THE ROLE OF COST IN SOVIET MACHINE BUILDING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A001900020001-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 90
• Document Creation Date: December 23, 2016
• Document Release Date: July 25, 2013
• Sequence Number: 1
• Publication Date: January 1, 1961
• Content Type: REPORT

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N. 102 ?
THE ROLE OF COST IN SOVIET MACHINE BUILDING
January 1961
THIS REPORT SHOULD NOT BE REPRODUCED IN
WHOLE OR IN PART WITHOUT THE PERMISSION
OF THE CENTRAL INTELLIGENCE AGENCY
CENTRAL INTELLIGENCE AGENCY
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THE ROLE OF COST IN SOVIET MACHINE BUILDING
CIA/RR ER 61-2
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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STAT
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(
FOREWORD
To the 'Soviet leadership the cost of production is one of the most
important factors in their planned economy, principally because it is
regarded as a measure of the efficiency with which national resources
are utilized. There is, however, a general lack of knowledge in the
West about the nature of Soviet cost data -- how they are derived and
how they are used. This report examines the Soviet cOncept of cost,
the methods by which cost is calculated under varying conditions of
production in the machine building industries, and the use to which
such cost data are put.
The methods of calculating cost in Soviet machine building are
illustrated through a number of hypothetical examples taken from
Soviet literature. Particular attention also is devoted to the prob-
lems of costing new articles in Soviet machine building. The use of
costs as a basis for planning prices is examined only in passing be-
cause-it is regarded as a subject requiring more treatment than it
can receive in this report.
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CONTENTS
a
Summary and Conclusions
I. Introduction
A. General Features of Cost and Cost Accounting in the
USSR
Page
7
7
B. Khozraschet, or the Principle of Economic Account-
ability
10
C. Accounting and Reporting Procedures
11
P. Centralized Organizations Concerned with Accounting
and Reporting
12
II.
Techniques of Computing Cost in Machine Building .
15
A. Estimate of Outlays for Production
15
B. Calculation
15
a
1. General Features
15
2. Methods
18
a. Normative Method
18
b. Order Method
21
c. Conversion Method
22
3. Types of Calculated Cost and Their Composition
23
a. General
23
b. Plant Cost
24
c. Full Cost
27
d. Branch Cost
28
III.
Level of Cost
31
A. Planning
31
1. Centralized
31
2. Plant
33
B. Commodity Output
34
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Page
1. General
34
2. Comparable Output
35
3. Noncomparable Output
36
C. Reporting
38
D. Published Soviet Data on the Change in Cost
?42
1. General
42
2. Methodological Problems
45
3. Institutional and Technological Factors
?
?
49
IV.
Structure of Cost
53
A. Comparison of Machine Building with Other Indus-
tries
53
B. Changes in Machine Building, 1932-59
53
C. Analysis
55
1. Machine Building as a Whole
55
2. Individual Machine Building Plants and Shops .
.
56
Appendixes
Appendix A. Khozraschet
59
Appendix B. Norms
63
Appendix C. The Normative Method of Calculating the Unit
Cost of Output ... . ..... ? ? ?
?
73
Appendix D. Cost Data from the 1941 State Plan for the De-
velopment of the National Economy of the
USSR
83
Appendix E. Source References
87
Tables
1. USSR: Example of Report Submitted by an Industrial
Enterprise on Reducing the Cost of Comparable Output
and on the Cost of Total Commodity Output, March 1957
and First Quarter 1957
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39
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Page
2. USSR: Example of Report Submitted by an Industrial
Enterprise on the Cost of Comparable Output and the
Cost of Total Commodity Output, Distributed by Items
of Calculation, First Quarter 1957
3. USSR: Annual Percentage Change in the Cost of Compa-
rable Output in Machine Building and in Industry as a
Whole, 1929/30 - 1958 44
4. USSR: Structure of the Cost of Output in Industry as a
Whole and in Selected Heavy Industries, 1959 54
5. USSR: Sample Record of the Movement of Materials in
Production of Type S Machines at Machine Building
Plant X, July 1957 75
6. USSR: Sample Worksheet for Computing Basic Production
of Type S Machines at Machine Building Plant X, July
1957 77
7. USSR: Sample Cost Calculation Report for the 8-2
Machine (Type 0, July 1957 80
8. USSR: Data on the Planned Cost of Commodity Output of
Industry, 1941 84
9. USSR: Data on the Planned Cost of Commodity Output in
Machine Building Commissariats, 1941 - 85
Chart
USSR: The Dispersion of Primary Economic Elements
Among Items of Calculation following page
(
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THE ROLE OF COST IN SOVIET MACHINE BUILDING
Summary and Conclusions
The Soviet state attempts to regulate the consumption of naional
resources at state enterprises through its costing system and itS
program of cost responsibility. Costs also are used in planning the
prices of goods and services in the USSR, although the degree of
direct correlation between costs and prices is not known. This
re-
port focuses primarily on the use of cost accounting in SOviet ma-
chine building. to plan and to reduce progressively expenditures' in
the manufacture of machinery and equipment. The use of cost account-
ing as a method for measuring and effectuating changes in efficiency
of Production is not, of course, unique to -- Much less original
With the USSR, having been etployed.hy industrial firms in Market-
oriented economies for many years. What is significant, in contrast
to Market-oriented economies, is the Scale on which a more or leSs
uniform national costing system has been established in the ,USSR.
The establishment of a high degree of uniformity in cost accounting
at Soviet state enterprises is intended not Only to sitplify-State
regulation of the level of eXpenditures at many such enterprises but
also to insure homogeneity of data for statistical purposes.?
The cost* of goOds in the USSR generally reflects a.less
Sive concept of cost than is the case in Market-oriented economies'.
Stemming from the organization of the Soviet economy itself, with ?
preponderant state ownership of the means of production and with the
absence of competition in the domestic market, such items of cost as
land rents, insurance, interest on.capital, and sales promotion, for
example, are not reflected in the -cost of Soviet goods. Expenditures
for Specialized training of perbonnel as well as for research and
development, which are commonly borne as items of cost by private
enterprises in a market-oriented economy, may in some caSes be partly
or entirely finanCed out of the state budget in the USSR and conse-
quently may not be fully reflected in the ruble cost of the oUtput.of
an enterprise. Because they are less inclusive, it mar generally be
said that the given unit costs of Soviet machinery and equipment are
understated relative to the cots of similar articles manufactUred
in a market-oriented ecbnomy.
* The term cost as used in this report refers. to the production
cost (sebeStoimost').
a
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The costs of production in Soviet industry do not tend to be as
responsive to short-run scarcities of supply as in a market-oriented
economy, because the Soviet government establishes the prices of the
factors of production on a nationwide basis in advance Of each ac-
counting period. The costing of the direct factors of production in
Soviet industry is largely a process of converting physical inputs
of production into ruble values on the basis ofpreplanned conversion
ratios (fixed prices of materials, fixed wage rates, output norms,
and the like).
In spite of the absence of market competition and private enter-
prise in the USSR -- and the absence of the attendant effects that
market competition may have on costing and pricing practices at the
enterprise level -- it may be said that those aspects of cost account-
ing which are properly concerned with the exercise of managerial con-
trol over the costs of production are generally similar in the US and
the USSR. The similarity between the systems of cost accounting in
the two countries is most marked in the accounting concepts employed,
especially in the use of standards for measuring variations in costs.
Cost accounting in both countries probably is more oriented toward
the primary objective of reducing costs than is true in Western Euro-
pean countries where the primary objective of cost accounting is re-
portedly the ascertainment of product unit costs for the purpose of
establishing prices. This situation probably is explained by the
anomalous fact that in the more competitive US industries and under
Soviet conditions of state monopoly alike the price structure is such
that enterprises tend to increase profits through the reduction of
costs rather than the raising of prices.
In spite of,the similarity in the primary objectives of cost ac-
counting in the US and the USSR,. there probably is greater emphasis
on determination of the unit cost of manufactured articles in the
USSR than in the,US, in part as a result of the Soviet use of such
data in the construction of industrywide indexes showing periodic
reductions in the cost of output. Periodic reductions in the cost
of output are regarded as an indication of increased efficiency of
production and are, therefore, an important objective of Soviet eco-
nomic planning. The difference between fixed enterprise wholesale
prices and declining unit costs of output at state enterprises rep-
resents "profit" and is the major source of capital accumulation by
the state.
In the absence of private profitmaking as a stimulus to holding
down costs in production, the USSR has recently introduced financial
incentives in the form of bonuses for managerial personnel who me-et -
or exceed plans for the cost of output, provided that they simulta-
neously fulfill the other major production goals. The principal
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?
method for systematically controlling costs in the USSR, as in the
US, however, is the establishment of production standards or norms.*
Official state norms governing operations are an integral part of
the production program of Soviet machine building plants.
Whether in the US or the USSR, the establishment of production
norms and the allocation of cost is often an involved procedure in
machine building, where large numbers of heterogeneous articles,
including many new articles, may be produced at a single plant in
a given period. Insofar as possible, the costs of materials and
the wages of production workers in the USSR are directly allocated
to the specific end articles manufactured, whereas overhead costs
are indirectly allocated among the articles.
The most common method of cost accounting in Soviet machine
building is the so-called normative method. Under this method,
norms are set in advance for the outlays required to meet the pro-
duction program of 4 plant, the norms usually being based on theo-
retically substantiated opportunities to realize savings in com-
parison with the previous production period. Deviations from the
norms for the outlays that occur in actual production are recorded
in the accounts of the plant. Such deviations, expressed in ruble
values, are then added to or subtracted from planned costs.to derive
actual costs at fixed intervals during the production process. On
the basis of periodic reports, deviations may be traced to their
source and corrective action taken before the accounting period is ,
completed. In this way, norms serve not only to establish the planned
cost of production but also to check on and regulate the actual cost
of production at frequent intervals. The normative method is most
suited to large-scale production.
A number of important types of machinery and equipment are pro-
duced in small series or .as individual units, especially in ship-
building and heavy machine building. Because the nature of small.
series 'and custom production does not readily lend itself to the
normative method of accounting, the so-called order method is used.
The cost of an order placed for a custom-built heavy, press, for
example, is estimated in advance, but, in the absence of substan-
tiated norms governing the building of the press, it is difficult
to ascertain how far the actual cost may reasonably deviate from the
estimated cost during the various stages and operations of the pro-
duction process. In some cases the soundness of the estimate itself
may be in question. In any event, total actual cost is not deter-
mined until the order has been filled, sometimes only after a period
of months or even years.
* For a discussion of the Soviet system of norms, see Appendix B.
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New articles going into series production for the first time,
like articles manufactured on a custom basis, are not initially
covered by substantiated norms. Consequently, costs can only be
estimated. The cost of new articles in Soviet machine building is
generally quite high because of the practice of writing off in the
first 2 years of their manufacture all plant costs connected with
the designing, manufacturing, and testing of prototypes as well as
the tooling for production. Because there are no previously estab-
lished costs with which to compare the actual cost of new articles,
the output of Soviet machine building is divided into two categories --
comparable output and noncomparable output -- for purposes of comput-
ing an index of change in cost. The index of change in cost is com-
puted only for comparable output and includes only articles that are
in at least their second consecutive year of production.
Comparable output accounts for a smaller percentage of commodity
output* in Soviet machine building than in practically any other
Soviet industry. In contrast to the mining, oil extraction, and lum-
bering industries, where allegedly 90 to 100 percent of the commodity
output is comparable from one year to the next because of the homo-
geneous nature of the product, only 50 to 60 percent of the commodity
output in Soviet machine building was credited in 1957 with being
comparable. The sizable share of noncomparable output in machine
building reflects the large number of new articles manufactured an-
nually, largely as a result of the Soviet policy of encouraging the
adoption of new and improved types of machinery and equipment through-
out the economy.
Soviet economists have been critical of the index of change in
cost for some time largely because it does not include the noncom-
parable segment of commodity output and because, being a link index,
it tends to overstate annual reductions in cost in those industries,
such as machine building, where sizable annual reductions are realized
from declines in the initial high unit costs of new articles after
their first year of production. Accordingly a new index showing re-
ductions in outlays per ruble of commodity output (comparable and non-
comparable) was adopted to replace the' index of change in cost as the
official index under the Soviet Seven Year Plan (1959-65). The new
index, which is based on the ratio of the outlays of production to
the total value of commodity output expressed in wholesale enterprise
prices, is itself the target of many criticisms. Soviet economists
charge, among other things, that this index does not strictly reflect
the dynamics of cost but rather the change in profitability (in which
* For a brief explanation of commodity output and the difference be-
tween commodity output and gross output in Soviet industry, see the
first footnote on p. 17, below. Also see III, B, p. 34, below.
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cost is only one factor). The new index appears to be far from a
satisfactory substitute for the older cost reduction index,based on
comparable output, which is still in limited use.
Among Soviet industries, machine building is generally credited
with registering one of the highest, if not the highest, annual per-
centage reductions in cost. Although no firm data on annual reduc-
tions in cost in Soviet machine building as a whole are available
for the years since 1944, it is claimed that, under the Fifth Five
Year Plan (1951-55), average annual reductions in the cost of com-
parable output ranged between approximately 8 and 10 percent in the
machine building industries. Meanwhile, the reduction of cost in
machine building is significantly reflected in reductions of cost in
the commodity output of industry as a whole because of the large con-
tribution made by machine building to industrial output. Although
reduCtion of cost in Soviet industry under the Fifth Five Year Plan
was planned at 25 percent and was actually 23 percent, the planned
reduction under the abortive Sixth Five Year Plan (1956-60) was 17
percent and under the current Seven Year Plan is to be "no less than
11.5 percent."*
Soviet reliance on domestic sources of production to meet .its
rapidly expanding requirements in goods has, through the years,
fostered production of essential articles at some machine building
plants that produced at relatively higher costs than other plants.
Consequently, prices on such articles had to be set high enough to
give a profit on average costs, the extra profits from the more ef-
ficient plants of a ministry being used to cover the losses of the
less efficient plants. One method by which the USSR is now seeking
to reduce cost in Soviet machine building is by eliminating high-
cost production through greater specialization of output at individ-
ual plants.
In spite of the allegedly increasing influence of cost considera-
tions on the structural organization and the production program of
Soviet machine building, it may reasonably be assumed that the desire
of the Soviet leadership to attain or surpass the technological level
of the industrialized West in key industries will, from time to time,
justify the priority of selected physical production targets over
considerations of cost. The recently initiated program for radically
and rapidly increasing the domestic production of petrochemical equip-
ment by dispersing such production among various types of machine
building plants as well as by expanding the petrochemical equipment
industry itself, for example, emphasizes that under the Soviet system
* This target figure presumably is based on the new index showing the
decline in outlays per ruble of commodity output.
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of selective forced-draft development of critical industries, physical
production targets of machinery and equipment are of paramount im-
portance when imports cannot be relied on to fill domestic require-
ments.
In addition to their use in planning and controlling consumption
of resources, in establishing prices, and in measuring changes in
productional efficiency, costs also are used in the USSR to determine
the balance between materials (including fuel, energy, and amortiza-
tion) and wages within industries. In general, a decline in outlays
for wages relative to outlays for materials is considered in the USSR
to be an indication of technological progress and, consequently, an
economically desirable development. Although the share of wages (in-
cluding deductions for social insurance) in Soviet machine building
declined from 51.1 percent of total cost in 1932 to 31.7 percent in
1959, machine building remains one of the more labor-intensive indus-
tries in the USSR. This fact is explained by the relatively higher
wages and/or relatively larger amounts of manual labor required in
various machine building industries compared with industry as a whole.
An interesting trend in the structure of cost in machine building was
the perceptible increase in the share of wages in total outlays during
the middle 1950's. This reversal of the secular trend toward a lower
share for wages probably can be ascribed to reductions in the whole-
sale prices of material inputs as well as to wage increases that took
place during the period.
