2 BULLETIN 660, U. S. DEPARTMENT OF AGRICULTURE. 
these were confined largely to the State highway departments. 
Only in rare instances were cost-keeping systems found in counties 
or townships. This condition is due largely to the notable scarcity 
of information available on the subject of highway cost keeping, as 
practically all textbooks on cost keeping have been prepared from 
the viewpoint of factory management and are not readily adaptable 
to highway work. Furthermore, the usefulness of highway cost 
data has not yet been generally appreciated by public officials. 
Purpose of the bulletin. — The purpose of this publication is to pre- 
sent, first, in an elementary way the principles which govern cost 
keeping; second, a practicable application of those principles to 
highway work. 
Development of cost systems. — Cost keeping was developed in the 
manufacturing industries. To Charles Babbage has been conceded 
the honor of having first called the attention of the manufacturing 
world to its desirability, in 1832, in his publication entitled "The 
Economy of Manufacture." Half a century elapsed, however, 
before factory managers, forced by relentless competition to elimi- 
nate waste and incompetency from their factories, began to intro- 
duce systems of cost keeping. 
Since 1900 the use of cost keeping in manufacturing industries 
has developed steadily. During this period of development prin- 
ciples regarded as basic have been established. While cost keeping 
for highway work is of comparatively recent origin, it is based upon 
factory cost keeping, and the same principles govern. 
COST ELEMENTS. 
The term "cost," as generally interpreted and as used in this bul- 
letin, is the summation of expenditures expressed in terms of money 
involved to acquire or produce a utility or to perform a service. 
The cost of every unit of product, whether it be a square yard of 
road surface maintained, or a cubic yard of concrete which is a part 
of a bridge or culvert, is composed of four basic elements of expense, 
namely : 
(1) The cost of labor. 
(2) The cost of materials. 
(3) The cost of service of plant and equipment* 
(4) The cost of general expense or overhead. 
LABOR. 
The costs of labor are divided into two classes; first, direct 
labor cost; and, second, indirect labor cost. All labor chargeable 
against the product which can be designated as directly expended 
on it is called direct labor. All labor chargeable against production 
and not directly expended on the product is called indirect labor. 
