PART I 



METHODS AND PRINCIPLES 



CHAPTER I 

 INTRODUCTION 



THE need for cost analysis in connexion with productive 

 enterprise is one which has grown up gradually with the 

 growth of industry. It has been pointed out that when 

 production was effected by manual labour, either under 

 a more or less primitive factory system, or in a cottage 

 industry, intricate accounting was not required ; but the 

 rapid changes in industrial conditions, due to the intro- 

 duction of labour-saving machinery and the specialization 

 of labour, have led to processes of manufacture so intricate 

 and on such a scale that ' it is only by means of systematic 

 records that leakage, waste, and fraud can be prevented, 

 and that employers can know the cost of any article of their 

 manufacture, and be able to determine accurately and 

 scientifically, not merely approximately and by haphazard, 

 the actual profit they make or loss they sustain, not only 

 on the aggregate transactions during a given period, but 

 also upon each individual transaction. . . . There is always 

 the danger, where only the general result of a business is 

 known, of departments or processes which are relatively 

 unremunerative being unduly fostered, and of those which 

 yield more than the average profit not receiving adequate 

 attention '- 1 Side by side with these results comparisons 

 can be made of the advantages of alternative processes, of 

 the efficiency of different machines, and of various grades 

 of labour, whilst a proper system of record-keeping enables 

 the management to know, from day to day, the stocks of 



1 Garcke and Fells, Factory Accounts, 6th ed. (1912), p. 5. 