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I. Introduction
A. General Features of Cost and Cost Accounting in the USSR*
Produdtion costs (sebestoimost') in the USSR are used to meas-
ure, record, analyze, and plan outlays ofproduction with the aim of
controlling the consumption of resources at state enterprises. . The
cost of goods in the USSR generally reflects a less inclusive concept
of cost than is the case in market-oriented economies. Stemming from
the organization of the Soviet economy itself, with preponderant state
ownership of the means of production and the absence of competition in
the domestic market, such items of cost as land rent, insurance, in-
terest on capital,** and sales promotion, for example, are not reflect-
ed in the cost of Soviet goods. Other items of cost that are often
borne by the private enterprise in a market-oriented economy, such as
specialized training of personnel as. well as research and development,
may in some Oases be partly financed, out of the state budget in the
USSR and so may not be fully reflected in the ruble cost of an enter-
prise's output. In general, the cost of output in Soviet machine,
building is calculated on the basis of the current operating expenses
of the producing plant. In comparison with similar US goods, the
cost. of Soviet machinery and equipment probably is understated as a
result of differences in the comprehensiveness of cost in the two
countries.
. The costs of production in Soviet industry do not tend to be
as responsive to short-run scarcities of supply as in market-oriented
economies, because the Soviet government establishes the prices of the
factors of production on a nationwide basis when planning the over-all
physical requirements of the national production program. The costing
of the direct factors of production in Soviet industry is largely a
process of converting the inputs of production into ruble values on
the basis of preplanned conversion ratios (fixed prices of materials,
fixed wage rates, output norms, and the like).
In spite of the absence of market competition and private en-
terprise in the USSR -- and the absence of the attendant effects that
market competition may have on costing and pricing practices at the
enterprise level -- it may be said that those aspects of cost account-
ing which are properly concerned with the exercise of-managerial con-
trol over costs of production are similar in the US and the USSR. Of
course, the various existing methods of cost accounting are designed
* 1/. For serially numbered source references, see Appendix E.
** The initial cost of building and equipping most state enterprises
is covered from the state budget in the form of an interest-free char-
ter fund. For a fuller explanation of the charter fund, see Appendix A.
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to meet the specific requirements of those who employ them. Because
the methods of cost accounting used in the USSR are prescribed by the
state and are mandatory for all state enterprises in the country,
there is certainly greater uniformity in cost accounting and reporting
practices than in the US, where enterprises are generally free to
follow any accepted practice they please. In the USSR, as in the US,
however, techniques of cost accounting are under constant analysis,
and there are always areas of controversy with respect to the super-
iority of one or another technique, often based on the objectives
that those who use cost accounting are pursuing.
The similarity between cost accounting in the US and the USSR
is most marked in the accounting concepts employed, especially in the
use of standards for measuring variations in costs.* Cost accounting
in both countries probably is more oriented toward the objective of
reducing costs than in Western European countries, where the primary
objective of cost accounting is reportedly the ascertainment of prod-
uct-unit costs for the purpose of establishing prices. This situa-
tion probably is explained by the anomalous fact that in the more com-
petitive US industries and under Soviet conditions of state monopoly
alike the price structure is such that enterprises tend to increase
profits through the reduction of costs rather than through the raising
of prices.
In the absence of private profitmaking as a stimulus to holding
down costs in production, the USSR has recently introduced financial
incentives in the form of bonuses for managerial personnel who meet or
exceed plans for the cost of output, provided that they simultaneously
fulfill the other major production goals. In the machine building in-
dustries this new bonus system went into effect on 1 January 1960.
Except for several currently critical types of equipment, such as
electrical, and electronic equipment, chemical equipment, petroleum
equipment, and equipment for the metallurgical industry, the new bonus
system based primarily on cutting down costs supplants the old bonus
system based primarily on meeting or exceeding physical production tar-
gets. Bonuses are more modest under the new system than under the old
and in the machine building industries cannot exceed 40 percent of an
* Because the description of cost accounting in Soviet machine build-
ing that is found in this report is based on primary Soviet sources and
is intended to be an aid to those who may be working with Soviet data,
the cost accounting terminology used is that found in Soviet publica-
tions. Although readers familiar with US cost accounting terminology
may have. little difficulty in equating such basic terms as planned
cost, actual cost, deviations, and norms in the USSR to standard cost,
historical cost, variances, and standards, respectively, in the US, it
is believed to be advisable not to push the identity of these concepts
and terms too far by employing US terminology to describe Soviet cost
accounting.
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individual's salary. Although the new bonus system may, in part, be
designed to eliminate some of the abuses connected with the old system
of bonuses and may reduce the size of bonuses paid to supervisory and
technical personnel, it probably reflects as well the ever-increasing
use of cost accounting by the Soviet regime to effectuate more effi-
cient utilization of resources.
In spite of the similarity in the primary objective of cost
accounting in the US and the USSR, there probably is greater emphasis
on determination of the unit cost of manufactured articles in the USSR
than in the US. A separate form for reporting unit costs is provided
among the documents that a Soviet machine building enterprise submits
to the central statistical and financial agencies at periodic inter-
vals. Such data are used to construct industrywide indexes on reduc-
tions in the cost of output.
1
To what extent the initial enterprise wholesale prices* of
articles in machine building bear a uniform percentage relationship to
their initial planned unit costs remains a moot question in spite of
inferences in Soviet literature that some degree of uniformity exists
between costs and prices at this accounting stage. Because of the
absence of competition in the domestic Soviet economy, it would seem
that, in general, prices in the USSR might have a more direct corre-
lation to unit costs than in the US, where the complex factors of
competition must often be reckoned with in the pricing policy of an
enterprise. The Soviet practice of leaving prices in effect for rel-
atively long periods of time while unit costs decline, however, indi-
cates that over a period of time any initial relationship is destroyed.
Not until such time as enterprise wholesale prices are administratively
reviewed and readjusted to prevailing unit costs is the initial per-
centage relationship restored between the unit cost and the price of an
article.
Reductions in unit costs are an important objective of Soviet
economic planning because they are used to calculate economies realized
in production. The difference between the fixed enterprise wholesale
prices of output and the declining unit costs of output at Soviet.state
enterprises represents "profit." Such profit is the major source of
capital accumulation by the Soviet state, and systematic reduction of
unit costs is regarded as an important method of helping to finance
capital investment programs.
* Producer goods manufactured at Soviet machine building plants are
generally sold by the manufacturer directly to other state enterprises
at enterprise wholesale prices; consumer durables (such as refriger-
ators, stoves, radios, and television sets) manufactured at machine
building plants also have enterprise wholesale prices but are sold to
the public at state retail prices.
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B. "Khozraschet," or the Principle of Economic Accountability*
Soviet machine building plants operate within the statewide
system of khozraschet (khozyaystvennyy raschet).** The khozraschet
system of the USSR is intended to encourage operational efficiency and
financial self-sufficiency in state enterprises which might otherwise
be a drain on the state budget. Soviet spokesmen describe khozraschet
as "a socialist method of economic management which seeks to establish
commensurability between the monetary value of the outlays of produc-
tion and the financial status of an enterprise as reflected in the re-
sults of its economic activities." A khozraschet enterprise is ordi-
narily expected to recover from the sale of its output (goods and
services) the cost/of the outlays of production as well as to show a
margin of profit.
Khozraschet is the principal method of es-
tablishing a regime of economy at enterprises in
order to achieve the best results with the least
outlays. It makes the financial and economic
status of each enterprise directly dependent on
fulfillment of the indexes contained in the
state plan. 2/
Although the volume of output, the product mix, the cost of
the outlays of production, and the prices of the output of an enter-
prise are, in the final analysis, centrally determined, the management
of each khozraschet enterprise is responsible for seeing that all pos-
sible economic measures are taken at the enterprise to meet or exceed
the planned targets. Because the bulk of the cost of production in a
machine building plant is incurred in the semifinishing, machining,
and assembly shops, many machine building plants extend the principles
of khozraschet to the individual shops and their subunits.
This practice is known as intraplant khozraschet and requires
a detailed record of the outlays of production by shop, section, or
* 2/
** The term khozraschet has been variously translated as "self-
supporting," "nonfinancing by the state," "cost accounting," "cost
accountability," "economic accounting," "economic accountability," and
"nonbudgetary." Although each of these terms describes some facet of
khozraschet, none is wholly adequate in itself. Consequently, the
Russian term is used throughout this report. ? For a brief discussion
of the evolution of the khozraschet system as well as the distinguish-
ing features and juridical status of khozraschet enterprises, see
Appendix A.
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other subunit to be kept so that actual performance can be quantita-
tively and qualitatively compared with the planned indexes. Like a
khozraschet enterprise, a khozraschet shop is provided with the fixed
capital required for performing a particular production process, and
the shop is then given a plan that specifies the quantity, quality,
and mix of its output along with appropriate norms governing the out-
lays of materials and labor. The planning and bookkeeping departments
of a khozraschet enterprise must keep various regional and central
organizations of the state informed of the enterprise's progress in
fulfilling the plan and, if the enterprise is deviating from planned
indexes beyond the permissible limit, must pinpoint the reasons for
the deviation and take corrective measures.
C. Accounting and Reporting Procedures*
Because the immense state-operated Soviet economy requires a
large degree of centralized control to insure that organizations and
individuals operate within the framework of the state plan for eco-
nomic development, a tremendous network of offices for the accounting
(bukhgalterskiy uchet) and reporting (otchet) of economic data has
been created. The data submitted by Soviet enterprises are used not
only for direct control purposes but also for compiling national, re-
gional, and industrial branch indexes. Consequently, Soviet accounting
and reporting procedures are oriented toward these ends. The data re-
ported during one plan period are used as the basis for planning the
indexes of the following period.
The principal source of data at the plant level is the primary
document (pervichnyy dokument). The data for these simple control ac-
counts come both from the production shops of a plant, where the costs
of materials and labor that enter directly into production are allo-
cated to the appropriate articles of output, and from the various of-
fices, shops, and laboratories, where overhead costs also are allocated
among the articles of output. These documents are drawn up on the com-
pletion of each operation or series of similar operations for the pur-
pose of recording basic production data that can be directly forwarded
or further processed. The periodical reports that are forwarded by the
plant to administrative, statistical, and financial organizations supe-
rior to it may contain primary data in their initial form, may summa-
rize data from a large number and variety of primary documents, or may
contain statistical indexes derived from data contained in primary doc-
uments.
Until Soviet industry was largely reorganized from a central-
ized ministerial system of administration to a regional system of ad-
ministration in mid-1957, each machine building plant reported cost
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data to its controlling administrative organization, usually a depart-
ment or administration of its ministry in Moscow. After the data from
all the plants of the ministry had been summarized, they were trans-
mitted to the Central Statistical Administration (CSA), which had pre-
viously received copies of the plant reports through its regional of-
fices, presumably as an independent check on the ministries as well as
to enable preliminary statistical computations to be made. Since the
reorganization of industry, all but one of the machine building minis-
tries have been abolished, and administrative control over the machine
building plants has been largely vested in regional economic councils
(sovnarkhozy), which in turn are subordinate to the councils of minis-
ters of the various republics in which they are located. Machine
building plants, like other industrial enterprises, now report their
cost data to regional organizations for administrative purposes. As
before, however, direct reporting of individual plants to the regional
offices of the CSA is continued. Data-processing centers set up by
the CSA within the regions transmit the data to the CSA in Moscow.
D. Centralized Organizations Concerned with Accounting and
Reporting*
. The CSA bears the major responsibility for running the nation-
wide system of statistical accounting and reporting. Because of the
need for close contact between the planning authorities and the col-
lectors of statistics, the CSA for a period was part of Gosplan, USSR.
In 1948, however, the CSA was detached from Gosplan and placed directly
under the Council of Ministers, USSR, allegedly to perform its ever-
increasing workload with a greater degree of independence.
At present the CSA exercises centralized control over the Soviet
accounting system through a ramified network of statistical offices. In
each of the 15 union-republics there is a republic statistical adminis-
tration with branch offices in the various administrative-territorial
divisions of the republic. Administrative control of the reported cost
data for machine building was formerly exercised by the various special-
ized machine building ministries but is now the immediate concern of
machine building administrations under the regional economic councils.
The methodology of compiling, analyzing, and reporting cost data, how-
ever, is supervised by the CSA. The CSA hands down instructions con-
cerning accounting and statistical reporting to departmental heads who,
in turn, pass them down through channels. Local CSA bodies receive
copies of these instructions in order to assist and check on depart-
mental reporting.
. Other centralized organizations concerned with accounting and
reporting in the Soviet economy are Gosplan, USSR, and the Ministry of
*
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Finance, USSR. The CSA coordinates with Gosplan its annual plan of
statistical projects, including the forms for recording statistical
data, instructions, and methodological provisions. In turn, Gosplan
coordinates all the methodological instructions it sends to the 15 con-
stituent union-republics (formerly to the ministries) in connection
with the drafting of the state plans, including cost estimates, with
the CSA. This coordination is intended to provide a unified methodol-
ogy in planning and reporting so that statistical indexes will be com-
parable.
Within Gosplan, USSR, the departments responsible for planning
the development of the various machine building industries are believed
to work with the Department of Prices and Cost in coordinating the
planning of costs and prices for machinery and equipment of national
importance. Special state committees established directly under the
Council of Ministers, USSR, to guide the development of the important
machine building industries engaged in defense production are believed
to work closely with Gosplan, USSR, in matters of planning.
The Ministry of Finance, USSR, supervises the methodology of
accounting in cooperation with the CSA. Together with the CSA, it ap-
proves standard forms for invoices and accounts as well as instructions
pertaining to filling out these forms. The forms for the annual plan
fulfillment reports:of industrial enterprises are approved jointly by
the CSA and the Ministry of Finance, USSR.
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II. Techniques of Computing Cost in Machine Building
A. Estimate of Outlays for Production*
For purposes of computing the cost of the different types of
outlays required to meet the over-all production program of an entire
machine building industry or an individual machine building plant, the
drawing up of an estimate of outlays for production (smeta zatrat na
proizvodstvo)** is required. This method of itemizing the outlays
needed to fulfill the planned production program also provides the
data used by Soviet economists in analyzing the structure of cost.***
In Soviet machine building the estimate of outlays for production con-
sists of the following eight primary economic elements (pervichnyye
ekonomicheskiye elementy): basic materials, auxiliary materials, fuel,
energy, wages, deductions for social insurance, amortization, and other
expenditures.
The sum of these elements reflects the total cost to an in-
dustry or a plant of the .goods and services for which it must spend
its financial resources. As such, the estimate of outlays for produc-
tion serves as the basis for establishing the financial plan of each
machine building plant. The itemization of cost by primary economic
elements at the plant level conforms to the method of itemizing cost
in the state plan. In this way the sum of the cost of the resources
allocated to the individual plants of an industry is kept in balance
with the cost of the resources allocated to the industry as a whole.
B. Calculation
1. General Featurest
However useful they may be for over-411 planning.purposes,
the primary elements of cOst contained in the estimate of outlays for
production do not readily lend themselves to computing the unit cost
of specific articles or to analyzing and controlling the day-to-day
operations of the various shops and departments within the plant. The
complex technology and organization of production in machine building
as well as the variety of articles produced give rise to the movement
of many different articles through successive stages of manufacture in
the semifinishing, machining, and assembly shops of a plant, where the
major share of the production costs originate. These main production
* y
** Frequently referred to in abbreviated form as "estimate of pro-
duction" (smeta proizvodstva).
