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Determination of Costs 113
methods in the way of cost reductions are not realized.
As a rule, only two purposes are served by the traditional
cost system. These two purposes are among the very
least of those which can and should be served by a
scientific cost system. They are as follows: (1) The
traditional cost system gives the billing department some
kind of basis for establishing prices on repair parts;
(2) it also furnishes retrospective information to the
superintendent when a job has apparently cost a great
deal more than the same or a similar job cost ini
to previous records.
Another reason for inaccurate costs is that the work
of cost-keeping is left to poorly paid clerks. The head
of the cost department is usually burdened with so many
duties and so much routine work that he has no oppor-
tunity to plan or study. It is quite customary for a
corporation with a business of a million dollars a year
to have a thousand-dollar-a-year cost-department head,
although the head accountant and purchasing agent are
paid three times this salary. A company doing a business
of a million dollars a year could unquestionably get far
better results with a cost department consisting of a
head at three thousand dollars, a first assistant at fifteen
hundred dollars, and two clerks at a thousand dollars,
making a total of sixty-five hundred dollars, than could
be secured with a cost department in which the head is
paid a thousand dollars, and having ten clerks at six
hundred dollars each, making a total expenditure of
seven thousand dollars.
NEED oF Accurate Costs
The need of accurate costs is thoroughly demonstrated
when manufacturers of similar commodities, such as
machine tool builders or furniture builders or shoe manu-
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