Cost Accounting, Theory and Practice

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Ronald Press Company, 1913 - Cost - 341 pages
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Page iii - THE manuscripts of the books forming the Ronald Accounting Series have been submitted to us and have been approved by us for publication. In some cases the authors express views that are not fully in accord with those entertained by us, but in no instance are such differences of sufficient importance, in our judgment, to warrant the withholding from publication of a meritorious work. JE STERRETT ROBERT H. MONTGOMERY...
Page 25 - Indirect material consists of such material as factory supplies, which, while used in the processes of manufacture, either do not enter into the product, or else enter in such a way as not to be chargeable conveniently to any particular article.
Page 39 - ... reward to bring into full exercise their abilities. The extra gain is a price which society must pay in order to secure the extra service. 4. If business profits are in some respects analogous to rent, they are in other respects closely related to interest. We have tacitly assumed that so much only of a business man's income is to be regarded as profits as is in excess of interest on the capital which he manages.
Page 37 - No comparison is possible between different establishments, between different periods in the same establishment, or between different methods in the same establishment, if capital investment in labor-saving or material-saving machinery is neglected; for the very purpose of such investment is to save cost in other directions, and to neglect the capital sacrifice, made in saving other costs, is to neglect in part the very aim of cost accounting.
Page 39 - In common parlance, therefore, the word "profits" means much or little. Knowing this, men always interpret it with a mental foot-note. On the announcement of the figure of profits under an agreement which makes no provision for interest, the first mental act of anyone interested in the business is to see what relation those profits bear to the capital — so as to see what are the excess profits over a reasonable return on the investment. Instinctively interest is a first deduction — partly because...
Page 43 - ... figure with the total capital employed, including not only fixed but circulating capital necessary for manufacturing purposes, will give the rate of return yielded by all classes of articles. The cause of any variation in this rate of return, as compared with a previous period, or of the varying rates of return on different articles in the same factory, or of the same articles in different factories, will be obtained from the detail figures. Such variations may be due either to — ( i ) Higher...
Page 22 - ... 2,500.00 To President 2,500.00 The second entry being erroneous, the following should be made to correct the books : Capital Stock $2,500.00 To President's Account $2,500.00 COST ACCOUNTING Question I State four principal objects to be obtained by a modern cost system. (Massachusetts, 1915.) Answer "The functions performed by a cost system with respect to increasing the efficiency of a plant from an organization standpoint may be noted under the following heads : "1. The records provide for a...
Page 111 - In the lower left-hand section of this form the storeroom operations are indicated, ie, the value of the inventory at the beginning of the period, the purchases during the period, and the material delivered to operating departments during the month. This material delivered is recorded in the upper section of the statement under the caption "Direct," opposite the account "Material.
Page 39 - ... the investment. Instinctively interest is a first deduction — partly because it has a definite basis that can be figured, and partly because it is the one thing that everyone counts on. One does not think of terminology: one thinks only of the fact. Virtually everyone admits that in partnership or other settlements the most satisfactory agreement is one that provides for a definite interest charge. This is mere practical convenience. Though the accountant is not much concerned with theoretical...
Page 42 - ... (3) The time during which such facilities are in use for a unit of each class ; (4) The selling price of each unit of each class. If these elements be known, comparisons can be made between different articles produced in the same factory, or between the same articles produced in different factories, as to the amount of fixed capital employed in different processes, and the time for which it is employed; as to the amount of working capital constantly maintained and used ; and as to the effect...

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