*** For the structure of cost, see IV, p. 53, below.
ti/
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shops of the plant are, in turn, serviced by auxiliary shops. In
order to use the data contained in the estimate of outlays for pro-
duction to compute the cost of individual articles being produced
throughout the plant, the data are regrouped into "items of calcula-
tion" (kal'kulyatsionnyye stat'i), which conform more closely with
the internal accounting system of the plant. Insofar as possible,
the costs of materials and the wages of production workers are
directly allocated to the specific end articles manufactured, whereas
overhead costs are allocated among the output by indirect methods.
The items of calculation in Soviet machine building, like
the primary economic elements, are specifically prescribed by the
state. The eight major items of calculation,* none of which exactly
corresponds substantively with the primary elements even when bearing
the same name, are as follows: materials, fuel used directly in the
production process, electric energy used directly in the production
process, wages paid to production workers, deductions for the social
insurance of production workers, shop expenditures, general plant ex-
penditures, and nonproductional expenditures. The accompanying chart**
shows how the homogeneous primary economic elements are dispersed among
the items of calculation when outlays are reitemized for purpose's of
calculation.
A comparison between the outlays of production expressed
as primary elements and as items of calculation shows that the items
of 'calculation pinpoint the source of costs within the plant, whereas
the primary elements reflect the composition of the over-all require-
ments of the plant. These two techniques of computing cost are recon-
ciled in the cost section of the technical, industrial, and financial
plan (tekhpromfinplan). The regrouping of primary elements into items
of calculation is achieved through the technical-economic indexes con-
tained in various sections of the tekhpromfinplan. These indexes,
which are based on established material consumption norms and labor
consumption norms,*** are expressed in ruble values as well as in
physical terms. In this way, cost is the common denominator of the
tekhpromfinplan wherein all the production activities of the plant
are reconciled with one another and with the over-all production
program of the plant. Whether broken down into primary elements or
into items of calculation the total outlays for production are, of
course, identical.
* Depending on the size and importance of expenditures included
under any of these eight major items, the number of items may be
increased or decreased. See 3, p. 23, below; Table 2, p. 4o, below;
and Table 6, p. 77, below.
** Following p. 16.
xxx For a discussion of consumption norms, see Appendix B.
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USSR
The Dispersion of Primary Economic
Elements Among Items of Calculation
Distribution
Primary Economic Elements Among Items of Calculation
Basic Materials
Materials
Auxiliary Materials
Materials
Shop expenditures
General plant expenditures
Fuel
Fuel used directly in the production process
Shop expenditures
General plant expenditures
Energy
Electric energy used directly in the production process
Shop expenditures
General plant expenditures
Wages
Wages paid to production workers
Shop expenditures
General plant expenditures
Deductions for Social Insurance
Deductions for the social insurance of production workers
Shop expenditures
General plant expenditures
Amortization
Shop expenditures
General plant expenditures
Other Expenditures
Shop expenditures
General plant expenditures
Note: This figure reflects production costs only.
28486 4-60
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led%
Because of the important purpose it serves in the Soviet
costing system, the technique of computing cost known as "calculation"
(kalikulyatsiya) deserves a detailed examination. Calculation is pri-
marily used to allocate production costs among the specific goods and
services produced by a plant as a whole or by its individual shops
and departments. The unit cost of individual articles is calculated
not only as a prerequisite to establishing their prices and subse-
quently to constructing indexes of gross output (valovaya produktsiya)
and commodity output (tovarnaya produktsiya) but also to constructing
indexes of change in the cost of commodity output for purposes of
evaluating changes in the efficiency of production.*
Because of differences in the degree of specialization,
the type of output, and the organization of production from plant to
plant, several methods are used in Soviet machine building for keep-
ing the account of outlays expended in the manufacture of the output
of a plant. The exact number and title of item headings in calcula-
tion at a given plant depends largely on the particular method of
keeping accounts.
In Soviet machine building the three principal methods of
accounting the outlays of production and, hence, of calculating costs
are the following: the normative (normativnyy) method, the order
(zakaznyy or pozakaznyy) method,** and the mass conversion (peredelf-
nyy or poperedelinyy) method. In passing, a fourth method should
perhaps be mentioned, the so-called "boiler" (kotlovoy) method, which
is apparently all but 6bsolete.xxx The normative method is by far
the most prevalent. In practice, because of diversified production
* Commodity output includes only production of explicit goods and
services that are designed to enter into the national turnover during
a given period, whereas gross output in machine building also includes
the difference in unfinished production on hand at the beginning and
at the end of the period as well as some intraplant turnover. Indexes
of gross and commodity output valued in ruble prices serve in the
USSR as the principal measure of growth of a plant or an industry.
Because of the more specific nature of commodity output in comparison
to gross output, most Soviet cost indexes are computed on the basis
of commodity output.
** Also referred to as the batch (partionnyy or popartionnyy) method.
*** Under this method, expenditures in excess of norm expenditures
are merely distributed among the individual types of output in pro-
portion to the planned cost of each type. Because the "boiler" method
does not provide a basis for determining the nature or cause of ex-
cessive expenditures, it has been in disfavor with Soviet officials.
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programs at some machine building plants, more than one method may
be employed. .
2. Methods
a. Normative Method*
The normative method of calculating cost is the
method most highly favored by Soviet officials because it affords
the state the most complete control over month-to-month consumption
of resources. The normative method is especially suited to the com-
pilation 6f comprehensive statistical data on costs at machine build-
ing plants engaged in the mass and large-series production of a var-
iety of_articles. Costs calculated by the normative method are de-
scribed by Soviet spokesmen as being more scientifically substan-
tiated than those calculated by the other methods.
Within most Soviet machine building plants, the set-
ting of norms in the production processes is mandatory in planning
the production program. Technical-economic norms are an integral
part of the system of cost accounting at such plants. In addition
to setting norms for the principal outlays (materials and wages),
estimates of expenditures for services and for administration of the
plant (overhead) also are broadly treated as norms.** The alleged
superiority of the normative method as compared with the other methods
of accounting and calculating is generally attributed to four specific
features, as follows: the prompt reflection of deviations from norms
in the accounts and reports of the plant, the use of norms as indexes
of change in production efficiency, the method of allocating produc-
tion costs between finished and unfinished output, and the use of
aggregative statistical techniques that simplify accounting procedures.
(1) Under the normative method a close check may be
kept on whether or not actual cost is deviating from planned cost.
If actual cost is, in fact, deviating from planned cost, the norma-
tive method of accounting and calculating also reveals the source of
the deviation and enables prompt remedial measures to be initiated.
If the responsibility for the deviations can be traced to individual
persons or departments in the plant, such persons or departments may
be penalized accordingly.
* 8/. For graphic examples and a textual description of the steps
followed in making normative calculations, see Appendix C.
** For a discussion of norms in the USSR, see Appendix B.
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The most commonly cited causes for deviations
from material consumption norms* at Soviet machine building plants
are as follows:
(a) The nonconformance in type and size of .
raw materials delivered to the plant with those established by state
standards. Delivery of such materials results either in waste of
materials or in an increase in the weight Of the finished article.
The suppliers of such materials are usually held responsible when
deviations from norms result from this cause.
(b) The substitution by the plant of one kind
of raw material for another.
(c) Unnecessarily large allowances of ma-
terials 'resulting from incorrect layouts,- templates, and the like.
Deviations from the established norms for the
wages of production workers usually can be traced to the supple-
mentary payroll. Because wages are charged against specific articles
of output, it is possible to relate deviations from the wage norms
directly to the appropriate type of output. Such deviations occur
most often as a result ()fit disruptions in the normal working pattern
occasioned by the necessity of reprocessing raw materials or by the
use of cutting tools of inferior quality.
Althouel deviations from norms for direct expendi-
tures such as materials and the wages of production workers can be
shown in primary documents, the practice of recording them there has
not become as firmly established as Soviet officials would like. As
a result, the size and cause of deviations from consumption norms is
frequently detected only when drawing up the accounts. Deviations
occurring in indirect expenditures, such as shop and general plant
overhead, are usually discerned by comparing actual outlays with esti-
mated outlays.
(2) Annual consumption norms express the planned re-
duction per unit of output in the consumption of materials and labor
as compared with the previous year. In the same manner that annual
consumption norms are expected to reflect a progressive decline in
consumption per unit of output from year to year, so current consump-
tion norms, which are derived by subdividing the annual norm into
four quarterly periods, are expected to reflect a similar decline
* For an illustration of the method of recording deviations from ma-
terial consumption norms, see Appendix C.
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from quarter to quarter. Actual consumption for a given month may
vary within specified limits from the quarterly norm so long as the
average quarterly level of consumption as shown in the plan is met
during the quarter as a whole. Thus the consumption of materials or
the norm-hours of labor per unit of output may be somewhat higher
than the planned quarterly level in January and lower than the planned
quarterly level in March. Deviations from quarterly norms occurring
in a given month are shown in the monthly accounts because of their
importance in analyzing the current operations of the producing plant.
The recording of periodic changes in norms to re-
flect changes in actual consumption is considered to be an important
feature of the normative method because it points up changes in pro-
ductional efficiency at each producing plant and serves as the basis
for setting the norms for the following plan period. Norms expressed
in ruble values must be recalculated to reflect any adjustments in
the prices of material inputs, wage rates, and utilities and transport
rates, if the norms are to be regarded as indicators of changes in
productional efficiency.
(3) Deviations from current norms are usually charged
in full to the cost of the output finished in the reporting period.
Unfinished output is valued only at the norm cost. Soviet economists
claim that this practice does not distort the cost of most finished
articles inasmuch as the balances of unfinished output in mass and
large-series production are more or less uniform throughout a year.
In tightening up norms from one month to the next
as a means of reducing the consumption of resources, unfinished pro-
duction is revalued at the beginning of each new monthly reporting
period so that it will conform to normative calculations based on the
new current norms.
(4) Under the normative method, consumption norms are
established for types or groups of similar products. Types or groups
of similar products are defined as "products with approximately the
same technology of production, the same labor inputs, and the same
materials composition." By establishing general categories of similar
products based on the normative outlays required to produce them, the
work of recording the outlays and calculating the cost of the many
individual articles- that may be produced at a machine building plant
is simplified. In the plant's accounts, there is no attempt to dif-
ferentiate between the outlays for articles that have been grouped
together on the basis of their similarity.
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The unit cost of the individual articles included
under a given type or group is calculated and reported by the produc-
ing plant to superior organizations periodically during the year on
the basis of this aggregative statistical technique.* Any deviations
from current norms that have occurred as well as any changes in the
norms themselves are calculated for types or groups of articles as -a
whole. The normative cost is determined by a simple addition or 'sub-
traction of deviations from and changes in the norms relating to the
given type or group of articles. Thus the deviations from norms and
changes in norms recorded for a type or group of similar articles is
used for all of the individual articles within the group When their
unit cost is being calculated. Soviet economists claim that, as a
rule, the deviations from the consumption norms recorded for a group
of similar articles are almost uniformly applicable to each article
within the group.** Normative calculations may be made for both
finished and semifinished articles.
b. Order Method***
Under the order method of calculating cost, account-
ing is based on the individual order that is placed with a producing
plant, ordinarily for a predetermined quantity of output. The actual
cost of filling each order is determined only after the order, has
been completely filled. As a result, the period required for filling
large orders and manufacturing articles that entail prolonged process-
ing does not usually coincide with the normal Soviet monthly reporting
period. From the point of view of cost accounting, the most serious
defect in the order method of accounting and calculating is the delay
involved in submitting adequate data on the cost of output until the
month in which'an order is closed. This latter defect is considered
especially objectionable when a plant or shop is filling a whole .
series of orders requiring several months or several quarters to com-
plete, for deviations from planned cost cannot easily be caught and
remedied during the production process.
In the order method, actual outlays are recorded only
for the order as a whole. A separate account bearing the numerical
* A sample of a monthly calculation report on the unit cost of a
specific article and a sample of a worksheet on which deviations from
norms have been aggregatively calculated for all articles falling
within a given group of similar articles is presented in Appendix C.
** Without a knowledge of the degree of difference permitted be-
tween the individual articles classed together in one or another
group of so-called "similar articles," it is not possible to comment
on the accuracy of this statement.
*** 21/
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designation of the order is opened for each order, and all outlays
expended in filling the order are entered in this account. Direct
expenditures are entered from primary documents, and indirect expendi-
tures are distributed among all the orders being filled. The outlays
entered in the account for the entire order, expressed both in physical
units and ruble values, are merely summed to derive the total cost of
the output. From these data the actual unit cost of an article is
calculated.
Determination of the actual cost of partial fulfill-
ment of an order within a given month is difficult, if not impossible,
under the order system. If the cost of partial fulfillment of an
order is called for, finished output is valued, not at actual cost,
but at planned cost. When there is a very lengthy technological pro-
cess involved in producing large and complex pieces of machinery,
orders are sometimes further broken down according to complete com-
ponents, if they pass through distinct stages of processing, to per-
mit a more detailed calculation and distribution of cost on comple-
tion of the order.
The order method is an old method of accounting that,
until 1930, was the principal method used in Soviet machine building.
It is now used predominantly in individual and small-series production
and is limited largely to shipbuilding and heavy machine building. In
addition to being used for machinery and equipment produced individ-
ually or in sma11 series,, the order method is used in most Soviet ma-
chine building plants to calculate the cost of repair and installation
work and the manufacture of special tools and devices.
The order method is especially applicable in the de-
velopment of prototypes and experimental batches of new articles that
are destined for subsequent mass or large-series production because
of the many changes which may occur in the design, technology of pro-
duction, and technical norms established for such articles. Only
after formal documents attesting to successful production of parts
and components on production lines and in shops have been drawn up
and after substantiated technological norms have been established may
the normative method of accounting supplant the order method in the
manufacture of new articles on a mass or large-series scale.
c. Conversion Method*
The conversion method of accounting and calculating
cost is used in so-called mass conversion processes, where an initial
homogeneous raw material (or semifinished material) undergoes bulk
processing at distinct, consecutive stages. This method finds only
limited application in machine building, principally in the processing
* 21(2/
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oak
of such materials as iron, steel, and rolled ferrous and nonferrous
metals, where the technological process is brief, uniform, and repeti-
tive.
Because of the brevity of the process involved in,
each conversion, all outlays connected with a conversion are recorded
in full in the course of a reporting month. A calculation is made on
the basis of the types and grades of articles or semifinished goods
that emerge in the conversion of the material from one form to
another. When several types of articles (nuts, bolts, screws, rivets,
and the like) are manufactured simultaneously from one and the same
material, the outlays of production are commonly distributed among
the different types of articles through the use of coefficients that
must be approved by planning organizations. Control over consuMption
norms under the conversion method is exercised through accounts that
reflect the movement of the raw materials through the various phases
of conversion.
In machine building the conversion method is used
most extensively in foundries. Here; cost is calculated for the
two principal phases of production. The first phase (or conversion)
is the preparation of the molten metal, which includes the preparing;
placing in the furnace, and smelting of the charge. -The second phase
is the manufacture of the casting, which includes the preparation and
filling of the mold.and the 'knocking out and cleaning of the casting.
The conversion method also is used sometimes in forges, where the
nature of the production process does not always lend itself to the
normative method.
Before 1930 the conversion method followed essentially
the order method in form.. Since the introduction of the normative
method in mass and series production, however, the accounting and cal-
culation of cost at each phase of production under the conversion
method has been patterned more closely on the principles of the nor-
mative method.
3. Types of Calculated Cost and Their Composition*
-`
a. General
, Under Soviet procedure, two costs are calculated for
,the output of a machine building plant: the plant cost (fabrichno-
zavodskaya sebestoimost') and the full cost (polnaya sebestoimost').
A third cost, the branch cost (otraslevaya sebestoimost'), is derived
*
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by averaging the full cost of a given article at all the plants that
bear major responsibility for producing the article. In general, it
is the planned branch cost of machinery and equipment that serves as
the basis for setting prices. With increasing emphasis being placed
on plant specialization in Soviet machine building, some models or
types of machinery and equipment are currently produced at only one
plant. In such cases, of course, the full cost at the producing
plant also is the branch cost.
b. Plant Cost
In calculating the cost of an article or of the entire
output of a plant, the fpllowing seven items* make up what is called
"plant cost" in Soviet machine building.
(1) Expenditures for the purchase of materials --
principally metal in machine building -- depend primarily, of course,
on the price and quantity of materials required to meet the produc-
tion program of the plant. Transportation and handling costs
(transportno-zagotovitel'nyye raskhody) connected with the procure-
ment, storage, preliminary processing, and intraplant distribution of
basic materials, however, also are included under this item. In com-
puting the consumption of materials, the value of reusable scrap
(determined by its ultimate disposition) is subtracted from the mi-
tial cost of work pieces bought in the rough. The cost of finished'.
and semifinished goods purchased from other plants also may be in-
cluded in this item.
(2) Fuel used directly in the production process, in-
cluding fuel used for smelting iron and steel in the plant foundry
and for heating metal in the forges and in the heat-treating shops.
(3) Electric energy used directly in the production
process, including electric energy consumed by electric furnaces in
foundries and in the welding, galvanizing, and heat-treating shops.
* The decree "Basic Principles of Planning, Recording, and Calcu-
lating the Cost of Industrial Output," approved in 1955 by Gosplan,
USSR; the Ministry of Finance, USSR; and the CSA, USSR, provided for
a simplified itemization in calculating the cost of Standard prod-
ucts. Some machine building plants itemize expenditures in greater
detail than is done in this report. For example, when expenditures
connected with setting up a new production line are sufficiently
large, they may be separately itemized rather than being lumped
under "shop expenditures" as in this example (see (6), (d), p. 25,
below).
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(4) Wages paid to production workers. In reporting
cost, only wages paid for work already completed are included. Sup-
plemental wages paid to production workers, even though not envisaged
in the plan, are included when calculating actual cost. The size of
a worker's wage is determined by the norm governing his work, the
category of his work, and the wage rate for that category of work.
(5) Deductions for the social insurance of production
workers are paid by enterprises on a direct percentage basis in rela-
tion to wages. The size of these payments is established by the
government on the basis of working conditions. Within the various
branches of machine building, the size of payments for social in-
surance ranges from 7.2 to 8.5 percent of the wages.
(6) Shop expenditures which include the following:
(a) The overhead costs of operating the shop, in-
cluding the wages of the shop management, engineers and technicians,
office workers, junior service personnel, and auxiliary workers as
well as shop maintenance, intrashop transportation costs, safety
measures, and the like.*
(b) Expenditures for the maintenance and operation
of equipment, including lubricants and abrasives; energy used to drive
motors for purposes not directly connected with the production pro-
cess; the wages of setup men, oilers, and repair men; and amortiza-
tion of shop equipment.
(c) Depreciation of special cutting tools and
accessories, including the cost of repair and preventive maintenance
of such tools and accessories. Special related expenditures, includ-
ing outlays for the testing of finished articles when such testing
leads to full depreciation of special tools and accessories.
(d) Expenditures arising from the services re-
quired of design bureaus, testing stations, or plant laboratories
in production of individual articles.
(e) Costs incurred in setting up mass and series
production of new types of articles,** including any or all of the
* When calculating the actual (as opposed to the planned) cost of
output, the following expenditures are allocated to shop expenditures:
idle time chargeable to the shop (including fuel and energy used dur-
ing a period of idleness); shortages of and damages to assets; and
losses arising from the underutilization of parts, components, cut-
ting tools, and attachments that have been modernized.
** This item refers, of course, only to that portion of the cost of
new articles incurred directly by the shop. Specialized design bu-
reaus and institutes attached to state pootnote continued on p. 267
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following expenditures: the designing of new articles and the de-
velopment of the technological process for producing them; the test-
ing of materials, semifinished goods, cutting tools, and attachments
required for production of new articles; the manufacture of proto-
types; the redesigning and'rearrangement of equipment (exclusive of
centrally allocated capital outlays) required for production of new
articles; and the difference between the actual and planned cost of
the first batch of articles manufactured'in the process of setting
up production.
(f) Losses from rejeCts, wnich reflect outlays
for production of components, parts, or articles that are rejected
because of defects as well as outlays for work connected with elimi-
nating the source of defective articles. Losses from rejects in-
clude the following: the cost of the materials expended for rejected
parts less the value of the reusable part of the materials, the base
and supplemental wages as well as deductions for social insurance of
those workers who were engaged in the processing of defective parts
up to the time of discovery of the defect as.well as the wages and in-
surance of those workers who are engaged in trouble shooting, shop
expenditures allocable to the rejected articles, and expenditures for
the repair or replacement of parts of an article that is sold under a
guarantee, if the article breaks down before the expiration date of
the guarantee. Excluded in calculating losses from rejects is the
value of the price at which rejected articles Can be sold for limited
use as well as the pay withheld from the wages of those responsible
for rejected articles.
(7) General plant expenditures, which include over-
head expenditures not specifically allocated to shops or other de-
partments of the plant, such as outlays for the management of the
plant; amortization of buildings and equipment not subject to
scientific and research organizations also engage in research and
development, some of which is financed from the state budget. The
plant also may have a design bureau. To determine all the outlays
that a shop (plant) expends in setting up production, a special esti-
mate is drawn up for each new article. All the expenditures connected
with setting up production are allocated to the cost-of producing the
new article during a 2-year period, dating from the manufacture of
the first batch. The length of this period may be extended only by .
securing special permission from higher authority. In this way, part
of the expenditures connected with setting up production of new
articles is written off during the first Year of production, and the
remainder is written off in the following year.
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amortization at the shop level; maintenance of the plant's grounds;
personnel on detached duty; and office, postal-telegraph, and trans-
portation expenditures. When determining the actual cost (as opposed
to the planned cost) of output, the following penalty charges are
included under general plant expenditures: fine b paid by an enter-
prise for demurrage, for failure to meet scheduled deliveries, for
losses in production resulting from a shortage of assets and unfinished
production, and for overdue payments on loans.
It may be seen from the items which are included
in the calculation of plant cost that all of these costs are incurred
in the production process at the plant. Items (6) (shop ,expenditures)
and (7) (general'plant expenditures) include all the overhead costs
incurred at the plant.
c. Full Cost
The full cost of an article or of a plant's output
is computed by adding to the plant cost certain expenditures tidat
are not directly connected. with the production process. Among these
so-called nonproductional expenditures* are the following:
(1) Expenditures incurred in packaging, crating,
and transporting articles to the station of shipment.**
(2) Payment for the services of sales organiza-
tions.***
(3) Contributions by the plant (on a pro rata
basis) for the maintenance of organizations above it in the adminis-
trative hierarchy, such as combines, trusts, administrations, and
departments.
(4) Funds paid by the producing plants to help
defray the cost of centralized programs affecting the machine build-
ing industry as a whole, such as scientific-research work, personnel
training programs, and the standardization of articles.
* Vneproizvodstvennyye raskhody -- literally, "extraproductional
expenditures."
** The domestic prices of machinery and equipment in the USSR are
ordinarily quoted f.o.b. (free on board) station of shipment.
*** Ordinarily machinery and equipment are sold by the producing
plant directly to the using plant in the USSR. Before the 1957
administrative reorganization of industry and construction, however,
antifriction bearings, for example, were sold through the All-Union
State Trust for the Sale of Bearings.
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Nonproductional expenditures account for only a very
small share of full cost, the major share comprising the plant cost.
The calculation of the unit cost of an article and of the cost of the
entire output of an individual machine building plant, however, is
based on full cost.
d. Branch Cost
The calculation of the full cost of an article has
been discussed as it relates to individual producing plants. It
should be noted, however, that where several machine building plants
are producing the same article, the full cost at the individual plants
will Vary in accordance with the specific conditions of production
obtaining at the respective plants. In such cases, rather than set-
ting a different price at which each plant will sell the article, a
single nationwide price is set on the basis of the branch cost of
the article. The branch cost is an average of the full cost of pro-
ducing the article at all plants within the branch of machine build-
ing that bears the major responsibility for producing it. The branch
cost of an article, however, is not a simple arithmetic average but a
weighted average, for the sum of the outlays of all the individual
producing plants is used to derive the full cost of producing the
given quantity. On the assumption that the planned physical volume
of output is produced at the planned cost and sold at the fixed
price, the branch of machine building in question is assured of re-
covering the full cost of the article plus its planned profit, even
though one or more of its individual plants may produce the article
at a planned loss.
Although the planned cost of producing an article at
a given machine building plant is used as a check on the efficiency
of that plant in meeting its cost targets, the planned branch cost of
an article is used as a measure for comparing the relative efficiency
of production at all plants that produce the same article. Excessively
high costs at an individual plant, such as exist when a plant first
begins to produce an article already in full production at other
plants, may temporarily be excluded in the calculation of branch cost.
In such cases the initial high costs connected with setting up pro-
duction at the plant are charged off when full production is estab-
lished and the cost is more nearly in line with that of other pro-
ducers of the article. It (is probable that in the current Soviet
campaign to concentrate production of given types of machinery and
equipment in the minimum number of plants conducive to realizing the
maximum benefits of specialization, branch cost data are considered
in allocating production responsibilities to the most efficient
producers. Where production of a specific type or model of machinery
or equipment is concentrated at a single plant in the USSR, however,
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the state planners and administrators have no comparative basis for
judging whether or not the article is indeed being produced at the
plant which can produce it most efficiently.
Because of the Soviet practice of establishing uni-
form national prices on important industrial goods, the unit cost of
most of the materials used in machine building is the same throughout
the USSR. The price of metal in the USSR, for example, is quoted f.o.b.
station of destination, which means that transportation costs have been
taken into account in establishing a uniform national price on metal.
This practice, in itself, tends to obscure advantages in production
of machinery and equipment arising from the location of a producing
plant near the source of raw materials. sAlthough the establishMent
of branch costs for articles in Soviet machine building is designed
to limit production of articles to officially designated plants (pro-
duction of such articles at unauthorized plants presumably results
in unprofitable production for the plants), many plants when faced
with a shortage in the supply of parts or components from the desig-
nated producers are forced to choose between manufacturing their own
parts and components at a financial loss or failing to meet their
production goals.
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III. Level of Cost
A. Planning
1. Centralized*
The level of cost within the Soviet economy is planned on
a national scale at the time that the national economic plan is formu-
lated and approved. Planning by centralized state agencies has under-
gone several significant changes since the 1957 reorganization of the
administration of industry and construction and the subsequent adoption
of the Seven Year Plan (1959-65).
With the replacement of practically all of the military
machine building ministries by state committees under the Council of
Ministers, USSR, and of the civilian machine building ministries by
departments in the all-union and union-republic gosplans (with corres-
ponding administrations, as appropriate, in the regional economic
councils), the role of Gosplan, USSR, in establishing the cost targets
of the national economic plans has been strengthened. Whereas the
former ministries exerted,a strong influence on the final cost targets
adopted by Gosplan, USSR, the present regional economic councils,
because of their multiplicity and dispersion, are not in such a favor-
able position.
Among other criticisms leveled against the former ministries
was the charge that, in planning cost for the plants administratively
subordinate to them, the ministries approached the matter in a purely
mechanical way without investigation of the real opportunities for re-
ducing cost at individual plants. As a consequence, the level of
planned cost allegedly was sometimes inflated at the producing plants,
and the plants were permitted to make unwarranted profits by selling
at prices established on the basis of such inflated planned costs. The
present machine building administrations of the regional economic coun-
cils, it is maintained, are sufficiently close to the producing plants
to ascertain that the cost plans assigned to the plants conform more
closely to theoretically substantiated opportunities for reducing costs.
Following the adoption of the Seven Year Plan, increased
emphasis has allegedly been placed on annual targets as integral parts
of long-term plans rather than as separately conceived goals based on
actual performance in the preceding year. In drawing up long-term
plans (5, 7, or more years), targets are established not only for the
terminal year of the plan but for each individual year included in the
plan as well. The target figures established for each given year are
*w
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referred to as "annual targets of the long-term plan." It is claimed
that this method of planning eliminates the necessity of drawing up
annual plans at the approach of each new year, a practice which in-
volved using incomplete data from the current year as a basis for
drawing up the new plan and which sometimes left the economy operat-
ing without a firm plan during the interim between the drafting and
approval of the new annual plan. It is maintained that, by establish-
ing in advance targets for all years of the long-term plan, the
economy operates continuously under a plan, annual plan targets being
merely adjusted where necessary to take care of deviations from the
plan in the preceding year:
The planning of the national economy is
now based on long-term plans broken down into
annual targets by branch of industry, union-
republic, administrative economic region,
enterprise, and construction project. The
plans drawn up by enterprises, construction
projects, regional economic councils, minis-
tries, or other governmental departments are
based on the control figures of the long-term
plans worked out by Gosplan USSR with the
assistance of Gosplans in the union-republics
and ministries and departments of the USSR
and approved by the Central Committee of the
CPSU and the Council of Ministers, USSR. 11/
When the government corrects annual targets in the long-
term plan, corresponding changes are made in the plans of the union-
republics, the ministries and departments of the USSR, the regional
economic councils, and finally the producing plants.
Starting with aggregative data on production, construction,
labor, materials, technical equipment, and finances, the central
planners establish control figures for the development of the national
economy. In planning costs and prices on a national scale, the state
planners rely primarily on norms to relate resources to the planned
volume of output. The four major types of technical-economic norms
used in establishing this correlation are as follows:
a. Norms governing the utilization of equip-
ment and productive capacity.
b. Norms governing the consumption of materials
(including processed materials, fuel, and elec-
tric energy).
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c. Norms governing labor inputs in the manu-
facture of the major types of products.
d. Norms expressing a ratio between the amount
of technical equipment installed and the number
of production workers (tekhnicheskaya vooru-
zhennost').
Once the available resources have been apportioned among
industries and administrative areas, the appropriate targets are
disseminated to the various union-republics and administrative eco-
nomic regions, where they are further elaborated in terms of the
particular industries located in each jurisdiction. Finally the in-
dividual plant receives its targets, the implementation of which is
worked out in the plant's tekhpromfinplan. Throughout this entire
process, all physical targets must be reconciled with the central
control figures pertaining to the level of cost and reductions in
cost contained in the state plan.*
2. Plant**
The planning that goes on above the plant level involves
only major aggregative control figures. To the extent that the plants
themselves coordinate the various major goals disseminated to them
from above, it may be said that there is an element of decentralized
planning in the USSR. Using the standard forms and methodologies pro-
vided by the state planning and statistical agencies, the individual
producing plant works out its over-all plan of operation, the
tekhpromfinplan, in which every activity is detailed. The tekhprom-
finplan contains data on the volume of output; on the growth of tech-
nology; on the utilization of equipment, floorspace and manpower; on
labor productivity and wages; bn deliveries of materials and technical
equipment; on cost; on financing; and on capital construction. The
result is a program of coordinated indexes. Indexes governing the
plant's production program are detailed in physical terms and corres-
ponding ruble costs.
Under the present organization of. planning, the cost plan
of a plant is an integral part of the tekhpromfinplan. The tekhprom-
finplan elaborates in specific detail how the cost plan is to be met
* Although the exact procedure followed in the centralized planning
of cost in the USSR has not been comprehensively described in Soviet
sources, acquisition in the West of the 1941 State Plan for the De-
velopment of the National Economy of the USSR provides insight into
this subject (see Appendix D).
