ABSTRACT
Legitimate overhead is the definite cost of a definite amount of standard processing capacity. The process is represented by a hopper into which the various services art flowing evenly for the purpose of maintaining the process in a state of preparedness. Standardization of the cost of preparedness is effected by setting: Carefully budgeted cost of the various services which comprise legitimate overhead against, Normal or standard capacity of each department process, measured in actual working hours. Close control over the legitimacy of overhead items is obtained by budgeting factor by factor, and any departure from normal is traced at once. The whole question of what wages may be legitimately paid for specific work can be studied free from all ratios, percentages or other mathematical devices as soon as overhead is recognized to be the cost of manufacturing preparedness-of process capacity and of nothing else.
