From the Rolls-Royce experimental archive: a quarter of a million communications from Rolls-Royce, 1906 to 1960's. Documents from the Sir Henry Royce Memorial Foundation (SHRMF).
Cost analysis, overheads, and standardisation procedures for the central lubrication pump.
| Identifier | ExFiles\Box 141\2\ scan0057 | |
| Date | 7th November 1933 | |
| X 3866 To Wor.{Arthur Wormald - General Works Manager} from G.{Mr Griffiths - Chief Accountant / Mr Gnapp} c. to Hs.{Lord Ernest Hives - Chair} Standardisation Sheets - Central Lubrication Pump. ------------------------------------------ Reference Hs{Lord Ernest Hives - Chair}3/MJ.6.11.33. We were not aware that Hs.{Lord Ernest Hives - Chair} was endeavouring to fix the cost of new parts for standardisation purposes. We understood that Sft.{Mr Swift} would obtain the particulars relative to the labour times and pass the information to the Cost Dept. who would then complete the costs, enter them on standardisation sheets which would be sent to Hs.{Lord Ernest Hives - Chair} Will Wor.{Arthur Wormald - General Works Manager} please confirm that this is the routine to be followed. Regarding the question of the cost of the Luvax Pump we confirm that the 20/25 HP. pump costs £3. 5. 0. using charges at 200% and that the Bentley Pump is purchased for £2. 10. 0. There is, therefore, a saving of 15/- per pump (when charges of 200% are used), which saving is enhanced by the royalty - 7/6 per pump - we have to pay when we manufacture the pumps ourselves. For standardisation costs we use overheads at the rate of 150% as instructed by Wor.{Arthur Wormald - General Works Manager} It is, therefore, important that we should know for what purpose cost figures are required, as unless we are informed that they are required for standardisation purposes we should usually apply charges at a higher rate than has been instructed for standardisation costs. We suggest it is a dangerous practice to give nett labour and material costs as such information is misleading and usually misused. The cost of parts manufactured by us should undoubtedly carry overheads. Parts supplied to us finished by outside contractors carry, in addition to the suppliers burden, a profit as well. The actual overheads expended in purchasing a complete Luvax Pump is considerably less than those which are incurred in purchasing the materials for the pumps made by us. For the latter we have to deal with approximately 20 firms against only one firm for the former. G.{Mr Griffiths - Chief Accountant / Mr Gnapp} | ||