**
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in each phase of the plant's operation. The over-all performance of
the plant is therefore reflected in the cost plan, which reconciles all
the component parts of the production program of the plant. During any
given period a comparison of the reported level of cost at a plant with
the planned level of cost reveals at a glance the over-all performance
of the plant in meeting its indexes. Because the cost plan is a compos-
ite plan of the plant's activities, it reveals in what respect the
plant may be deviating from the plan.
It is through the cost plan'that the primary elements in
the estimate of production are reconciled Iiith the items of calculation,
as these costs are computed in difl'erent ways-and must be kept in bal-
ance throughout the.planning process. It is also through the tekhprom-
finplan that the estimate of the outlays of production is linked with
the volumes of gross and commodity output, with the plan of material-
technical supplies, the labor plan, and the organizational and techni-
cal plan (orgtekhplan). A decree of the Central Committee of the Com-
munist Party (CPSU) and the government made it mandatory, beginning in
1959, for enterprises to complete by no later than 15 November of each
year the annual program for the following year, based on adjustments
made in the annual control figures of the national long-term plan and
showing all indexes broken down by quarterly and monthly periods.
B. Commodity Output*
1. General
In establishing the level of the' cost of output, Soviet
planners use commodity output rather than gross output for several rea-
sons. First, commodity output includes only production of explicit .
goods and' services that are designed to enter into the national turn-
over during a given period, whereas gross output in certain cases in-
cludes some intraplant turnover and in a number of branches of industry
with long lead times (such as the machine building industry) includes
the difference in unfinished production on hand at the beginning and at
the end of the period as well as some intraplant turnover. Second, in
planning the level of cost, a major consideration is the planned reduc-
tion in the unit cost of articles that have been in production during
the previous period. The level of cost of all such goods is planned by
establishing the new level of cost as the, difference between the exist-
ing level of cost and the planned reduction in cost. Commodity output
is preeminently suitable for this purpose because the norms relating to
established goods ,and services included-incommodity output provide a
convenient method of computing reductions in the unit cost of all such
goods and services-compared with the previous year. The level of the
cost of new articles included in commodity 'outputcannot, of course, be
* 121
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calculated from changes in norms and planned reductions in unit cost
compared with the previous period simply because these articles were
not produced in the previous period. Consequently, in calculating the
level of cost of commodity output, the output is divided into two cate-
gories, the costs of which are calculated separately and then added
together -- comparable output (sravnimaya produktsiya) and noncompara-
ble output (nesravnimaya produktskiya).
2. Comparable Output
Comparable output includes all articles in the commodity
output of a plant that are in at least their second consecutive year
of production. In machine building, comparable output may include
finished articles, parts, and semifinished goods as well as services
and work recurrently performed for other plants and organizations.
Partial changes in the technology of manufacturing or in the design,
operation, equipping, material composition, or exterior finish of an
article already in production do not invalidate the comparability of
the article unless such changes are accompanied by the issuance of
new technical specifications or state standards.
The planning of the level of cost of comparable output
in Soviet machine building depends to a large degree on the collec-
tion and anaJysis of statistical data pertaining to production in
the period previous to the plan period. In general, the Soviet sys-
tem assumes that the unit cost of comparable output will be reduced
successively from one year to the next.
In planning the cost of comparable output, the level of
cost is expressed as an absolute ruble value and also as a percent-
age change in comparison with the actual level of cost in the previous
year. To derive the level of cost of comparable output in the plan
period, the number of units of each article to be produced is multi-
plied by the planned unit cost. The level of cost of comparable out-
put in the previous year is derived by multiplying the number of units
of each article to be produced in the plan.period by the annual aver-
age unit costs actually reported for these articles in the previous
period. The relationship between the levels of cost in 2 successive
years may be expressed by the ratio and the percentage change in
q2c1
q?c2 where
=
level of cost, by the formula
12c1
q2 = volume of output in the second year,
c2 .= unit cost of output in the second year, and
ci = unit cost of output in the first year.
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Reductions in the level of cost of comparable output in
machine building may reflect economies of production achieved in ma-
chine building itself or reductions in the prices of the materials
and services supplied by other industries. In the first case, econo-
mies of production may be realized in machine building through reduc-
tions in the unit consumption of materials and labor, through a re-
duction in overhead costs per unit of output, through a more rational
use of production facilities, through mechanization and automation of
production processes (including materials handling), and the like.
Reductions in the prices of materials and services required for pro-
duction in machine building may result from economies achieved in the
metallurgical, fuel, electric energy, and transportation industries.
Reductions in such costs may be partly offset, of course, by increases
in wages and amortization rates in machine building.
Soviet announcements concerning percentage changes in the
cost of output in machine building may be misleading to the layman
insofar as they sometimes appear to apply to the entire commodity
output. In some industries, such as the mining, oil extraction, and
lumbering industries, where allegedly 90 to 100 percent of the output
is comparable from one year to the next because of its homogeneous
nature, percentage changes announced in the cost of commodity output
may, in fact, apply to virtually the entire output. In machine build-
ing, however, where each year witnesses the introduction of a rela-
tively large number of new articles, data concerning the planned
change in cost apply only-to slightly more than half of commodity
output.
3. Noncomparable Output
Noncomparable output includes articles which have never
before been produced at a plant (even though they may have been pro-
duced at other plants) as well as articles which have been previously
produced only on a sample basis. If there is some question as to
whether an article belongs in comparable or noncomparable output, the
matter is referred to the appropriate planning agency at a higher
level.
In planning the level of cost of noncomparable output,
costs are ti.cessarily estimative in nature and are established only
for the plan period. When an article has not previously been manu-
factured and when norms have not been established for its production,
there is no substantiated basis for setting the level of cost.
Under Soviet conditions, the principal factors that-deter-
mine the estimated unit cost of an article are the prices and quan-
tities of inputs, on the one hand, and the number of units produced,
on the other. Although prices of inputs are generally no problem in
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estimating the cost of new articles inasmuch as they are generally
established for rather prolonged periods, sometimes an unforeseen
change in these prices requires that the estimated cost be recal-
culated. More of a problem, in the absence of established norms, is
the accurate estimation of the physical inputs required. Estimation
of the number of new articles that will be manufactured in the first
year of production also is subject to error, especially if all the
difficulties connected with the setting up of production have not
been resolved at the time that the plan is drawn up. Because unit
cost in mass or series production varies with the number of units
produced, a delay in the starting up of production or an unantici-
pated interruption in production may cause a fewer number of units
to be produced than was planned. Failure to produce the planned
number of units may lead to a higher unit cost than estimated in the
plan. With new articles the incidence of rejects also is apt to be
high, and the unit cost of production may rise accordingly.
Because of the Soviet policy of charging off the devel-
opmental costs and the costs of setting up production incurred by a
plant to the cost of new articles in the initial period of their
mass or series production,* the level of cost of new engineering
products is relatively high in the USSR, and, consequently, noncom-
parable output accounts for a sizable share of the total cost of
commodity output. In fact, it may safely be said that noncomparable
output accounts for a higher percentage of the total cost of com-
modity output in Soviet machine building than in any other Soviet
industry.**
Soviet economists claim that in estimating the cost of
new articles it is common practice to work from analogy with the
cost of articles already in full production. Even so, problems in-
herent in planning the level of cost of noncomparable output apparently
leave room for wide margins of error. To judge from cases cited in
the Soviet press, enterprises are guilty of "padding" the estimated
costs of new articles, not only to cushion themselves against unfor-
seen contingencies but also with the conscious intent of making high
profits for the enterprise "at the expense of the economy as a whole."
Because of their very nature, estimates of cost for new articles to
some degree have been exempt from the rigorous standardized controls
of costing norms. An increasing effort is being made, however, to
* See the second footnote on p. 25, above.
** Some of the problems of interpreting published data on the re-
duction of cost in Soviet machine building are discussed in p, p. 42,
below., where the influence of the relative sizes of comparable and
noncomparable output on the cost of commodity output is analyzed.
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bring such estimates under the Closer scrutiny and control of central
agencies as well as to develop a more standardized methodology for
drawing up estimates.
C. Reporting*
Data on the level of cost are included in the monthly and
quarterly report submitted by Soviet plants on Form 3-P: Report of
an Industrial'Enterprise on Fulfillment of the Plan Pertaining to
the Cost of Commodity Output. The titles of the various sections of
this report are as follows:
1. Fulfillment of the Plan for Reducing the Cost
of Comparable Output and for the Cost of
-Total Commodity Output
2. The Cost of Comparable Output and Total Com-
modity Output by Items of Calculation
3. The Influence on Cost of Changes in Prices,
of Materials and Fuel
14. Losses from Defective Goods -
.5.. The Unit Cost of Major Types of Output
6. Outlays for Production Exclusive of Intraplant
Turnover
The data appearing in Sections 1 and 2 of Form 3-P also are sum-
marized for the year in the annual report submitted on Form 6:
The Cost of Commodity Output. Because Sections 1 and 2 of Form
3-P provide the most salient data for purposes of centralized ac-,
counting and control, examples of these two sections are shown in
Tables 1 and 2.**
In Table 1, several costs have been computed for comparable
output and total commodity output in March 1957 and in the entire
first quarter of 1957 by multiplying the physical units of output
in the respective periods first by the average annual unit cost***
*
** Tables 1 and 2 follow on pp. 39 and 40,'respective1y. Data are
hypothetical.
*** Text continued on p. 41.
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Table 1
USSR: Example of Report Submitted by an Industrial Enterprise on Reducing the Cost of Comparable Output a/
and on the-Cost of Total Commodity Output b/ -
March 1957 and First Quarter 1957
Thousand Rubles
Time Period
(1)
(2)
(3)
Comparable Output
(4) (5)
Planned
Percentage
Change
in Cost
Expressed
in Average
Annual Cost
of Previous Year
Cost According
to Quarterly
Plan
Actual
Cost
'Actual
Percentage
Change
in Cost SI/
(6) (7) (6)
Total Commodity Output 2/
(Comparable and Noncomparable Output)
Cost According
to Quarterly
Plan
Actual
Cost
,Savings
From Reduction
of Cost
in Excess
of Plan
For March 1957
-9.2
6,233
5,770
5,245
-15.9
5,875
5,397
478
For the first quarter of 1957
-9.2
17,625
16,072
15,232
-13.6
16,354
15,551
803
For the period since the
beginning of the year
-9.2
17,625
16,072
15,232
-13.6
16,354
15,551
803
a. Comparable output consists of those goods and services produced in a given
comparable output comprises the residual of commodity output.
Report of an Industrial Enterprise
b. Based on Section 1 of Form 3-P:
Output, using hypothetical data.
c. When submitted at the end of a quarter, this report also gives the value of commodity output in enterprise wholesale prices. In
this example, commodity output was valued at 18,056,000 rubles, including 17,660,000 rubles of comparable output and 396,000 rubles of
noncomparable output.
d. Column (4) minus Column (2) divided by Column (2).
year that were also produced in the
preceding year. Non-
on Fulfillment of the Plan Pertaining to the Cost of Commodity
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Table 2
USSR: Example of Report Submitted by an Industrial Enterprise on the Cost of Comparable Output a/
and the Cost of Total Commodity Output, Distributed by Items of Calculation b/
First Quarter 1957
Thousand Rubles
(1) ?(2) (3) (4)
? Comparable Output Total Commodity Output
(Comparable
Expressed and Noncomparable Output)
in Average Annual Costs
Items of Calculation of Previous Year Actual Cost Planned Cost Actual Cost
Raw and processed materials
6,272
5,221
5,537
5,314
Fuel and energy
659
290
431
295
Basic wages
2,091
1,966
2,091
2,038
Supplementary wages
1,587
1,231
1,447
1,258
Expenditures connected With setting up
production
57
17
13
17
Losses from rejects
318
253
81
254
Shop expenditures, including expenditures
for Maintaining and operating equipment
General plant expenditures
4,761
1,706
4,622
1,448
5,055
1,517
4,727 .
1,463
Plant cost of commodity output
17,11.51
15,011.8
16,172
15,366
Nonproductional expenditures
174
184
182
185
Full cost of commodity output
17,625
15,232
16,351+
15,551
a. Comparable output consists of those goods and services produced in a given year that were also produced in the preceding year.
Noncomparable output comprises the residual of commodity output.
b. Based on Section 2 of Form 3-P: Report of an Industrial Enterprise- on Fulfillment of the Plan Pertaining to the Cost of Com-
modity Output, using hypothetical data. This information is calculated for the quarter in reports submitted in March, June, and
September and is otherwise calculated for the month.
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?
that obtained in the previous year (Column 2), then by the unit cost
called for in the quarterly plan (Column 3), and finally by the actual
unit cost as determined by cost calculation in the plan period
(Column )-i-). The level of cost computed from unit costs in the pre-
vious year (Column 2) is subtracted from the actual level of cost
(Column )i). The difference between these two levels of cost is divided
by the level of cost in the previous year (Column 2) to derive the
percent by which the cost of comparable output was reduced during the
period reported on (Column 5). The actual percentage reduction in
the cost of comparable output may be compared with the percentage re-
duction planned for the period (Column 1)
The actual cost of total commodity output (Column 7), which
is the sum of the actual cost of comparable and noncomparable output,
is compared in Section 1 with the planned cost of total commodity
output in the same period (Column 6) to determine the size of savings
or excessive expenditures in relation to the plan. Although there is
no space provided for reporting and comparing the planned and actual
cost of noncomparable output, the difference can easily be computed
by subtracting, respectively, the planned and actual cost of comparable
output (Columns 3 and 4) from the planned and actual cost of total
commodity output (Columns 6 and 7). In this hypothetical example, taken
from a Soviet source, the planned cost of noncomparable output for
March 1957 was apparently 105,000 rubles,* and the actual cost was
152,000 rubles. It should be Observed that the size of savings or
excessive expenditures in the actua:1 cost of all commodity output
(Column 7) compared with the planned cost (Column 6) may, in Soviet
machine building, often be attributable to faulty estimates of the
cost of new articles (noncomparable output).
Section 2 of Form 3-P (Table 2)shows the distribution of the
planned and actual cost of commodity output (Columns 3 and 4) among
the items of calculation, thereby pinpointing sources of deviation
from the plan. In a similar manner the cost of comparable output is
distributed among the items of calculation, and the actual cost re-
corded for each item (Column 2) is shown in juxtaposition with the
cost expressed in average annual costs of the previous year (Column 1).
From these data the reduction in cost of each item used to calculate
comparable output may be computed. In effect, Section 2 (Table 2) sup-
plements certain of the aggregative data contained in Section 1
(Table 1).
* Most ruble values shown in this report are hypothetical, and, conse-
quently, there is no necessity of a conversion factor for converting
rubles to US dollars. The only exception is to be found in Tables 8
and 9, pp. 84 and 85, respectively, below, where ruble values are ex-
pressed in 1941 rubles. The ratio between 1941 rubles and 1941 US
dollars was 5.3 to 1.
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D. Published Soviet Data on the Change in Cost*
1. General
The two published Soviet indexes on the change in cost of
industrial output (izmeneniye sebestoimosti promyshlennoy produktsii),
including machine building output, have for some years been based on
the change in the annual unit costs of comparable output.** Both in-
dexes are link indexes, so that data for each year in the series are
related only with the data for the preceding year. In one index, how-
ever, the influence of changes in the prices of the material inputs of
production are reflected in the change of cost from one year to the
next, and in the other index this influence is excluded by using uni-
form prices for material inputs in each of the two years for which
costs are being related. Accordingly, the first cost index, entitled
"in the current prices of each year" (v deystvuyushchikh tsenakh
sootvetsvuyushchego goda), reflects total changes in cost in money
terms, whatever the source. The second index, entitled "in prices
comparable with the previous year" tsenakh, sopostavimykh s
predydushchim godom), by reflecting changes in inputs, thereby re-
flects changes in real cost. Beginning with 1959, there was intro-
duced a new cost index, one that covers the entire commodity output
and not just comparable output. This index is based on "outlays per
ruble of commodity output (zatraty na rubl' tovarnoy produktsii)."
