=47. By─Products.= A special problem found in certain industries is to provide for an accounting of salvage, which is either sold in its natural state or manufactured into other products──known as _by─products_. For example, the operation of the cutting room of a harness factory is a continuous process──sides of leather are cut to produce the largest possible quantity of stock that can be used in the manufacture of harness. The pieces produced vary in size, and it is necessary to figure the cost of cut stock by weight. After this stock has been produced, there remains a certain quantity of scrap leather. This scrap leather is not worth what it originally cost in the sides of leather, but has a certain market value. It should, therefore, be weighed and the value credited against the gross charge for leather to the cutting room. Now, some manufacturers, instead of selling this scrap as it comes from the cutting tables, convert the best of it into such by─products as heels and washers, selling the residue as scrap. Here is an added manufacturing process──a new department, operated because the price obtained for the by─product makes it profitable. The natural thing to do is to keep accurate cost records for this department, charging the material at scrap prices and take credit for the profits. But some accountants contend that the value of the by─product──less cost of production──should be credited against the material charge to the principal product. Provided the volume and value of the by─product is small, there is no serious objection to this plan, but it is not a safe rule to follow. In some industries, the value of the by─products is greater than that of the so─called principal product. The large soap factories make glycerine and other by─products of greater value than the soap products. So profitable is this branch of the business that the scrap or residue from the manufacture of soap, is bought from smaller factories, to be used in the manufacture of these by─products. The by─products from the manufacture of gas produces a revenue, in the case of a large gas company, more than sufficient to pay the entire cost of operating the plant. Under these conditions, it is readily seen that the manufacture and sale of by─products should be treated as a distinct branch of the business; otherwise it might easily be shown that the principal product is without cost. PRODUCTION RECORDS =48.= Methods of recording the cost of material and labor used, and of tabulating these costs for individual jobs, have been discussed in the preceding pages. To complete the cost department records, there should be a record of total production──a record showing the cost of all finished jobs. This information has an important bearing on the general accounting system.