The term G in the formula is the shipping weight of the castings and in the example on the Cost Rec-
ord this is 3000 pounds. The term (G 4 D 4 H) in the formula is 5400 pounds in the illustration. There-
86.7 XX 3000
fore, the yield for the castings from this pattern is — —— = 48.2%
5400
The cost of steel per net ton of good castings is obtained for these castings having a yield of 48.2 per-
cent by reference to the table on page 21. Each foundry must establish this table by using its own data and by
using the method explained on page 20, since all the figures are assumed in this description. In this illustration
the cost of steel is $47.11 per net ton of good castings.
Every casting should be charged with its share of the defective castings for the entire shop, since the
average cost summary from which overhead rates are established contains the cost of the defective castings.
Whenever there are no defective castings from a specific pattern, or the actual percentage of defective cast-
ings from a specific pattern is less than the average percentage shown on the average cost summary used for
establishing overhead rates, the average amount of defective castings in percentage of the good castings should
be used in the job cost calculations. On page 19, the average amount of defective castings is oo X 100 or 6.7
percent of the good castings. This percentage was not used in calculating the cost of the castings on the Cost
Record shown on page 25, because the actual amount of defective castings exceeds the average of 6.7 percent.
A suggestion is made that all castings, whether or not they require cores, be charged with a fixed mini-
mum cost per net ton for indirect labor and expense in the Core Department. This would be in the nature of
a “readiness to serve” or “demand” charge; and it would be used if the Core Department overhead for a spe-
cific casting obtained by calculating it as a percentage of the core direct labor is less than this predetermined
minimum amount, and also when a casting requires no cores. Each foundry using this suggestion would be
obliged to determine its own minimum Core Department charge per net ton of good castings.
The Cost Record on page 25 is merely a suggested form to be used. Some foundries may wish to have
1 column for “Total Amount” which would be used for inserting the total dollars expended for each item, This
column of figures might be more convenient to use by some foundries, particularly for the various items of di-
rect labor when it is desired to have these items include the good and defective castings. The form illustrated
shows the costs of the direct labor items per piece and per net ton of good castings, and the direct labor costs
for the defective castings are added as a percentage.
ACTUAL COSTS AND ESTIMATED COSTS
The estimated cost of a casting and the actual cost of a casting are calculated in the same manner, except
‘hat the basic data are estimated in the former, while they are results of actual experience in the latter, Slight
errors in estimated data on which the calculation of the total cost depends, have a great influence on the total
cost. Therefore such data must be carefully determined when estimates are prepared. It is essential that the
estimated data be compared with the actual data when the castings are produced, as this procedure will im-
prove the estimating practice and it will also enable the discovery of costly errors,
PROFIT
The astounding percentage of business failures clearly shows the necessity for establishing selling prices
which not only cover the complete cost of doing business, but also include sufficient profit to enable the com-
pany to perpetuate itself and make new improvements. A company can be permanently successful only when
the element of profit is given careful consideration before selling prices are established.
It is necessary when making quotations to include an amount of profit sufficient to insure returns which
will be large enough to assist in payment of dividends during periods of business depression which occur from
me to time.