Some explanation of the various factors that influence these indexes
is a necessary prerequisite to evaluating their significance and use-
fulness.
Where Soviet indexes showing annual changes in the level
of cost of commodity output pertain only to comparable output, the size
of such output in relation to total commodity output in any given in-
dustry and in Soviet industry as a whole is of some consequence. The
composition of commodity output in Soviet machine building is marked
by relatively rapid change from one year to the next as some articles
drop out and others enter into production. According to the 1941 -
state plan, the share of comparable output in the commodity output of
'individual machine building industries in that year was to range be-
tween 64.9 and 87.0 percent, a percentage conspicuously below that
planned for other industries.*** Since 1941 the phare of comparable
output in commodity output has declined even further in the machine
building industries. With comparable output accounting for as little
* 11/
** The method of computing annual percentage changes in the cost of
comparable output using unit cost data is described in B, 2, p. 35,
above.
*** See Appendix D.
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as 25 to 30 percent of commodity output in those areas of machine
building where small series and individual unit production pre-
dominate, the share of comparable output in commodity output for
machine building as a whole was said, in 1957, to average between
50 and 60 percent.
Among Soviet industries, machine building is generally
credited with registering one of the highest, if not the highest,
percentage annual reductions in the cost of comparable output. This
phenomenon is generally attributed by Soviet economists to the siz-
able annual reduction in unit costs of comparable output that may
accompany expanded scales of production, rises in productivity, and
the marked declines in the unit cost of new articles after the cost
of designing, testing, and tooling for production has been written
off as an item in their production cost. There is no published index
available since the end of World War II on annual reductions in the
cost of comparable output for Soviet machine building as a whole, al-
though it is claimed that under the Fifth Five Year Plan (1951-55)
average annual reductions ranged between approximately 8 and 10 per-
cent in the machine building industries. Data on annual changes in
the cost of comparable output in machine building and industry as a
whole for the years 1929/30 - 1958 are given in Table 3.* More recent
data on percentage changes in the cost of comparable output in two
branches of machine building are tabulated below (presumably based on
prices comparable with the previous year).
Year
Percent
Electrotechnical
Industry
Motor Vehicle
Industry
1947
-8.1
N.A.
1948
-12.9
N.A.
1949
-12.3
N.A.
1950
-7.9
N.A.
1951
-8.0
N.A.
1952
-8.8
N.A.
1953
-6.9
N.A.
1954
-5.5
N.A.
1955
-7.4
-11.4
1956
-9.1
-10.2
1957 (Plan)
-5.6
N .A .
* Table 3 follows on p. 44.
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Table 3
USSR: Annual Percentage Change in the Cost of Comparable Output 62/
in Machine Building and in Industry as a Whole
1929/30 - 1958
Percent 12/
Year
Machine Building
Industry as a Whole
1929/30
-12.1
-6.8
1931
-5.5
+1.4
1932
-6.0
+4.7
1933
-12.3
+0.5
1934
-12.2
-3.7
1935
-7.2
-4.1
1936
-1.2
-4.o
1937
-6.o
-0.1
1938
N.A.
N.A.
1939
N.A.
N.A.
1940
N.A.
-1.5
1941
-24.0
-6.9
1942
-17.0
-5.9
1943
-9.0
-2.5
1944
-9.8
-3.0
1945
N.A.
+0.9
1946
N.A.
+0.7
1947
N.A.
-2.0
1948
N.A.
-8.6
1949
N.A.
-6.8
1950
N.A.
-5.4
1951
N.A.
-5.4
1952
N.A.
-4.4
1953
N.A.
-3.7
1954
N.A.
-3.2
1955
N.A.
-4.6
1956
N.A.
-2.9
1957
N.A.
-2.6
1958
N.A.
-3.1
a. Comparable output consists of those goods and services produced in a
given year that were also produced in the preceding year. Noncomparable
output comprises the residual of commodity output.
b. Based on prices comparable with the previous year.
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The comparable output of machine building, although ac-
counting for a smaller percentage of commodity output than is the
case in other Soviet industries, is relatively hiel in value and con-
sequently constitutes a significant percentage of the total comparable
output of industry as a whole.* For this reason, changes in the an-
nual level of cost of comparable output in machine building have a
marked influence on the annual percentage change in the cost of com-
parable output for industry as a whole. The Soviet index on the
change in cost of the comparable output of industry as a Whole may be
compared in Table 3 with available data on machine building. It may
be noted that in all but one year (1936) for which data are available
for both indexes, annual reductions in machine building have been
much larger than reductions in industry as a Whole. Of course, the
influence of the machine building index on the index for industry as
a whole is directly dependent on the share of machine building in the
total comparable output of industry. If, as appears likely, this
share is gradually declining, just as within the total commodity out-
put of machine building the share of comparable output is declining,
then machine building may exert less influence on the index for in-
dustry as a whole than it previously did. It may be pertinent to
point out in this context that, although cost in Soviet industry was
to have been reduced 25 percent under the Fifth Five Year Plan and
was reported to have been actually reduced only 23 percent, the planned
reduction under the abortive Sixth Five Year Plan (1956,60) dropped
to 17 percent, and under the current Seven Year Plan (1959-65) the
reduction is to be "no less than 11.5 percent."**
2. Methodological Problems
Although the index of change in the cost of comparable
output has long been the accepted official index governing the quali-
tative performance of plants and industries in the USSR, this index
has been criticized by Soviet economists on a number of grounds. One
major criticism has been the failure of this index to take account of
the cost of noncomparable output, especially in industries such as
* It should be noted, however, that the share of machine building
in the comparable output of industry is considerably less than its
share in the total commodity output of industry. In the 1941 Plan,
for example, the machine building industries accounted for about 24
percent of the total commodity output of industry but only about 18
percent of the comparable output of industry (see Appendix D, Table 8,
p. 84, below).
** This target figure presumably is based on the new index showing
the decline in outlays per ruble of commodity output.
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machine building, where such output constitutes a relatively large
share of commodity output. It is pointed out that there is little
basis for comparing machine building indexes, which may embrace only
50 to 60 percent of commodity output, with indexes for the extrac-
tive industries, the food industry, and the timber industry, where
the high degree of homogeneity of output from year to year leads to
inclusion of 90 to 100 percent of commodity output.
Another major criticism has been that in an industry such
as machine building, where a large number of new articles (noncompar-
able output) pass over into comparable output each year, the index
overstates actual reductions in cost relative to industries where
output is largely uniform from year to year. Because of the formula
that is used to compute the index of change in cost,* drastic reduc-
tions in the unit cost of newer articles, which occur when all plant
costs connected with their development have been written off and when
production is normal, introduce a strong downward bias in the cost of
comparable output as a whole. Because the cost of comparable output
in any given year is directly influenced by the number of newer articles
programed for a particular plant or industry in the several years pre-
vious, this index has been criticized as not being an objective measure
for evaluating the relative performance of individual plants or in-
dustries with respect to economizing on state resources.
Another objection has been that the criterion for deter-
mining comparable output in machine building has militated against
improvements in the quality and composition of comparable output be-
cause of the adverse effect which such improvements may have on the
cost of comparable output. In an effort to include as large a number
of articles as possible in the comparable output of machine building
from one year to the next, articles that are roughly the same from
the consumer's point of view (but for which the design, the technology
of production, the finish, the materials composition, and the like
may be modified without any change in specifications or state stand-
ards on the production side) are treated as comparable output. When
such changes lead to an increase in the unit cost of an article,
plants are hesitant to make changes--- even in the interest of im-
proving the quality and composition of output -- because such changes
tend to raise the cost of comparable output as a whole. The use of
the group method in the normative calculation of unit costs in machine
building (that is, the summing up of all the outlays expended for a
group of similar articles) means that any substantial increases in
outlays connected with changes made in one or more articles in the
group are recorded as deviations for the group as a whole and may be
* For the formula used for computing the index of change in cost, see
p. 35, above.
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reflected in the respective unit.costs of the articles, thus lead-
ing to an increase in the cost of all articles in the group compared
with the previous year. Soviet economists argue that the practice
of including articles in comparable output in spite of modifications
which may lead to increased unit costs of production discourages that
improvement in the quality and assortment of articles for which the
regime is constantly pressing on behalf of the economy.as a whole. ?
Other criticisms include the following points. The ma-
chine building index of change in cost, being limited to comparable
output, is not organically related to indexes of growth in physical
volume of output, labor productivity, and profitability, all of which
are based on total output. Because of the annually changing composi-
tion of output in machine building, it is virtually impossible to con-
struct a meaningful base-year index for this industry in planning or
recording reductions in cost over a period of 5 years or longer (the
existing link index admittedly does not reflect the absolute measure
of savings realized from reductions in cost).
In view of the shortcomings of the index of change in
cost, instructions were issued as early as 1955 by Gosplan, USSR;
the Ministry of Finance, USSR; and the CSA, USSR, requiring that the.
following three measures be used to establish fulfillment of the
cost plan:. (a) the index of change in cost, 00 the plan for the '
cost of total commodity output, and (c) the plan for the unit cost
of articles of major importance. The desire to have a single com-
prehensive index for measuring changes in the cost of total com-
modity output, however, finally led to the adoption under the Seven
Year Plan of an index showing reductions in outlays per ruble of
commodity output (expressed in enterprise wholesale prices)* as the
only official index of cost in the national economic plan.**
This ratio may be expressed by the following formula:
ql cl
where
,
Outlays per ruble of commodity output =
qa. = commodity
ca.,= unit cost
p1 = wholesale
output in units,
of output,, and
enterprise price per unit of output.
P1
** The index of change in the cost of comparable output is now used
only at the discretion of local planning and administrative organiza-
tions.
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According to its proponents, the principal merit of the
index of change in outlays per ruble of commodity output compared
with the index of change in cost is that it covers the entire range
of commodity output. This feature is advantageous in evaluating the
qualitative performance of plants and industries in that it provides
a uniform measure of comparison in all cases. The effect of drastic
reductions in unit cost when new articles enter normal production is
less pronounced in this index, for such articles account for a smaller
share in total commodity output than in comparable output alone. Also,
in machine building the low unit cost of mass-produced articles is to
some degree balanced by the high unit cost of new articles not yet in
normal production. The index of change in outlays per ruble of com-
modity output is related with the other indexes pertaining to the
operation of a plant. It also is claimed that this index permits of
more accurate planning and accounting for periods of 5 years and
longer.
Although the index of change in outlays per ruble of com-
modity output is free from some of the defects of the index of change
in cost, such serious objections have been lodged by Soviet economists
since its adoption that it is surprising to find this index being
used as the only official index pertaining to cost. A thorough
analysis of this index, especially in view of its recent introduc-
tion and the lack of published statistical data, is beyond the scope
of this report. Some of the major criticisms registered against the
index in recent Soviet publications, however, merit a brief considera-
tion.
As the main point of attack, it is alleged that the index
of change in outlays per ruble of commodity output is not basically
an index of the dynamics of cost at all but an index of change in
profitability, reflecting, as it' does, changes in annual ratios of
the cost of production (outlays) to the value of commodity output,
expressed in wholesale enterprise prices. Thus the index may reflect
not only changes that occur in the cost of production but also changes
that may be made in the wholesale enterprise prices at which output
is sold. Additionally, the index may be affected by changes in the
product mix as between products with different profit margins. The
number of variable factors capable of affecting the ratios and dis-
torting the index has caused anguished cries from the economists
whose job it is to analyze and interpret the data. These distortions
would perhaps be merely of academic interest if they did not lie at
the center of the Soviet problem of finding a reliable criterion for
evaluating and rewarding the performance of state enterprises in ful-
filling the interrelated economic and technical indexes that are used
to stimulate and direct their activities.
1+8
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One Soviet economist, writing in Finansy SSSR (Finances
of the USSR) for October 1959, concludes that the index of outlays
per ruble of commodity output does not sufficiently stimulate the
reduction of cost, for the performance of an enterprise is evaluated
on the basis of an index that the enterprise itself can manipulate.
In citing an instance of such manipulation, he remarks, "It is clear
that it is only a game of figures. Can we permit a game of figures
to be the basis for evaluating the struggle to reduce cost?" Object-
ing to the absence in the state plan of any index concerned purely
with cost as such, he advocates adoption of a modified form of the
index of Change in cost.
The many methodological problems inherent in Soviet.in-
dexes on the dynamics of cost raise serious doubts as to the validity
and usefulness of such data, and yet the matter of systematically re-
ducing unit costs by fixed percentages and ruble values is treated
with the utmost seriousness in the state plans. Under the Seven Year
Plan, for example, the outlays of production in industry, construc-
tion, transportation, and the sovkhozes are to be reduced by approxi-
mately 850 billion rubles, a sum equal to almost one-half of the
state capital investments planned for the 7-year period.
3. Institutional and Technological Factors
In addition to distortions arising from methodological
problems inherent in Soviet indexes on the dynamics of cost, there
are several institutional and technological factors that currently
bear on the problem. The Soviet regimeis bringing pressure to bear
on machine building to intensify the degree of plant specialization
with respect to basic manufacturing processes.and product mix at the
same time that it is attempting to foster the production of tech-
nologically more advanced and diversified output.
In the past the overwhelming drive of the Soviet leaders
for quantity output at almost any cost led to the practice of dis-
persing production of some articles aMong high-cost producing plants.
The practice of allowing some plants to manufacture an article at
higher costs than others set the stage for substantial reductions in
cost at the plants that were initially high-cost producers. Such re-
ductions have been achieved by an unceasing campaign directed at high-
cost producers to make them emulate the methods of the low-cost pro-
ducers. Because of the absence of industry "trade secrets" within
the economy, the USSR has been in a position to introduce, at any pro-
ducing plant whatsoever, innovations and rational schemes developed
at other plants. Although it is not possible to assess quantitatively
the degree to which this factor has contributed to the annual reduc-
tions in the cost of comparable output in Soviet machine building, it
is reasonable to assume that reductions from this source will be harder
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to come by as the current program of "specialization and cooperation"
tends to eliminate duplication of production programs among machine
building plants.
Combined with the drive to increase plant specialization
in machine building is a perceptible change in Soviet requirements,
as expressed by the regime, in the mix and design of machinery and
equipment for the economy. In spite of reductions in cost realiz-
able from greater specialization in production of semifinished
artiales as well as standardized parts, components, and finished
articles manufactured on a mass or large-series scale, Soviet re-
quirements for technologically more advanced articles may lead to
an increase in the over-all level of cost. The extent to which new
articles (noncomparable output) may increase their share in the total
commodity output of machine building or influence the ratio of out-
lays to the value of commodity output will, of course, depend on a
number of factors. One factor is the relative emphasis placed by
the regime on the domestic manufacture of new articles at any cost.
Another is the extent to which the required types of machinery and
equipment can, be standardized and produced on either a mass or large-
series scale. Still another factor is whether or not -- if the cost
of a major effort to introduce the most advanced types of machinery
and equipment into the economy is very high --the present method of -
financing the cost of developmental work and tooling will be con-
tinued or whether a new method may be adopted.
In spite of the increasing importance of cost considera-
tions in the organization of the production programs of Soviet ma-
chine building, it may reasonably be assumed that the desire of the
Soviet leadership to achieve equality with, and eventually to over-
take, the major industrial powers of the West in respect to the level
of technology throughout the economy will justify the priority of .
physical production targets over considerations of cost in the case
of particular types of machinery and equipment deemed essential to
meeting immediate policy objectives. The recently initiated program
for radically increasing the production of petrochemical equipment by
dispersing production among various types of machine building plants
as well as by expanding the petrochemical equipment industry itself,
for example, emphasizes that under the Soviet system of selective
forced-draft development of critical industries, physical production
targets of machinery and equipment are of paramount importance when
imports cannot be relied on to fill the gap in domestic requirements.
