THE NATIONAL NURSERYMAN 
263 
COST ACCOUNTING—AN URGENT NEED 
By C. Stuart Perkins at the Southern Nurserymen's Association 
Convention, Held at the O'Henry Hotel, Greensboro, N. C.. 
September .i, J!)2-'f 
Mr. Perkins is with the firm of Ernst <(• Ernst, certified Public 
Accountants. Philadelphia, who are makiny a special study of 
seed and mirsery trade cost aecountiny. 
In coming before you at this convention, I am getting a double 
satisfaction. The Southerners at the American Association 
Conventions have always been in the foreground and now I can 
see them play on their home grounds. The other satisfaction is 
the privilege of discussing with you some of the whats, whys 
and hows of Cost Accounting for nurserymen. The interest that 
the nurserymen and their “cousins”—the Seedsmen—are taking 
in Cost Accounting seems to me a step in the right direction 
and, I am sure, will result in very material benefits to both your 
associations. 
In New York, until quite recently, there was a horse car line 
down on Chambers Street. It was run on a very small return 
merely to keep the franchise, but on account of the ridiculous 
aspect of the equipment there was .difficulty in keeping crews 
on this run. After several changes two young men of the He¬ 
brew faith took the job. The first and second days they turned 
in the usual eighty cents. On Wednesday the return was twenty 
odd dollars; Thursday about forty-five and Friday when they 
turned in nearly sixty dollars the superintendent called them in 
and requested an explanation. This was what he got: 
“Veil, Morris and I take this job and ve run this funny thing 
back and forth two days for only eighty cents. Vednesday noon 
ve have thirty-five cents, and Morris say, ‘Abie, vot kint of 
business is this anyway. Good Bye to Chambers Street; Let’s 
run up Broadway.’ ” 
Now in spite of the Ku Klux you are all like these two boys 
in that you are in business for profit. If there is any other 
reason why you are in business, you must make a profit to con¬ 
tinue very long. Everybody has a lot of rules for profit making, 
but there is one very good’ one: 
USE GOOD JUDGMENT, BASED ON FACTS, IN BUYING 
AND SELLING. 
Let me show you how easily this rule goes wrong without 
the facts. I watched four men playing stud poker on the train 
from New York to Philadelphia. On the first draw one, with an 
ace showing, started the betting. The next two stayed, and the 
last, with a ten showing, boosted the pot heavily. The man 
with the ace stayed as he had a pair of them, but two others 
dropped out. Finally, the first better had aces and queens and 
the other had a pair of jackc showing beside what looked to be 
another pair of tens. After'^a lot of heated betting it developed 
that the m^hical pair of tens was a jack and a ten and the 
aces and queens went down before three jacks. The loser did 
not have the facts. 
On what facts do you base your judgment of your own 
business? 
1. Do you have production records that tell you the average 
yield of Hydrangea, P. G.; what is the average percentage of 
2-3 foot grade, etc.? 
2. What acreage gives you a good average production, and 
what does not pay you the taxes? 
3. What lines show a margin of profrt between production 
cost and selling price? 
4. Could you not make direct mail advertising pay you better 
than canvassing your customers? 
MODERN BUSINESS IS NOT GUESSING, OR GAMBLING 
IT IS A SCIENCE IN WHICH YOU MUST KNOW THE FACTS 
TO WIN. 
The best means avaijable to give you the facts is Cost Ac¬ 
counting. It takes the *Stud poker out of your business. 
WHAT IS COST ACCOUNTING? 
Cost accounting is the addition of certain expenses of prodim- 
ing, handling and selling to the original material cost of your 
product. It includes, therefore, the cost of that quality and good 
service that you do or should put out with your product to in¬ 
crease and maintain the good will of your customers. It t''kes 
account of the effect of all conditions under which you must 
produce or sell. 
In the nursery trade you have varied growing conditions, due 
to the wide fluctuation of the climate from one season to an¬ 
other. Production records will give you the average yield thar 
should be used to obtain your unit costs so as to include an al¬ 
lowance for climatic variations. 
You say, however, “Our business is different.” Of course it is: 
every business is ’different in detail but the same fundamental 
rules govern each one. 
