New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-06-24
Saturday, June %, 1917

of the eQeral EdOe COMMISSION &c
undertake an investigation for the
/ purpose Of determining the cost OF
raw materials so that basis may be
found for fixing prices on naval pur-
chases, Secretary Daniels remarked
The Lord put these things into the
ground and the only problem is in
getting them out" The views of the
commission were not published, but
it is not at all improbable that they
accepted this statement with reserva.
tjons. The problem of finding a cost
figure which would be of any practi.
cal value for price fixing purposes
while Of course not so important a:
the problem of attaining maximum
production of industrial essentials, j;
at least as difficult of solution. Per
haps it would be more accurate tC
say that it cannot be solved at all.
When the commission commence:
its investigation it viii first have tC
face the question Of what is meant
By costs. That is not so easy to an
swer as might be supposed. 1t would
in fact, be difficult to find two cost
accountants who could agree exactly
on that point. II. L. CAN'T, one OF
the foremost cost engineers in the
country, has this to say;
Inasmuch as the Federal govern
ment is at the present time placing
large contracts for material and
construction on a basis Of cost plus
a percentage, it is Of vital import
ance TO the community to know
exactly what the term cost in
cludes.
Manufacturing costs may be d.
vided into three parts: material.
labor and overhead expense or
burden.
We all know what cost of ma
terra! means, and also what we
mean by the cost Of labor; but
there is still a great deal of mis-
understanding about what is called
overhead expense. II seems i'm
b portant therefore that we should
as soon as possible try to get a
clear idea Of what we mean by this
term
Shall it include all the expense in
CURED while the work was being
done? Or shall it include only so
much Of that expense as contrib
uted to the work in hand?
In the past it has been a pretty
general practice to charge to the
product all the expense Of that
nature which was incurred while
the product was being made. no
matter how small that product
was.
We should decide promptly as TO
whether this method shall continue
or whether expense charged to a
product shall be limited TO that
needed TO produce IT,
This is i matter Of vital import
ance, for the difference between
these two amounts may be very
great. Until this question is set
tied, cost plus percentage may
mean almost anything.
Assuming, however, that a salts
factory basis for determining cost
had been established the commission
would be only at the beginning Of its
troubles. for practical application Of
any method 10 any industry present:
obstacles which are almost, if not
quite. insurmountable There is ar
astonishing degree Of variation in the
cost Of producing, say, a ton Of SHY
plates. geographically and according
TO the capacity Of the plant The cost
TO the Bethlehem Steel Corporation
fer instance, might be a fifth more Of
Q fifth less than the cost to The
United States Steel Corporation. A
producer in the Pittsburgh district
might be able to make plates for {
third less than one in the Eastern
district. And the extreme variation
might be much more than that.
A steel maker told The Tribune
the other day that some plants could
produce steel plates at profit at S56
a ton, while the actual cost to other:
was as much as 500 a ton.
There was published in 1913 BOOB
giving the results Of an intensive
study Of costs in The steel trade, made
By the United States Commissioner
Of Corporations. The statistics were
compiled from the books Of producers
This is what they show for the year
1906, the last one covered in the re
port, in the case Of three commodi
ties. The figures represent the aver
age book cost per ton:
LARGE