Knowledge that Transforms

The article presents comments by scholar E.W. McCul on the survey on "Cost Accounting for Distribution by the Manufacturer," conducted by the Department of the Chamber of Commerce of the U.S. in the fall of 1929. The margin between the sales price and the cost of manufacture has frequently been the subject of criticism. This criticism arises from the assumption that costs in the marketing operations are too high. Those who undertake to analyze this statement are immediately confronted with the necessity for defining the phrase too high. How can it be known definitely that a cost is too high, unless there be a basis of cost that is not too high, in short, a basis that may be accepted as standard? A second question naturally follows. How can such a standard be set up, unless there be definite specifications on which it is predicated? The technique of cost accounting for distribution seems not to have reached that state of development that cost accounting for manufacture has reached. For this reason, possibly, knowledge of distribution costs is not as adequate as knowledge of costs of manufacture.

The purpose of the elementary accounting courses given at the Chicago, Illinois-based University of Illinois is to give the students a thorough knowledge of basic transactions and fundamental procedure. Much of the material given in elementary accounting course can be disregarded when an examination is prepared because it represents routine work. Subjects such as, the classification of accounts, the preparation of short financial statements, adjusting entries, closing of the ledger, and books of original entry are included in the first-semester examination. The second-semester course is devoted more to accounting procedure and so for this reason the final examination given in the second semester may be counted upon to have a large number of difficult journal entries covering a wide variety of transactions. The examination for the second semester may include problems such as requiring adjusting entries, where the amount must be calculated as well as entries formulated, requiring the opening of the books of a corporation, or requiring the changing of a single proprietorship or partnership.

Reviews the book "Corporation Finance," revised and enlarged by Edward S. Mead.

The classification of costs into constant and variable costs has likewise played a prominent role in price theory. If any particular element of cost be written as a function of volume of production for one enterprise, the function will not hold true in others. If one write the function to express an average relation for all enterprises in an industry for a given period, the function will not be true of an earlier or of a later period. Measurements of unused capacity, in other words, are unstable quantities both with respect to different concerns, different times, and different products. The proliferation of marginal theories both with respect to marginal producers and with respect to cost of producing marginal units have been developed also. But objective criteria whereby may know who are sub-marginal, who are marginal and who are supra-marginal producers are still wanting. Neither do one know whether or not any particular producer's volume stops short of the unit that would have been marginal, or just reaches that point or goes beyond it.

Reviews the book "Economic Rhythm: A Theory of Business Cycles," by Ernst Wagemann.

The student who understands the purpose of a course and who sees how the course will meet his needs has gone far in preparing himself for the study of that course. It is pertinent, therefore, to ask what benefits may be expected from a study of accounting which will justify the necessary expenditure of time. If it be true that the purpose of education is to fit one for living, how does the study of accounting aid in the realization of this aim? Whether one wishes it or not, most students are compelled to spend a large portion of the available time in providing for the necessities of life. The vocational value of bookkeeping and accounting is accepted without question a it is recognized everywhere that efficiency in the use of such knowledge is of direct value to employers. Accounting, however, does more than equip one to hold a mere routine job. Simple record making often leads to more important positions for those who can see beyond boundaries of their first job and who can make use of their experience and opportunities. Accounting provides the background for advancement as it enables one to see how his work fits into the work of other departments. It is not necessary to be a bookkeeper or a public accountant in order to make use of training in accountancy. The subject furnishes one method of learning about the industrial organization of present society.

Reviews the book "Rudiments of Business Finance," by Edward Sherwood Mead and Karl W.H. Schols.

The problem of labor turnover remains unsolved. This problem is not a new one, but over the year. has taken on varied aspects and has attained a significance which now calls for universal serious attention. The scope of the problem places it beyond the limits of comprehensive treatment in a single paper or by one individual. Of world-wide, international application, it knows no political boundaries, nor territorial prohibitions. Labor turnover is not only an industrial problem, it is a vast social problem. With some what cyclical regularity, it assumes the nature of an epidemic, under the diagnosed name of unemployment. For a single company, labor turnover has not been considered as fatal, but the effects upon business of the malady in virulent form and epidemic proportions, are paralysis or death. In 1921, consequences were serious enough to warrant coordinated and determined effort. Instead of that, only here and there was any constructive work done. No real lesson was learned. In 1929 and 1980, business suffered losses which justify the expenditure of a large sum to prevent the recurrence of such a situation or at least to insure distinct progress in that direction.

Reviews the book "Wall Street," by Charles F. Hodges.

Reviews the book "Credit and Its Uses," by William A. Prendergast and William H. Steiner.