. Addresses and discussions at the conference on scientific management held October 12, 13, 14, nineteen hundred and eleven. ticalperiod when its cost is met by the saving actually follows a period when the savings are increasinglygreater than the original cost and the difference is creditedto the cash outlay at the beginning. Suppose in a plant the present cost of manufacture is 150 per unit,and it is estimated that a reduction to 115 per unit is possible when theconditions are standardized through Scientific Management. Standardizing conditions means additional expense which mu
. Addresses and discussions at the conference on scientific management held October 12, 13, 14, nineteen hundred and eleven. ticalperiod when its cost is met by the saving actually follows a period when the savings are increasinglygreater than the original cost and the difference is creditedto the cash outlay at the beginning. Suppose in a plant the present cost of manufacture is 150 per unit,and it is estimated that a reduction to 115 per unit is possible when theconditions are standardized through Scientific Management. Standardizing conditions means additional expense which must beadvanced. This increases the unit cost to say 160 at the beginning,but it grows less and less as the development work proceeds. Atabout, say the sixth month of work, the savings equal the develop-ment expenditure, and the unit cost — the development cost included —is exactly what it was at the beginning. From then on, the savingsbeing increasingly greater than the development cost, the unit costdeclines until, say by the end of the year, development cost ceases andthe unit cost reaches the estimated 115 y*mr /<- The line ab = the unit cost before development. The line cd = thegradually decreasing unit cost (development cost included) duringdevelopment. The line de = the unit cost after development is com-pleted. The distance ac = the increase cost at the beginning of ON SCIENTIFIC MANAGEMENT 183 development. The distance df = the saving in unit cost at the timedevelopment is completed. The total cost of development (savingsdeducted) is area w, which has been advanced and must be area y (x = w) = net savings of the year. The real value of development can be seen in the second year. Thedevelopment burden has ceased. The advantage, therefore, of thestandardized over the unstandardized plant = z. It should be observed that unit cost through any period cannotbe represented by a straight line, because it varies with the constantvariation of manufactur
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