This method is based on the principle that the production of each department of a plant should shoulder its own expense, and also a share of the general expense. In other words, the cost of the output from the _Blacksmith Department_, for instance, would be the total productive labor of the department, plus the material used, plus the operating expense of the department, plus its share of the general expense of the whole plant. It is only necessary, then, to establish the relation between the productive labor and the expense, and express the same in a percentage. It is immaterial how many departments or processes there may be in the factory; this relation should be found in each case, based on its own productive labor and expense, each department having its own percentage ascertained from its own actual conditions; no estimating about it. The expense, then, is figured on the labor cost. If, in the _Blacksmith Department_ already referred to, it is found that the expense at which the department is operated is one─fourth of its total productive pay─roll for the same period, it is at once apparent that if to the labor cost of every productive job, 25% is added for shop expense, the total of these expense items added will equal the total expense of the department. In other words, the shop expense is split up and added to each job in proportion to the labor expended on it. The general expense is handled the same way. If the total general expense is found to be one─third of the total productive labor in the plant, it is likewise apparent that, if to the labor of every productive job, 33⅓% is added to cover general expense, the sum total of these percentage items added will equal the total general expense of the plant. Following, then, the formula outlined at the opening of our discussion under the heading of _True Cost_, the cost of a job done in the _Blacksmith Department_, on which the direct labor cost was $100.00, would appear on our records as follows: Direct labor $100.00 Material 50.00 Factory expense at 25% 25.00 ──────── Factory cost 175.00 General expense 33⅓% 33.33 ──────── Manufacturing cost $208.33 This is the _percentage method_. While it is quite natural in anything of value and merit to look for its imperfections, this method is criticised by some accountants who point to flaws in its logic and method of computation; nevertheless, it stands to─day as the best solution of the vexed question of expense distribution that has yet been devised, for it not only has the approval of our best technical authorities, but that of the practical accountant as well. It commends itself to the intelligent judgment of the manufacturer, who is quick to realize its superiority, and it can be recommended for many reasons: