HIGHWAY COST K&EPING. 9 



small in proportion to the aggregate expenses. Any portion of 



general expense that can be assignable directly to a project should 



be charged against such project. The remainder should be prorated 



over all the project expenditures for the period. 



Engineering and supervision. — To engineering and supervision 



should be charged all expenditures for surveys, plans, specifications, 



estimates, tests, and all engineering inspection and supervision in 



the nature of oversight required to secure the proper execution of 



the work. Such expenditures can be charged directly to individual 



projects. 



FIXED CHARGES. 



Fixed charges are those items of expense which go on practically 

 unchanged irrespective of the activities of the organization. Those 

 fixed charges which pertain to the production plant have been dis- 

 cussed in relation to plant and equipment. Certain fixed charges 

 not immediately connected with production operations may best 

 be considered as a part of general expense. Thus depreciation, 

 interest, taxes, and insurance are elements of expense also in relation 

 to the plant and equipment of the administrative organization, such 

 as buildings, office and laboratory equipment, instruments, machines, 

 and similar items. 



In the practical application of cost keeping, fixed charges are con- 

 sidered only in so far as they aid in the determination of efficiency, 

 and their inclusion as an item of cost is a question of accounting. 

 Where fixed charges result from methods of financing rather than 

 the methods of doing the work they belong to the field of bookkeeping 

 and not cost keeping. Thus, where a county issues bonds for road 

 improvement the interest is a fixed charge which must be paid and 

 so increases the total outlay for the improvement but has no relation 

 to the efficiency with which the work is executed, and is, therefore, 

 a matter of bookkeeping and not cost keeping. Where two crews 

 are engaged in excavation, one with power tools and the other with 

 hand tools, fixed charges are of prime importance to the cost keeper 

 for the purpose of determining efficiency and the cost of operation 

 in each case. 



It is customary among contractors to include all fixed charges as a 

 part of the expense of work, and therefore they appear in the unit 

 prices of their itemized bids. In making up his estimates on unit 

 prices to check against submitted bids, the engineer therefore should 

 include among other fixed charges interest on capital invested in 

 plant and on necessary operating capital, for materials, pay roll, and 

 deferred payments. 



Considerations of fixed charges are also important in the select- 

 ing of equipment and determining upon types of improvements. 

 These considerations are, however, within the field of engineering 

 41601°— 18— Bull. 660 2 



