“My impressions from the very loose way in which the term ‘overhead’ is used by all and sundry, is that there are many people who know very little about it. Indeed, I feel that the subject of ‘overhead expenses’ might be discussed to advantage for the information of both the public and our own staff, because it is a most misunderstood subject,” says Mr. E. T. Spidy, who proceeds thus to discuss the question.

The popular impression of “overhead” would appear to be that it represents all Foremen, Head Office, Clerks and capital expenses, and any idea that wages of Workshop men form a substantial part of overhead expense, is usually not to be found at all. This popular impression is by no means correct, and it is to remove it that I give the details and figures for the current year, for our four main Workshops at Otahuhu, Hutt, Addington and Hillside. These figures are the averages to date (that is for six four-weekly periods), and the amounts shown against each overhead expense item are the percentages of the total expense of the Workshops.

This is the only way to get a true perspective of the position, because, included in the overhead expenses are items for labour and material, and these are also included in the total expenses.

From the foregoing it will be noted that the percentage of overhead to the total expense is 28.39 per cent. It may be further noted that, with the exception of the first two items, which cover supervision expense, clerical expense, and fixed charges for the plant and buildings, all the other items include wages of men in Division II. These wages of the men charged to overhead expense are either for doing work which is as essential to the output of the Workshops as is the work that is charged direct to output, or else they are the cost to the Department of privileges, concessions and working conditions that have been granted from time to time.

In viewing the overhead expense subdivisions aforementioned, the percentages of wages of Division II. employees in each of these subdivisions are:—

Now, having detailed what our overhead expense, consists of, and what it amounts to, the question of how this expense is to be distributed over the output of the Workshops may be considered. This can be done in a number of different ways, according to the requirements of the management.

In some Workshops it is prorated on to the output on the basis of the number of labour-hours that are charged direct to the output. Another method is to distribute the “overhead” on the basis of the value of material charged direct to the output. Still another method is to charge it proportionately to the combined value of labour and material charged direct to the output. Other methods are to distribute on the basis of the whole factory output as a unit; or by separate departments in the Workshops; or by production centres in departments of the Workshops; or even by machine-hour or man-hour production units.

I merely mention these methods, which are in use in different industries, to show that various methods are employed. One hears “overhead expense” talked of as page 15 amounting to anything from 20 per cent, to 275 per cent., which means absolutely nothing to anyone unless he knows the basis on which the statement is made, and understands what is included in the figures quoted.

I have personally been employed in a factory where the overhead was 275 per cent.—a very successful concern too—and yet this would seem an astounding figure, giving a popular impression of great inefficiency, whereas actually, it was nothing of the sort. Ratios such as these simply depend on the number of items not charged direct to the work, and so long as it is possible to check overhead expenses by some definite means, it is not a matter of moment whether it is charged “direct” or to “overhead.”

The method employed in our Workshops is a direct labour and departmental combination, designed to make each department of the Shop carry its own proportion of the total overhead expenses. The proportion carried by each individual department thus varies according to the number of men employed therein, the size of the Shop, the amount of machinery and equipment, and the cost of same.

In our Shops all detailed items referred to, and many others as well, have a separate

Recent Additions To The Rolling Stock On The N.Z.R.
Above: One of the splendidly appointed sleeping cars built in the Department's Workshops for service on the North Island Main Trunk Line. Below: S.K.F. Roller-bearing bogies, as fitted to the above and other units of the new trains recently commissioned for this important express service.

order number, and these order numbers total several hundreds. They are checked up in relation to the total output individually, and by this means we get all the figures necessary for our purpose, with a minimum of clerical work.

Addington Railway Workshops

The completion of an agreement with the Department under which permission was granted for the use of the Addington Railway Workshops Dining Hall, as a Social Hall, and the provision of an annexe, for which the material was advanced by the Department, and labour was provided, voluntarily, by members of the staff during their spare time, has given an impetus to the social activities of the staff at the Workshops. The enthusiasm displayed in this work by the Manager, the Foremen, and the staff generally, resulted in a first-class job being made.

The Social Hall was opened by a special dance function, and between 150 and 200 members of the works staff and their friends spent an enjoyable evening. Praise of the hall, the commodious dressing rooms, and the general arrangements, was heard on all sides, and the Social Committee, which had waited so patiently for their hopes to be fulfilled, felt justly proud of the result.

“Play in the sunshine while you can, Dear little maid and tiny man.”
Our Children's Gallery.—(1) Pat and Rose Campbell (Wanganui); (2) Brian, Doreen, Lewis and Clarry McCleary (Wanganui); (3) Jack and Fred Hoffman (Wanganui); (4) Shirley Hogg (Wanganui); (5) Ngaire Dalglush (Wanganui); Frankie Robertson (Wanganui); (7) Clinton McKenzie (Wanganui); (8) John Anderson (Cross Creek); (9) Jean Gibson (Cross Creek); (10) Murray Fly (Cross Creek); (11) Bobbie Fielding (Cross Creek); (12) Mabel and Bobbie Cheesman (Cross Creek); (13) Elaine Maclean (Cross Creek); (14) Ray and Joan Forward (Cross Creek).