As the pressures to keep abreast of Western technology
in industry have increased, the Soviet machine building industries
have had to produce not only new standard equipment but also custom
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equipment. Such production is'burdensome to the Soviet method of
planning and controlling the cost of production, and it is declared
Soviet policy to standardize articles for large-stale production
wherever possible. Because of the almost unlimited requirement in
basic types of machinery and equipment that has Characterized the
Soviet economy since the inauguration of the 5-year plans in 1928,
it has generally been economically feasible to standardize articles
to a high degree and to manufacture them on a series or mass produc-
tion basis with comparatively low unit costs of production. At the
present time, however, as the technology of production grows more
sophisticated, greater emphasis is being placed on complex automated
types of equipment,. especially in the chemical and ferrous metal-
lurgical industries. Not all components of such equipment readily
lend themselves to standardization, and it may be assumed that the
unit costs of manufacturing them are consequently high.
Soviet economists have alleged that the present system
of costing tends to retard the introduction of new articles both
because of the high initial cost to the consumer and because of the
lack of any harked profitability to the producer. Although it is
professed Soviet policy to encourage the introduction of technically
advanced equipment, the present method of charging off the cost of
developmental work and tooling at the plant to the initial produc-
tion cost allegedly tends to discourage immediate widespread intro-
duction of such equipment because of its high price. Nor does the
high initial cost generally associated with new articles in Soviet
machine building necessarily make them more profitable than estab-
lished articles for the producing plant to manufacture.
Although, in practice, producing plants may unofficially
"pad" the estimated cost of new articles in order to assure them-
selves a margin of profit, the enterprise wholesale price of new
articles in machine building is ordinarily set at a level that is
3 to 5 percent above the estimated cost. This margin of profit is
similar to that set on established articles in machine building when-
ever prices are adjusted to costs. The fact that prices of estab-
lished articles may be reviewed and adjusted to costs only at rather
prolonged intervals in the USSR, however, means that, as prices re-
main constant and costs steadily decline, the margin of profit on
established articles increases. Thus although a producing plant
may meet its production target with respect to the planned volume of
output of new articles, output in excess of the plan is apt to con-
sist of those articles which are most profitable -- namely, estab-
lished articles the prices of which have not currently been adjusted.
The expenditure of precious resources on established articles that
may be technologically inferior to new articles is not a desirable
situation from the Soviet point of view.
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Although it is obvious that,some reform could be intro-
duced to change the situation, any change of the. existing procedure
of costing new articles would presumably involve a degree of direct
subsidization from the budget, a practice which runs counter to the
principles of khozraschet and a practice from which the Soviet leader-
ship attempted to escape at the time of the 1949 wholesale price re-
form. Furthermore, the high initial costs (and prices) of new
articles tend to inflate the index of gross output and contribute to?
a substantially higher growth rate in machine building than would
otherwise be the case, a feature that is of important propaganda
value. Indexes of reduction in cost also are enhanced by the exist-
ing Soviet cost system, once the unit cost. of new articles commences
to decline.
A factor that weighs against these paper considerations
is the official concern with the present rate of introducing equip-
ment of improved design and efficiency. Methods of stimulating a
more rapid rate of expansion and replacement of existing inventories
of machinery and equipment with better machinery and equipment, how-
ever, presumably must not be incompatible with the centralized method
of controlling the financial activities of state enterprises. Should
the .Soviet authorities feel that the present method of costing and
pricing new articles is a stumbling block to their broader policy
objectives, it is entirely possible that a change might be made if
it did not run contrary to the principles of khozraschet.
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IV. Structure of Cost
A. Comparison of Machine Building with Other Industries*
Soviet economists, in analyzing the structure of cost in an
industry, attach considerable importance to the relationship between
the outlays fol. materials (including fuel, energy, and amortization
of fixed capital) and the outlays for wages (including deductions for
social insurance). Information on this relationship is needed in a
planned economy for the regulating of wage rates, on the one hand, and
of prices of materials and amortization charges,** on the other. In
general, a decline in outlays for wages relative to outlays for mate-
rials in the structure of cost is considered in the USSR to be an eco-
nomically desirable development and an indication of technological
progress.
The high degree of standardization in the accounting and re-
porting documents of nearly all Soviet industries facilitates compari-
sons of the structure of cost not only between individual plants within
an industry but also between industries. In such comparisons the struc-
ture of cost is analyzed on the basis of the homogeneous primary eco-
nomic elements found in the estimate of outlays for production. In
Table 4xxx the structure of the cost of output in Soviet machine build-
ing is compared with the structure of the cost of output in other se-
lected heavy industries and in Soviet industry as a whole in 1959, the
individual industries being arranged from left to right in the descend-
ing order of their labor intensiveness in terns of cost.
The most labor-intensive industries in the USSR are the extrac-
tive and machine building industries, where higher wages are paid and/or
relatively larger amounts of manual labor are required than in industry
as a whole. In the materials-intensive industries, such as the chemical
and energies industries, the share of wages and deductions from wages in
the total cost of output is below the average for industry as a whole.
B. Changes in Machine Building, 1932-59t
As shown in the tabulation below the balance between materials
and wages in the cost of output in Soviet machine building changed
markedly in the 27 years between 1932 and 1959.
*
** Until 1955, Soviet amortization charges on machinery and equip-
ment were based on physical depreciation and capital repair only.
Since that time, there has been an attempt to allow for technological
obsolescence as well.
*** Table 4 follows on p. 54.
t 12/
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Table L.
USSR: Structure of the Cost Of Output in Industry as a Whole.
and in Selected Heavy Industries
1959
Percent a/
Outlays Categorized
Industry.
Machine Building
Petroleum
Ferrous
Electric
and Steam
by Primary Economic Elements
as a Whole
Coal
and Metalworking
Extraction
Metallurgy
Chemicals
Energy
Basic materials
63.9
16.9
51.8
0
1 48.4
:63.9
0
Auxiliary materials
4.8
13.5
4.5
'
8.4
6.0
5.6
4.7
Fuel
3.6
0.8
2.0
1.8
13.5
2.3
55.0
Energy
1.7
2.7-
2.1
8.9
2.1,
5.2
0.3
Wages and deductions for
social insurance
19.3 '
. 53.6
31.7
22.5
21.1
16.0
14.5
Amortization
3.5
5.7
3.9
46.5
5.8
. 4.0
20.3
Other expenditures
. 3.2
6.8
4.o
a1.9
. 3.1
3.0
5.2
Total
100.0
100.0
100.0
100.0
100.0
100.0
100.0
a. Based on outlays of production in-current rubles.
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Percent
Outlays 1932 1940 1953 1955 1957 1959
Materials (including
fuels and energy)
and amortization
39.3
57.9
64.4
63.1
62.2
64.3
Wages (including de-
ductions for social
insurance)
51.1
36.5
31.3
33.2
34.1
31.7
Other expenditures
9.6
5.6
4.3.
3.7
3.7
4.o
Total 100.0 100.0 100.0 100.0 100.0 100.0
The relative decline in wages may be attributed mainly to the growth
of mechanization and to new technologies of production. According to
Soviet economists, the change in the structure of cost has been espe-
cially marked in machine building because of the introduction of mass
and large-series production techniques. Soviet economists further
claim that the increase in the share of materials and amortization and
the decrease in the share of wages has been accompanied by a steady
reduction in total outlays per unit of output. Whether or not declines
in Soviet accounting costs per unit of output can be considered a reli-
able indication of declines in real costs, however, is far from certain.
It is noteworthy that the share of wages and deductions from wages
tended to increase between 1953 and 1957. This change probably was
due to reductions in the wholesale prices of materials as well as to
increases in wages which occurred during this period.
C. Analysis*
1. Machine Building as a Whole
The structure of cost in Soviet machine building is typi-
fied by the following characteristics: (a) a sizable share of outlays
for basic materials in comparison with most other branches of heavy
industry, (b) the purchase by some machine building plants of large
quantities of semifinished goods from other machine building plants,
and (c) a large wage bill compared with the average for industry.
The relatively high share of outlays both for materials
and wages 'in machine building is explained by several qualitative con-
siderations. Not only are relatively expensive materials (high-quality
ferrous and nonferrous metals) used in machine building, but these
* 20/
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materials also are subjected to complex and repeated processing at the
machine building plants. The degree to which raw materials are con-
verted into semifinished goods within the plant that manufactures the
finished article (that is, the degree of vertical integration) and the
degree to which semifinished goods are purchased from other plants (a
transaction known as "cooperation" in the USSR) varies greatly from
plant to plant within the machine building industry.
In the technology of Soviet machine building, there is a
predominance of mechanical processing that is more labor consuming,
for example, than the chemical and electrical processes employed in
some other branches of industry. Differences in the share of wages in
the total outlays of individual machine building plants largely reflect
the relative cOmplexity of the technology in use at the plant and the
amount of precision work requiring a high degree of manual skill.
The relatively small outlays for fuel and electrical energy
in machine building as compared with some other branches of industry is
explained mainly by the very limited use in machine building of chemical
and electrical processes that require a large amount of fuel and energy.
The size of the outlays for fuel and energy in machine building plants
depends largely on the level of technology and the 'scale of production
in foundries and forges.
The percentage of outlays for amortization in machine build-
ing is relatively small, considering the complexity and cost of equip-
ment. Soviet economists explain this fact in large part, however, by
citing the ,relatively high productivity of the equipment found in ma-
chine building plants.
2. Individual Machine Building Plants and Shops
The cost pattern varies between individual types of machine
building plants, depending on a number of factors. Differences in the
structure of cost within the machine building industry are illustrated
in the tabulation below, where various costs in a heavy machine build-
ing plant are compared with those in a plant producing cutting tools:
Percent
, Heavy Machine
Building Plant
Cutting Tools
Plant
Materials (less scrap)
23.1
38.8
Purchases of semifinished goods
22.4
o
Auxiliary and other materials
4.0
7.7
Fuel
8.9
1.6
Energy
0.6
1.6
Base and supplemental wages
30.7
37.9
Deductions foo social insurance
2.1
2.9
Amortization
4.5
4.4
Other expenditures
3.7
5.1
Total
100.0
100.0
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The total structure of the cost of output also varies
greatly among the 'individual shops of a machine building plant. Cost
categorized by items of calculation instead of by primary elements is
usually used in comparing the structureof cost in the various shops,
within a machine building plant, especially if intraplant khozraschet
is established at the plant. The tabulation below shows the structure
of the actual cost of output in selected shops of the Urals Heavy Ma-
chine Building Plant in a recent year.
Percent
Outlays
Assembly Shop
Foundry
Forge
Repair
Shop
Tool
Shop
Materials
Fuel used directly
in the production
77.6
24.6
68.2
20.4
35.4
process
0
0.6
3.3
o
0
Electrical energy
used directly in
the production
process
0
7.8
o
o
0
Wages paid to pro-
duction workers
4.8
15.3
3.3
30.1
28.2
Deductions for the
social insurance
of production
workers
0.4
1.3
0.3
2.8
2.3
Shop expenditures
14.0
43.0
20.3
46.3
34.1
Depreciation of
cutting tools and
dies
2.6
1.1
4.5
0.4
0
Losses from rejects
0.6
6.3
0.4
o
o
Total
100.0
100.0
100.0
100.0
100.0
Differences in the structure of cost at the various shops
are explained primarily by differences in the technology and organiza-
tion of production. Thus in the assembly shop the outlays for semi-
finished goods (parts and components) manufactured in other shops at
the plant or at cooperating enterprises account for a large share in
the cost of output. Outlays for materials other than semifinished
goods are small in assembly shops.
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The large share of outlays for energy used directly in pro-
duction in the foundry is due to the use of electric furnaces for smelt-
ing metal. The sizable outlays for cutting tools. and'Aies in the forge
compared with the other shops-result from the extensive use of stamping
and, increasingly, Costly dies.'
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?
APPENDIX A
KHOZRASCHET*
The system of khozraschet was introduced in the USSR in 1921 at
the inception of the New Economic Policy (NEP). Lenin is quoted as
having written that "the transfer of state enterprises to so-called
khozyaystvennyy raschet is inevitably and indissolubly connected with
the new economic policy and in the near future this type of enter-
prise will inevitably become predominant, if not exclusive." The
trend toward khozraschet was accelerated under the policy of indus-
trializing the country. A decree of the Central Committee of the
All-Union Communist Party, dated 5 December 1929, on reorganization
of the administration of industry declared that khozraschet had fully
justified itself and that it was to be introduced in all enterprises
of state industry. During World War II, however, substantial con-
cessions were made in this policy as the result of wartime economic
pressures. Since the war a number of measures have been inaugurated
to restrengthen the khozraschet system in state enterprises.
Khozraschet enterprises are distinguished from budgetary enter-
prises by the following features:
1. A,charter establishing the departmental subordi-
nation of the enterprise, its structure, the
competence of the administrative and technical
chiefs, the rights and obligations of the en-
terprise as a juridical entity, and its rela-
tionship to controlling economic organizations.
2. A charter fund allocated by the government in
the form of fixed and working capital needed
by the enterprise for obtaining the physical
resources required for continuous operation
in fulfillment of state plans.
3. A plan of operation organized on the basis of
an annual technical-industrial-financial plan
(tekhpromfinplan) detailing the planned tar-
gets with respect to volume of production,
labor, cost of output, materials and technical
equipment to be supplied, the sale of output,
financing, and capital accumulations.
21/. See the second footnote on p. 10, above.
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4. Operational independence in the disposition of
funds within the limits of the existing state
plan. This independence is exercised by the
directors of the enterprise in devising and
applying the most effective methods of organiz-
ing production, of providing the enterprise
with the necessary labor force, of procuring
materials at the proper prices, and of selling
the output of the enterprise at established
state prices.
5. The utilization of credit in appropriate banking
institutions when the working capital allotted
to the enterprise proves to be insufficient.
6. The use of a payment account (raschetnyy schet)
in the State Bank (Gosbank) for accumulating
reserve funds.
7. A complete system of recording (uchet) and re-
porting (otchet) in order to show the results
of economic activities connected with produc-
tion.
8. A periodic balancing of the books to establish
the financial status of the enterprise.
9. Provision of material incentives for the per-
sonnel of enterprises by utilizing a part of
the enterprise's capital accumulations for
awarding premiums and for improving living
conditions.
10. Responsibility for a rational program of opera-
tion, including proper and efficient utiliza-
tion of labor, materials, and finances.
Khozraschet enterprises are charged with definite responsibilities
in the following 'activities at the enterprise level: the planning of
production, the planning and supervision of capital construction, the
exercise of technical control, the organization of the supply and sales
system, the conduct of commercial and financial transactions, the set-
tlement of labor problems, the training and assignment of the labor
force, and the appointment and dismissal of supervisory personnel.
Of all the features that set a khozraschet enterprise apart from
a budgetary enterprise, perhaps the most significant is the responsi-
bility that the khozraschet enterprise bears to the state in return
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for the use of state-owned capital. The fixed capital that the state
allocates to each khozraschet enterprise is used to erect and equip
the physical plant, and the working capital is used to purchase stocks
of materials in given quantities and prices and to maintain funds in
the bank for paying the wage bill and settling the accounts of the
enterprise with other enterprises and organizations. A khozraschet
enterprise may increase its fixed capital through capital accumula-
tion -- that is, by investing a portion of its profits in expanding
or modernizing the plant. In the event that the working capital
allocated to a khozraschet enterprise by the state in the charter
fund is insufficient, the enterprise can obtain bank credit that is
repayable at a date and with a fixed percentage fee dependent on the
size of the loan and the length of the period for which it is granted.
