30 Mat nd Thru Handling 



in the storeroom, in the shape of materials, is 

 vastly in excess of any actual cash in the treasurer's 

 office. Because these values are in supplies ins: 

 of in coins is no reason why they should not be 

 guarded and accounted for with the same care. 



Relation of Material to Cost of Production. 

 No business can continue in a competitive industry 

 without accurate and detailed knowledge of its 

 costs on every item it makes. To know last year's 

 profit and loss on the business as a whole is of 

 little value in directing its policies. To guide both 

 the sales and the manufacturing intelligently, it is 

 necessary to know just what your output is costing 

 now and exactly where and how these costs are 

 distributed. The same profit is not made on every- 

 thing manufactured. Some lines and some items 

 may show a profit and others a loss. Therefore, 

 the management should have accurate cost data 

 on every item and have it promptly, so that, if 

 losses creep in, their presence may be known at 

 once and the situation met. 



Whatever the business, there are three main 

 elements in cost; namely, the direct material, the 

 direct labor, and the overhead. The first two 

 elements comprise such material and labor as can 

 be assigned directly to a production or customer's 

 order. The third includes all other items in- 

 direct material, administration expenses, taxes, in- 

 terest on loans, depreciation, fuel, light, etc. This 

 third element is a large one and may be, even in 

 a well managed business, the largest of the three. 

 It is not possible to figure it specifically for any 



