§ Mr. MARKHAMasked the First Lord of the Admiralty what method is used of assessing overhead charges in the Royal Dockyards when tendering for outside work?
Mr. ALEXANDERIt is not the practice of the Admiralty to quote fixed tenders for work performed by the Royal Dockyards, though an estimate may be given of what the charges will probably be, when work is undertaken for private concerns or individuals. On completion of the work the actual cost is claimed. This is computed by the accounting system in force and includes due contribution towards all overhead charges; the exact method by which overhead charges are assessed and applied is undergoing change, as the accounting system of each dockyard is being modernised. Briefly it might be stated that, under the old system, the gross overheads are expressed in terms of average percentages of direct charges plus fixed time charges for the use of equipment; and that, under the new system, there is attached to each hour of labour its pertinent oncost, according to the type of the labour, and to the extent of the call it makes on what is provided by the expenditure on "overheads"; and to each unit of use of equipment or service a charge designed to absorb on usage the complete coated expense of that equipment or service; this presents what is termed in modern costing the "factory production cost."