You say your yield is at the mercy of the weather. Why then 
won’t more facts about your average yield and the cost of pro¬ 
ducing that average yield help you? How long could an insur¬ 
ance business last without an actuarial force to show them their 
average risk? Do they reduce your premium just because you 
never had a fire? Of course not, but that is about what you do 
when you have a big crop. You sell it cheaply and then spend 
the next several years trying to make the money on a short 
crop that you should have gotten when your production was 
good. Why not know the average cost of producing your stock 
and consider this cost in selling? 
You say your selling price is controlled by supply and de¬ 
mand. Is there any business in which this is not true? If the so 
called monopolies do freeze out some of their competitors that 
competition will spring right up again with an increase in prices. 
You have had the same experience with “fence corner growers.” 
Do not think that Cost Accounting is some magic that will 
cure all your business ills. Let me mention though some of the 
things it will do for each of you as an INDIVIDUAL ENTER¬ 
PRISE. 
It will give you the “score" of your business as you go along. 
You don’t have to wait until you can estimate your inventory 
to see what is your profit or loss—ESTIMATED. 
It shows you what is your cost of production, selling, etc., of 
each item of your line so that you can better consider the pre¬ 
sent or future market situation. It gives you reasons for getting 
your price instead of cutting at the first scare. 
It charts the cost of your operations—shows you where the 
money is being spent—so that you can see where there is too 
much expense. 
Those lines that you cannot produce at a profit can be elim¬ 
inated. The wholesaler—yes, and the retai'ier—must have a 
complete line for his trade but there is always enough margin 
in jobbing nursery stock to buy, rather than grow, your unprofit¬ 
able lines. The other grower may be situated so that he can 
grow some things more cheaply than you. 
Cost accounting takes the guess-work out of your business and 
gives you facts upon which you can base your judgment. 
Though you may agree that Cost Accounting will do these 
things for you, there is, of course, a rather high cost of install¬ 
ing individual systems. There is, however, a way to cut this 
cost very materially. That is, to undertake as an association. 
A UNIFIED ACCOUNTING SYSTEM 
The association appoints a Cost Committee, engages a firm of 
accountants to make the necessary surveys, and they, with the 
Cost Committee, will develop a system made up in units. These 
units can be installed according to the individual needs of the 
grower, jobber, and retailer. It is this plan that we have pro¬ 
posed to your American Association and it is before the Ex¬ 
ecutive Committee for approval. The Unified Plan is by far 
cheaper. 
We have offered to make the necessary surveys and formulate 
a Unified Accounting Plan for you for $4,000.00. This plan will 
make available for the members a complete general and Cost 
Accounting system. The individual installations will be made 
at our per diem rate of $35.00, or roughly from $600.00 to $800.00. 
The Association expense this way would be about $20.00 per 
member, plus, say, $800.00 for installation, or $820.00. Individual¬ 
ly it would cost each member at least $3,000.00 to undertake 
Cost Accounting. A saving then of about $2,200.00 on each sys¬ 
tem. 
There is, of course, some clerical labor connected with opera¬ 
ting a Cost Accounting System. We are formulating a Unified 
Accounting Plan for the American Seed Trade Association. We 
have found in our surveys for them that improvements can be 
made in their general accounting methods which will save more 
than enough clerical labor to operate the Cost Accounting. 
Some of the other advantages of the Unified Plan are these: 
A common accounting language among members. When you 
talk of Sales Cost you mean the same thing. Each member’s 
costs are slightly different, of course, under the varying con¬ 
ditions, but each one uses the same methods of obtaining their 
costs 
With costs each member helps to put your market on a better 
basis. You are not so quick to cut prices below cost if you know 
what that cost is. 
Just in closing I cannot refrain from mentioning another 
episode of that race who toil not nor spin but seem to make 
money. 
^Irs. Cohen said to her husband, “Abie, did you hear that Mor¬ 
ris Katz made $50,000.00 in womens suitings in Chicago?” “Yes,” 
said Abie, “but it was his brother in Detroit. It was piece goods, 
though, and $5,000 00 which he didn’t make but lost.” 
Don’t be like Mrs. Cohen. Know the facts. 
