioning the indirect expenses. 



Factories are established for the profitable transformation of 

 material by the organized employment of labor. How shall the 

 indirect expenses be distributed ? In ratio to the material, or 

 the labor? By quantity, or by value? 



I believe that the incidental expenses are incurred for the 

 purpose of making labor more effective, and that the more 

 material enters as their divisor, the more does it vitiate the 

 probability of the result. 



For, the more material costs, the more labor it has already had 

 spent upon it ; and the less, and not the more, does it need the 

 facilities provided by the incidental expenses. On the other 

 hand, the more men are employed, irrespective of their cost, the 

 greater is the wear and tear, the waste, the cost for room, light, 

 heat, and attendance, etc. 



These and other similar considerations lead me to determine 

 for each department a cost factor as follows : 



i. To distribute such general expenses as rent, insurance, 

 taxes, etc., among departments profiting by them according to 

 the most probable hypothesis. 



