page_title: Henry Metcalfe (military officer)
section_title: System of cost accounting
hierarchical_section_title: Henry Metcalfe (military officer) / Work / System of cost accounting
caption_attribution_description: English: Classification of Important Mechanical Operations of an Arsenal or Machine Shop, 1885
context_page_description: Captain Henry Metcalfe was an American Army ordnance officer, inventor and early organizational theorist, known for his 1873 invention of a detachable magazine for small arms, for his work on modern management accounting, the development of the "time card" and his theory on the role of middle management.
context_section_description: In his 1885 The Cost of Manufactures and the Administration of Workshops Metcalfe presented one of the first fully developed systems of cost accounting. This system of methods was based on multiple elements:
  Classification of the most Important Mechanical Operations of an Arsenal or Machine Shop (see image). There was further classification of possible transactions, one in the scope of the foremen, and another in the scope of the storekeeper.
  The Card system, as described above, for the real time control of the order flow, and other real time registration of the daily operations.
  Overview sheets of data such as Monthly abstracts of purchases; Time Book on  return work (see image); Proposed Daily Costs Sheet; Proposed Daily Credit Sheet; etc.
  Sheets for Analysis of performances, such as service performed on components of shop-order.
  The whole system, introduced in the 1885 publication, was summarized in the 1886 article, entitled "Metcalfe's cost of manufactures" in the journal Mechanics. Typical for the situation in that time is, that the article started with a description of what factory accounting is about, and what problems they are facing:
  It is almost an axiom that bookkeeping consists in the classification of accounts. In commercial bookkeeping these accounts are relatively simple, and the heads of accounts being easily recognized, the balances between classes may be determined by positive rules.
  But in workshop accounts it is difficult for the accountant to apportion properly the gross sums with which he deals among the different objects on which they have been expended. There is a tendency on the side of the shops, in which the knowledge must originate, simply to work in the most efficient way and to let the records take care of themselves. On the side of the offices there is a contrary tendency, requiring constant knowledge of how things are going and how similar results, when obtained under different circumstances, compare. These tendencies conflict, so that the office is always asking for more specific information than the shop is able to supply, except by guess.
  To get a better understanding of how factory accounting could and should work, the article gave an explicit example:
  Suppose that the total cost of a year's expenses be known, the office may want to divide them among the yearly products by some better method than that of an average based, as is sometimes done, on their weights, or on some other remote relation to their cost. Stoves, and even harness, are often appraised by weight ; while it is evident that, like fret work, the less they weigh often the more they cost. Then, supposing that by any means the gross cost of a job is known, there is usually a remainder in the drawings, patterns, &c, useful for further work of the same kind, which would enable estimates for such work to be made at a lower figure than if the whole work had to be done anew. Or else the cost of some individual component of the product may be required to be separated from the gross cost, as when parts are to be made for repairs, or are to be omitted, or combined. Then, further operations may change; work on some components formerly done by hand may now be done at a less cost by machine ; or labor at a different rate may be employed, the effect of which changes on the whole cost may be required to be anticipated.
  The article continued to stipulate the main problem at the time:
  It is safe to say that each of these steps in analysis is often attempted, and as often fails from lack of trustworthy data. If the accountant had the data he might classify them ; but they are known only to the shop; and then only from day to day forgotten as new works comes along.
  To remedy this, foremen are often required to keep " little books," which can never cover all the ground of subsequent investigation, and which, just so far as they do cover it, turn these foremen into accountants, forcing them into work for which few are fitted, and taking from them time and attention which could be fa better employed.
  Now the article states that:
  ... Captain M
caption: Classification of the most Important Mechanical Operations of an Arsenal or Machine Shop, 1885
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