COST ACCOUNTING AND ESTIMATING. 

 By H. H. Schulze, Esq., Member. 



[Read at the twenty-ninth general meeting of the Society of Naval Architects and Marine Engineers, held 



in New York, November 17 and 18, 1921.] 



Cost accounting and estimating are so closely allied that it is not possible to treat of 

 one without the other. In early days, cost accounting as applied to ship work did not receive 

 careful thought or attention but was considered more in the nature of clerical work ; during 

 later years, and especially since the cost plus form of contract came into being, cost account- 

 ing has become better understood and is today considered among the most important depart- 

 ments of the shipbuilding business. 



Cost estimating occupied much the same position as cost accounting, and few shipyards 

 reduced their cost estimating to a systematic basis. It is therefore the intention of this paper 

 to treat mainly of the second portion of the title and to describe the methods adopted in the 

 effort to obtain, as nearly as possible, imiform results. 



COST ACCOUNTING. 



There are really three main functions of the accounting : First, for determining the profit ; 

 second, for submitting statements during construction to the operating manager, so that he 

 can anticipate or investigate the overrunning of estimated costs ; third, for estimating — that 

 is, to determine the basis upon which to submit bids for similar work. The financial state- 

 ments required for each of the above ptirposes are entirely unlike. 



For determining profit but one figure is required, namely, the completed cost; for use of 

 the operating manager the statement should be divided into groups corresponding with the 

 division of his operating department; for determining the cost for future work the state- 

 ments should be divided by groups represented by physical quantities so that unit rates can 

 be determined, to be applied to similar physical quantities calculated for the proposed work. 

 A good accounting system should provide means to indicate all the above. 



The number of groups in the accounting system depends largely upon the variety of work 

 constructed. It is understood that, should but one type of commodity be constructed in which 

 the relation of each operation to the other is always constant, but one factor would be neces- 

 sary to determine the rates for similar commodities. In ship work, however, because of the 

 varying relations of the many items and trades entering into the numerous types of ves- 

 sels, it becomes necessary to subdivide the return cost into the correspondingly numerous 

 items, which broadly may be classified in groups of hull and machinery. 



The hull is usually divided into general items such as bonds, insurance, watching, tem- 

 porary electric service, plans, trials and delivery; steel hull, including loft work, staging, 

 launching, hull castings and forgings, and structural hull; woodwork, including joiner and car- 

 penter work ; also painting, hull piping, ventilation, electric work, steering gear, warping gear, 

 boat gear, doors and hatches, airports, inside and outside fittings, handrails, deck covering. 



