page_title: Halbert Powers Gillette
section_title: Fundamental divisions of cost
hierarchical_section_title: Halbert Powers Gillette / Work / Fundamental divisions of cost
caption_attribution_description: English: Chart of Total Construction Costs, 1909
context_page_description: Halbert Powers Gillette was an American engineer and prolific author of textbooks and handbooks for the engineering and construction fields.
context_section_description: In Cost keeping and management engineering, Dana & Gillette (1909) went into the topic of the fundamental divisions of cost. They made clear, that such a subdivision can be illustrated (see image) but is not complete. Dana & Gillette explained:
  ... it would be futile to attempt to make a complete outline that would apply to any contracting firm. Keeping books is writing the history of business transactions; hence, it is obvious that no outline of the 'history' can be made until the 'events' are known. Even though two firms are in the same line of work, these 'events' are never of quite the same nature in both concerns. Therefore, it is clear that before an outline of the records of a concern can be made, that particular concern must be studied to learn the nature of all its transactions. For this reason no general discussion of the methods of keeping accounts for any line of business can hope to be more than thoroughly suggestive.
  Dana & Gillette continued that "every source of expense to a contracting business contributes to the total cost of the contracts carried by the firm. A certain proportion of the Office Rent, the Legal Expenses in connection with lawsuits, the cost of making unsuccessful tenders, etc., are just as much a part of the cost as wages paid to carpenters and bricklayers. To allocate these various costs seems a difficult problem, but the first step is simple, for each item can be readily classified..." They proposed the following divisions :
  Direct Expense: Direct Expense includes all expenditures that pertain to only one contract, and that can be charged to that contract without subdivision or apportionment.
  Overhead Expense : Overhead Expense includes all expenditures that pertain to all the contracts carried, and that cannot be charged to the individual contracts without subdivision or apportionment.
  The Direct Expense Account is divided into two parts: 
  Field Expense: Field Expense includes all items which can be directly charged to the work in the field.
  Sub-Contract Expense. Sub-Contract Expense includes all amounts paid for work done by sub-contractors.
  Under Field Expense we have four subdivisions :
  Labor: All expense for labor (except when sub-contracted) employed in the field is charged under Labor.
  Materials: Expenditures for materials which are found in the completed structure, and which are paid for according to the contract, are charged under Materials; e. g., Cement, Sand, Crushed Stone, Bricks, etc.
  Supplies: Supplies include all such items of material as are necessary to the carrying on of the work, but which are partially, or wholly, destroyed in the process of construction; e. g.. Oil, Waste, Coal, Rope, Hose, etc.
  Miscellaneous: General items of expense which do not come under any of the first three classifications, but which can be directly charged to the Field Account of a contract, come under Miscellaneous; e. g., Plant Rental, Plant Depreciation, Telephone and Telegraph, Postage, etc.
  Dana & Gillette (1909) continue with a further description of the analysis of overhead expense accounts.
caption: Chart of total construction costs, 1909
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