he system should
be changed so that the money will be put where it will bring the
best return.
The excessive stock in process is sometimes an outcome of blind
progressiveness--the blindness that fails to see that there is as
much money tied up in stock in process and in finished product as
there is in the entire machinery equipment.
An adaptable equipment facilitates keeping down the amount tied up
in stock in process. The modern plant should take advantage of
these modern methods and machines which tend toward profitable use
of capital. Such machines are highly developed and true to the
controlling ideal of adaptability and largest output per dollar of
investment.
Cost of the Product.
The practice of disregarding the profit, when considering changes
in machine equipment, is the natural outgrowth of the separation
of the mechanical and the business departments.
The changes in the equipment are usually determined by the
mechanical department, and this is done with particular regard for
the quality of work and the cost per piece. The relation between
the profit and the net labor cost is not considered.
The cost of the product of the average machinery-building plant
may be divided into three nearly equal parts: the material, the
labor, and the burden; or, in four equal parts, if a reasonable
interest charge is made for the use of the capital invested.
The material is the iron, steel and other material that enters
into the construction of the machine, and it is taken in the
condition in which it usually comes to the machine shop.
The burden includes all expenses and salaries necessary for the
maintenance of the business.
About one-half the amount paid for labor goes to the men who run
the machine tools, and the other half is paid to workmen who do
the other work, such as handwork, assembling, transporting, etc.
Therefore, the cost of machining is either one-sixth or one-eighth
of the total cost.
On top of the net cost of the product there should be a profit. If
it is not there, the sooner something happens the better. If it is
there, then it is proportioned to the volume of the output.
Therefore, both the size of the output and the labor cost should
be kept in mind.
The size of the profit per unit of output is not generally known
to the mechanical departments. But even if it is not known, there
is no reason for their being uninformed as to the importance of
large output for cost of the plant.
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