Navy Yard Cost Accounting

By WILLIAM MILLS CORLISS, C. P. A.

Announcement has been made by the president of the American Institute of Accountants of the appointment of seven of its members as a sub-committee to the advisory committee of the Council of National Defence and this has brought more prominently to mind the important part accounting must play in the management of the nation's affairs in time of war. That part is not confined, as the general public imagines, to the financing of large war loans, and good accounting procedure is very much more in evidence in the various Government plants, particularly in the navy, than the average public accountant believes.

The paper here submitted deals with the cost system of one of the largest navy yards in the United States, and if it goes more into detail than is customary with contributions for the readers of THE JOURNAL, the excuse must be that without giving the details, a description of a cost system could not be of use to anyone.

The navy yard here under consideration is classed as an industrial yard, as distinguished from non-industrial yards, and contains thirty-eight producing shops. All the expenditures for production, maintenance and care of the yard are provided in the cost system, and all charges are made from time-tickets (chits), stub-requisitions and stores-requisitions. The only exception to this is the salaries of certain civil service employees doing office work and inspectors and their assistants stationed in other plants working on government contracts. The salaries of these employees are punched on the cost system cards (which will be explained later) from payrolls, no time cards being used. Adjustments are put through the journal monthly, in stereotyped entries.

Time-Tickets.-Time-tickets (chits) are also job-cards and are made up complete in the shops. Even the appropriation to be charged is indicated upon each. These cards reach the accounting office the following morning, usually by ten o'clock, and are first checked against the rough payrolls which are made up as follows:-Cards called muster check cards reporting the number of men employed in each shop, and those not on duty, are received

from the shops daily at 8 a. m. and 12.30 p. m.; notices of separations from the service and changes of rating are forwarded promptly by the shops, and notices of employment are presented by the employees as soon as they receive appointment. From these data tally cards are made up the first thing each morning, one for each shop, showing what changes in the working force occurred the day before. From the tally cards the necessary changes are noted in the column for that day on the rough payrolls and then the unchanged items are extended from the column of the preceding day (most of these extensions are made rapidly with rubber stamps).

The rough payrolls are then footed and must agree to the cent with adding machine lists made up at the same time from the time-tickets. This affords a conclusive proof of the rough payrolls and releases the time-tickets for use in the cost section.

The time-tickets are then sorted according to job-orders—all for one order being stapled together permanently with the total for that lot marked on the first one in blue pencil. The blue pencil figures are then listed on adding machines and proved with the totals of the rough payrolls.

The first time-ticket of each lot then has marked upon it, in red pencil, the portion of overhead to be charged to that order and then all time-tickets are ready for the punching machines where a card is punched for each lot giving all the data required. These punched cards are then placed in a machine which prints from them a list which is at once checked in detail with the time-tickets in order to see that all the cards have been punched correctly. All charges for labor, both direct and indirect, are in this manner recorded permanently on punched cards, which may be quickly sorted by machinery under any desired classification (the overhead is also included in the record); and all of that work is completed within a trifle over a day and a half from the time the labor was performed. The time-tickets are then of no further use except for possible future reference to prove a disputed entry in the

accounts.

Stub Requisitions.-Stub requisitions are made out for all materials or supplies as needed except such as are carried in shop stores and charged to the stores of the various shops, and these are reported to the accounting office. Each requisition must be

made in triplicate and sent to the supply department where it is priced as soon as the prices can be definitely ascertained, and then one copy is returned to the division in which it originated and another sent to the accounting office, where it is at once introduced into the cost-records by having punched for it a card such as those used for recording labor, as explained above. Lists of requisitions issued are also sent daily by the issuing divisions to the accounting office. From these lists notations are made on the jackets prepared for filing requisitions and the priced requisitions, as received, are checked against these notations, so that a glance at the jacket of a particular job will tell if any stub requisitions have been issued for that job and not yet charged. All stub requisitions for the same job are filed in one jacket.

Shop Store Stub Requisitions.-Stores which have been placed in the various shops and charged to the stores account are charged to specific jobs by means of shop store stub requisitions. For each of these a card is punched.

Credit Requisitions.-Materials and supplies which have been charged to jobs by means of stub requisitions, but have not been used, are charged back to the supplies department and credited to the jobs by credit requisitions. Unused stores are charged back to the stores accounts in the same manner, a card being punched for each credit requisition.

Appropriations.-As cards are punched and proved they are sorted by machine under the appropriations against which they are to be charged. This necessitates a great deal of work which must be done most carefully and quickly. There are many appropriations, each divided into many sections, and, to make the matter more difficult, although the appropriations are made for one year, usually they are allotted to the various localities monthly, and any portion of a month's allotment which is not used within that month is not available until reallotted. These monthly allotments are based upon estimates submitted through the commandant, by the heads of the various divisions. A statement of expenditures by appropriations is sent daily to the officers who have power to authorize expenditures.

Job Orders. For all work authorized job orders are made out in the divisions which will do the work and copies of these job

orders are forwarded at once to the accounting office where they are filed in binders. Charges are entered upon them from lists obtained by putting the punched cards above described in automatic machines which print the data covered by the holes punched and also add and print footings. These lists are not run off until notice has been received from the inspection office that the job has been completed, unless a request is received for information about an uncompleted job. If it is desired to ascertain the cost to date of an uncompleted job the cards for that job (which are all filed together) are put in the machines, and in a few moments a list is printed which gives all the information in detail.

Foundries, etc.-Every job that enters the iron foundry, brass foundry, galvanizing shop, tool dressing shop or paint shop is charged, not with the direct labor and materials used on that specific job, but at a certain rate per pound which is determined by dividing the total operating cost of the shop in question for one month by the output of that shop for the same period, measured in pounds.

Overhead. The distribution of the overhead of the plant is complicated by the form in which appropriations are made. Various items included in the cost of conducting the yard must be charged to certain specific appropriations and the accounting for appropriations and accounting for costs cannot be done independently. To make clear to readers not familiar with naval routine the method of determining the rate which provides for charging each shop with its fair share of the overhead would take more space than is here available.

General.-There is in this plant, as in all places which have factory costs systems, more or less trouble and delay caused by errors in making entries on the job cards (in this case timetickets) by the shops. Such errors are discovered, almost without exception, at the time of filing the punched cards and the filing is done immediately after the charging to appropriations explained above, except about the first of each month when it is necessary to omit filing for a few days because of the press of work in connection with the preparation of the monthly statements of expenditures. If an error remains undiscovered at the time of filing the punched cards it is invariably found before the job is completed owing to the complete system of internal check in force.

As an indication of the volume of the cost records it should be noted that the labor charges cover four pay periods each month which total in the aggregate nearly $500,000, and there are more than 5,000 persons employed. The accounting department numbers about forty-five accountants, clerks and stenographers. It is not unusual to have open at one time 5,000 job orders.

Various statements are prepared monthly (in some cases oftener) and are forwarded to Washington where they are audited carefully. They must check against each other exactly and this affords an additional check on all of the work of the accounting office. It may safely be claimed that in no office, either in government or commercial life, is greater accuracy insisted upon and obtained.