244 COST ACCOUNTING AND ESTIMATING. 



masts and rigging, and outfit. In naval work there must be such additional items as ammu- 

 nition handling, turrets, installation of ordnance and armor. 



The machinery is generally divided into main engine, condenser, pumps, boilers, stacks 

 and uptakes, forced draft system, fuel oil system, piping, lagging, shafting, bearings, pro- 

 pellers, floors and gratings, tanks, and auxiliaries, including feed heaters, evaporators, dis- 

 tillers, oil coolers, auxiliary condensers, refrigerating, heating, fire extinguishing and disin- 

 fecting plants, together with tools and spares. 



The above groups are more or less subdivided, according to the nature of the work con- 

 structed at the particular plant. 



The return cost for each of the above items should be given in the three divisions : ma- 

 terial, labor, operating expense, termed overhead. 



Material is comprised of purchased material, i. e., items requisitioned and purchased 

 directly for a particular ship; and storehouse material, i. e., material drawn from the general 

 storehouse and applied directly to the vessel. The latter consists of such items as standard 

 pipe, fittings, bolts, nuts, etc. 



Labor, sometimes termed direct labor, is that portion of the labor which is charged di- 

 rectly to the vessel. 



Operating expense, or overhead, consists of both material and labor and constitutes just 

 as much a part of the cost as either the direct labor or material. It consists of material and 

 labor which is more accurately distributed by prorating than by the direct charge. 



The division between direct labor and indirect labor is by no means uniform at all 

 plants. The general principle which determines the division is that direct labor should include 

 all labor where little or no judgment is necessary by the operator in the division of his time. 

 Where it becomes necessary for the foreman or quarterman to estimate the division of his 

 time between the several vessesl or jobs, such labor should be classified as indirect labor. 

 An ideal system would be one where all the labor could be accurately distributed directly to 

 its appropriate job. Unfortunately, much of the labor entering into ship construction cannot 

 be charged direct without the arbitrary distribution by the employee, and it must therefore 

 be included in the operating expense. 



The material charges in the operating expense embrace such items as light, heat, coal, 

 water, etc., and the labor includes the compensation of foremen, leading men, inspectors, 

 clerks, messengers, cleaners, timetakers, etc. In addition to the above there is included, as 

 administration, selling and general expense, a proportionate part of the cost of the office of 

 the manager, sales department, treasurer, accounting department, purchasing department, 

 plant engineers, service department, etc. 



The distribution of the overhead in some businesses can be apportioned according to the 

 units manufactured, where such units are all the same character, but in shipbuilding it has 

 generally been customary to apportion the indirect expense as a percentage of the direct labor. 

 Each department in the shipyard should have an account to which the expense of the depart- 

 ment is charged, so that it may be possible each month to prorate the expense of that depart- 

 ment among all of the direct labor which it performed for that period. 



Since the distribution between the direct and indirect labor is not uniform at various 

 shipyards, it can be seen that direct costs of one yard are not comparable with another yard. 

 To make a proper comparison, it would be necessary to adopt not only a uniform cost sys- 

 tem, but a uniform force report so that the distribution between the direct and indirect labor 

 would be the same at all shipyards. 



