Application of machines to industrial cost accounting;

              Application of Machines to Industrial Cost Accounting
BY MAURICE S. NEWMAN Partner, San Francisco Office
Presented at a forum of the San Francisco Chapter of the National Association of Accountants — November 1957
PART II - PREPARATION OF THE SYSTEM
We are today on the verge of an industrial cost accounting revolution. Cost accounting is one of the last frontiers of mechanization but technologi­cal
changes and rising clerical costs will force us to overcome the complex problems facing us in this area and eliminate much of the drudgery in our present cost accounting work. For many companies this breakthrough may not come this year or the next, but for most companies it will surely come within the next decade. For some companies this has already come; we know of one company that has recently programmed its entire cost account­ing
operations on a magnetic drum data-processing machine, and we know others that perform all or part of their cost accounting work with tabulating equipment.
We can safely say, however, that we are still trail-blazing in this area of cost accounting mechanization and that much more remains to be done than has been done. Most companies, regardless of size, must perform a minimum amount of cost accounting; to them mechanization offers the promise of relief from the continuous reprocessing of production and cost data so com­monly
found in our cost accounting work. A little over a year ago the NACA surveyed a number of the larger companies to find out for what cost accounting purposes these companies were now using tabulating equipment. From the results of that survey it appeared that not more than half of the larger companies were using tabulating equipment for cost accounting.
While it is true that cost accounting is one of the more complex ac­counting
problems, it is, nevertheless, ideally adapted to the principles by which tabulating machines operate. Most standard cost accounting systems are based on the principle of collecting costs by operation and translating them into product costs, and this is a natural application for the use of tabu­lating
equipment. There have been limitations, in terms of speed and capacity in being able to prepare reports for management in sufficient time for them to be of any use, but as more advanced equipment comes on the market this becomes less and less of a limitation. There have also been limitations due to the size of jobs and to the present low cost of manual operation. Sometimes jobs are too small to transfer to the machines and sometimes they
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