November 14, 1919] 



SCIENCE 



447 



Some years ago we worked out a plan of 

 determining research cost and making credits 

 to the department which has given us much 

 valuable information. Each investigation 

 undertaken has its cost record kept by the 

 accounting department in the same way that 

 a production order has. We of course do not 

 ask our research men to register their time 

 on a time clock or anything of that kind, but 

 we do ask them to make a memorandum of 

 the work on which they spend their time and 

 turn in to the accoimting department once a 

 week a statement of the distribution of their 

 time over the orders running in the depart- 

 ment. Similarly, expenses and costs of mate- 

 rials are kept, and when an investigation is 

 closed its total cost is determined. If it hap- 

 pens to be one that has to do with manu- 

 facturing processes, such as test of new mate- 

 rials, etc., or development of new methods, 

 it is either charged to general expense or to 

 the expense of some particular product. If, 

 however, it is a piece of work which results 

 in the development of a new instrument or 

 product for sale, it is treated in the same way 

 that a new instrument developed and brought 

 in by an outsider would be. The research 

 committee decides how much royalty can 

 properly be charged to the cost of the instru- 

 ment, and then as each instrument is made 

 the ro,yalty is added to its cost and is credited 

 against its cost account in the research de- 

 partment. In that way a continuous record 

 of the usefulness of the research to the busi- 

 ness is available. In cases of minor impor- 

 tance it is customary to discontinue credits 

 when the cost has been covered. In cases 

 where new products result they are allowed to 

 run on indefinitely. Successful developments 

 accumulate royalties that more than pay for 

 the cost of their research and offset the costs 

 of work that leads to nothing. The diagram 

 shows the relation of annual and accumulated 

 costs of research to the annual and accumu- 

 lated credits since the department was given 

 a distinct place. In a little over six years 

 the total credits had equalled the total 

 charges and the balance went to the credit 

 side. On the books the account is closed 

 out each year to profit and loss. It is carried 



forward as a memorandum account only. In 

 the earlier years of the record the total 

 volume of business done by the company was 

 but a few hundred thousand dollars per year. 

 To summarize, I am making a plea for a 



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30,000 



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40,000 

 60,000 

 80,000 

 100,000 

 120,000 

 140,000 

 160, 000 



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conception and organization of research which 

 will allow it to emerge as a distinct depart- 

 ment in any growing technical business and 

 take its proper place just as sales, production 

 and accounting do. Any technical business 

 ambitious to grow and render worthy service 

 must in some way avail itself of research. 

 Kenneth Mees and others have pointed out 

 how industry in the past has developed 

 around invention and research, although the 

 distinctiveness of these functions was not 

 clearly recognized, and in many cases they 

 were not directly associated with the business 

 which profited b,y them. Certainly an enter- 

 prise will have a more worthy and normal 

 growth if its need for research is early and 

 clearly recognized, and the research depart- 

 ment will more easily find its proper relation 

 to the business as a whole if it is established 

 early and its place and functions are defined. 