The state, as the owner of the capital allocated to khozraschet
enterprises, has the right to redistribute working capital by with-
drawing surplus working capital from one enterprise and transferring
it to another enterprise that is short of working capital. Under the
former ministerial system of managing the economy, the state, granted
ministries the right to build up reserves in the amount of 3 percent
of a ministry's total working capital in order to render temporary
financial aid to its enterprises. A ministry could use the reserve
working capital of one of its enterprises for another of its enter-
prises on the condition that the capital be returned within a period
of 3 months, with payment of a fee corresponding to the percentage
rate prevailing in Gosbank. Under the present system, when produc-
tion is being expanded and an enterprise cannot meet the required in-
crease in working capital from its own capital accumulations, sup-
plemental working capital may be allocated from the state budget.
Another marked feature of most khozraschet enterprises is that
they are expected to operate at ,a planned profit. The profit of an
enterprise represents the margin between the full ruble cost and the
wholesale price of the output of the enterprise. It is this oppor-
tunity to make not only the planned profit but a profit even greater
than planned that the Soviet state regards as the principal incentive
in its drive for continuously improving efficiency and productivity
in state industry. The more that the actual cost of production can
be trimmed in comparison with the planned cost, the greater is the
profit of the enterprise.*
* Sometimes the methods of making greater-than-planned profits have
been of dubious benefit to the economy as a whole, and other methods
that have been clearly at the expense of the planned product mix have
been roundly condemned by the state.
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The profit realized by a khozraschet enterprise is usually dis-
bursed flIong the following items:
1. Payments to the state budget
2. Payments to the Industrial Bank (Prombank) for use in
capital construction
3. Replenishment of the enterprise's working capital ?
4. Financing of special measures, such as the training
of personnel, the introduction of new technical
equipment, the repayment of losses incurred in
operating the enterprise's housing, and municipal
services
5. Capital construction (over and above planned capital
investments)
6. Cultural services and bonuses to workers and improve-
ment of housing
Some of the features of khozraschet that are applicable at the
general plant level do not apply at the shop level or in the relation-
ships between shops within a plant which operate under so-called in-
trapiant khozraschet. For example, the contract basis of delivery
from one khozraschet enterprise to another; the independent account-
ing balance sheet, the payment account in Gosbank, and the granting
of bank credits, all of which are characteristic features of khoz-
raschet at the plant leVel, do not apply to shops and other organi-
zational/units of a pint operating under intraplant khozraschet.
The principal financial control over khozraschet enterprises is
exercised by the Ministry of State Control and the Control and the
Control-Revision Administration of the Ministry yf Finance, USSR.
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APPENDDC B
NORMS*
1. General
Basic to the Soviet system of planning and controlling the volume,
cost, and price of industrial output is the widespread and, in machine
building, mandatory use of norms to calculate the inputs of production
and to derive indexes of productional efficiency. Soviet economists
describe these norms as "computed values used for planning the pro-
duction program and the technical and economic efficiency of an enter-
prise as well as for evaluating its performance."
Although each norm is a specific value, all norms are subject to
periodic review and adjustment as changes occur in the technology and
organization of production. In establishing norms, Soviet officials
insist that they be "progressive" -- a Soviet euphemism meaning that
norms must be continually tightened up.
Soviet planners declare that the setting of norms of production is
Indispensable to running a planned economy. Norms are considered
essential in establishing the national economic balance sheet in which
available supplies of materials are correlated with the consumption
requirements of production. In machine building, where so much of the
output is produced on a mass or large-series scale in widely divergent
economic areas, norms are an important element in bringing productional
efficiency in the manufacture of similar products into a more uniform
relationship over the country.
2. Types of Norms
a. Consumption Norms
Because it is used to determine more than 90 percent of the
cost of output in Soviet machine building, the consumption norm
(raskhodnaya norma or norma raskhoda) merits primary consideration.
In keeping with Soviet accounting categories, the two principal types
of consumption norm used to compute the outlays of production are the
labor consumption norm (norma zatrat truda) and the material consump-
tion norm (norma raskhoda Materialynykh resursov).
* 22
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(1) Labor Consumption Norms
Labor consumption norms stipulate the amount of time re-
quired for a worker to perform a unit of work (an operation) or the
amount of output that a worker can produce in a given time. The first
is called a time norm (norma vremeni) and the second an output norm
(norma vyrabotki). The output norm is actually a derivative of the
time norm.
(a) Time Norms
Time norms are usually used to measure labor inputs at
machine building plants where the output is produced in small series
or in single units. These norms are established by determining the
amount of working time (hours and minutes) required by a skilled
worker to complete a particular job or operation under the prevailing
technology and organization of production.
When wages are paid on a piece-rate basis, ae is com-
mon in machine building, the time norm is used to establish wages in
relation to the orders being filled. Thus the time norm stipulates
the amount of working time (basic and subsidiary) to be allocated
directly to the productional operation, the amount to be spent in
servicing the work area, and the amount of preparatory and down time
allowed in the manufacture of an entire batch of articles.
(b) Output Norms
The output norm specifies the number of units of out-
put, expressed in tons, kilograms, meters, pieces, or the like, that
a worker must produce in a given length of time. Output norms are
used primarily where mass and large-series production prevail. Such
norms may be established equally well for the plant as a whole or for
groups of workers. The best productional results achieved by one
plant or by one group of workers in a plant are used to spur the more
backward plants and workers throughout the USSR to improve their labor
productivity. Output norms are used extensively in intraplant plan-
ning and accounting.
(c) Principles for Setting Labor Norms
In many cases, one and the same operation can be per-
formed in machine building using different methods and different
equipment. Consequently, different amounts of time may be required
to complete an operation, depending on the method and equipment used.
To achieve the highest productivity of labor in the performance of a
specific operation, Soviet officials call for adoption of the method
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that embodies the most effective utilization of equipment, the most
productive technology, and the best organization-of labor.
Soviet economists distinguish between two methods of
setting labor norms. One method is referred to as the analytical
method (analiticheskiy metod) and the other as the empirical-
statistical method (opytno-statisticheskiy metod). The second
method is in disfavor.
The analytical method of establishing labor norms is
based on "a strict verification of potential increases in the pro-
ductivity of labor and of the optimum utilization of equipment and
organization of labor." The analytical approach to setting.labor
norms is considered the only truly scientific approach. All, labor
consumption norms determined by the analytical method are referred to
as technically based norms (tekhnicheski-obosnovannyye normy). The
analytical method requires a breakdown of each operation into elements,
a computation of the duration of each element of the operation, and
finally a computation of the norm as a whole. Calculations are based
on indexes that describe the absolute productional capabilities of the
equipment used (capacity, load limit, and the like), the material
factors which influence the productivity of labor (the quality of the
materials processed and the cutting tools used), and the optimum
utilization of working time, not only with respect to equipment, tools,
and materials but also with respect to the skills of the worker. This
approach to setting labor norms requires independent research in order
to determine which, method insures the maximum utilization of the
factors of production. The approach also involves the chronometering
of working time and dissemination of the best results and most ad-
vanced methods. Technically based norms are considered "progressive"
norms, as they allow for continuous increases in labor productivity
independent of actual performance at any time.
In practice, however, some industrial enterprises ap-
parently still use the so-called empirical-statistical norms in place
of or along with technically based norms. Such norms are established
on the basis of reported statistical data in the previous period or
merely on the basis of the observations of norm setters. Both the
Communist Party and the Soviet government have condemned the use of
empirical-statistical norms, for they do not insure the maximum growth
of labor productivity. There is an active campaign to eliminate en-
tirely empirical-statistical norms from Soviet machine building.
(d) Uses of Labor Consumption Norms
In the USSR, labor consumption norms are used not only
to determine the share of the wages of individual production workers
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(or groups of production workers) in the total wage bill of a plant or
industry but also to measure changes in labor productivity. In plan-
ning the production programs, labor consumption norms provide the data
necessary for computing the production potential of individual sections,
shops, and plants as a whole; for determining the amount of equipment,
the number of workers, and the wage fund required to meet a production
target; and for scheduling completion dates in the manufacture of com-
ponents, parts, and finished articles.
Labor consumption norms also are used to determine the
labor intensiveness (trudoyemkosty) of production and to plan the cost
of labor per unit of output. The share of the cost of labor in the
total cost per unit of output is calculated from the sum of the indi-
vidual time norms for all operations required to manufacture a unit of
output under the given conditions of production. Because labor con-
sumption norms are used to plan the production programs of plants, the
quality of planning depends in large part on the validity of the norms.
Soviet planners declare that the correct formulation of labor con-
sumption norms is prerequisite to the correct planning of wages.
(2) Material Consumption Norms
Material consumption norms stipulate the amounts of various
materials .considered necessary for production of a unit of output or
the completion of a unit of work under specified conditions of produc-
tion. Soviet officials take the position that a planned economy is
impossible without technical norms which can be used to plan the
material inputs of production.
Although, in the broadest sense, machinery and equipment
are classified as materials in the USSR, the setting of norms for the
depreciation of machinery and equipment follows a pattern different
from that followed in setting norms for the consumption of raw mate-
rials, processed materials, fuel, and electric energy. The difference
arises from the fact that materials, fuel, and electric energy are
classified as working capital, whereas machinery and equipment are
classified as fixed capital. In setting norms for raw materials,
processed materials, fuel, and electric energy, consumption is computed
per unit of output, whereas in setting norms for machinery and equip-
ment, it is the degree of utilization and the length of service that
are computed. For the sake of convenience, norms pertaining to raw
materials, processed materials, fuel, and electric energy are treated
under material consumption norms in this appendix, whereas norms per-
taining to machinery and equipment are treated under the separate
subheading of amortization norms.*
* For a discussion of amortization norms, see b, p. 70, below.
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ret
4.
(a) Classification of Material Consumption Norms
There are several criteria for classifying material
consumption norms in the USSR. On a substantive basis, all material
consumption norms are classified as specific or general. Specific
norms are formulated to cover the materials consumed in the per-
formance of a specific operation or for the manufacture of specific
articles. General norms are designed to cover the materials consumed
in diverse types of operations where the only common unit is rubles
or hours.
A similar distinction is made with respect to the
applicability of material consumption norms. Here, norms are charac-
terized as individual or group norms. Individual norms are those
which are limited in application to the manufacture of a single
article or to production performed on a single piece of equipment.
Group norms apply to articles of a similar type or nomenclature manu-
factured on more than a single given machine. Group norms are really
aggregative norms that reflect the average consumption of materials
per unit of output for specific administrative or geographic juris-
dictions in the USSR.
With respect to their effective duration, material
consumption norms are classified as annual norms and current norms.
As a rule, material consumption norms are effective for a year. In
addition to annual norms, however, current norms may be established
for specific periods within the year when there are regular seasonal
fluctuations in the percentage of materials consumed per unit of
output or when changes in the consumption pattern arise from organi-
zational and technical measures taken to realize economies of pro-
duction. Current norms may be higher or lower than the annual norms.
The weighted average of all the current norms in the course of a
year, however, must be equal to or better than the approved annual
norm.
Still another distinction in material consumption
norms is made between technical norms and technical-economic norms.
Technical norms merely indicate the amount of materials required to
produce a unit of one or another type of output. In making the
calculations for these norms, use is made of technical data contained
in the designing documents and of results obtained from test pro-
duction runs. Technical norms are calculated with the use of specific
equipment and on the assumption of optimum output under the given
conditions of production. Because actual conditions of production do,
in fact, vary, technical norms also may vary. Technical norms are
formulated without considering the factor of cost.
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Technical-economic norms are based on technical norms
but, in addition, take into account all the economic factors of pro-
duction. These norms are designed to improve the utilization of
materials in production and to reduce the cost of output.' In formu-
lating technical-economic norms, the norm setters take into considera-
tion recommendations that have been made by innovators and rational-
izers to streamline production and conserve materials as well as the
latest achievements of science and engineering.
(b) Formulation of Technical-Economic Norms
In principle, technical-economic norms are identical
in structure for practically all types of,materials. The formula used
in setting consumption norms for materials is ND = T + D + P, where T
is the net amount of materials required per uniI of finished output,
D represents additional consumption per unit of output arising from
losses attributable to the technology of production, and P represents
additional consumption of materials per unit of output other than,
those directly attributable to the technology of production -- mainly
losses occurring in the delivery and handling of materials.
The value T in production of one or another type of
output either is.calculated by formulas or is determined by a direct
measurement or weighing of the finished article. In setting norms for
the consumption of metal or wood in production of articles that are
made exclusively of metal or wood, for example, the value T is identi-
cal with the net weight of the metal article or the net volume of the
wooden article. The difference between the actual consumption of
materials.per unit of output and the value T is used as an indica-
tor of the efficiency of the technological process in use. For
any. given technological process of production or given design of an
article, the?value T is a fiXed-amount. Whenever the technology of
production or the design is changed, the value T also is changed.
The tiorogressiveness" of a newly formulated technical-economic norm
is gauged by comparing not only the value T in the respective norms
but also the values D and P.
It is recognized, of course, that losses of material
inputs (D) arising from the technology of production are inevitable in
any given production process. The official -Soviet position, however,
is that the .size of the losses is not fixed and can always be further
reduced.
As for losses connected with the handling of materials
and finished output (P), .the official position is that such losses are
not inevitable and can be partly or entirely eliminated.
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Technical-economic norms may be reduced by either of
two methods: by reducing losses of materials in production (D and P)
or by decreasing the net consumption of materials per unit of output
(T). As an example of the latter method, the consumption norm for
metal in machines can be reduced by introducing rational changes in
the design of parts and components.
(c) Principles for Setting Material Consumption Norms
One of the major considerations in setting material !
consumption norms is the dovetailing of norms with state plans for
conserving'haterials. Reduction of unit consumption of materials in
Soviet industry is effected in the main by the tightening up of norms.
The Soviet regime has devised a number of methods, in the absence of
markt competition, to spur reductions in material consumption per
unit of output. These methods include socialist competition, ration-
alization and innovation, and recognition of better-than-norm per-
formance, all of which are accompanied by honorific and/or monetary
rewards. These various methods of reducing consumption are incorpo-
ratedin subsequent norms that thus serve as the principal vehicle for
continuous reduction in the outlays of materials per unit of output.
In planning the future output of articles that also
have been produced in the past (so-called comparable output), Soviet
officials stipulate the total amount by which the unit consumption of
materials is to be reduced. For example, the state supply plans for
1949-52 called for a reduction of about 3 million metric tons of fer-
rous metals, 4o million metric tons of standard fuel, 8 billion
kilowatt-hours of electric energy, and 14 million cubic meters of
lumber. Such goals are implemented by successive reductions in the
material consumption norms each year and are formulated on the basis
of a plan of organizational and technical measures (orgtekhplan)
drawn up by each plant in an effort to improve the utilization of
resources. Soviet officials claim that the setting of norms for the
consumption of materials facilitates better organization of production,
reduction of the cost of comparable output, administration of khoz-
raschet, and reduction of excess stocks of materials while generally
increasing the profitability of enterprises. In 1954, with a re-
duction of 4.4 percent planned in the cost of industrial output,
1.2 percent was to be achieved by reducing outlays of raw materials,
processed materials, fuel, and electric energy per unit of output.
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(d) Procedure for Establishing Material Consumption Norms*
Drafts of new consumption norms, incorporating pro-
spective reductions compared with prevailing norms, were worked out by
plants and submitted for approval to the appropriate main administra-
tion and ministry. The ministry submitted drafts of the most impor-
tant material consumption norms, particularly those involving critical
or deficit materials, to Gosplan, USSR, for approval. Individual
norms that were deemed especially important required the approval of
the Council of Ministers, USSR.
The Council of Ministers annually established for the
individual ministries and departments the quotas for the average re-
duction of material consumption norms, presumably based on the require-
ments of over-all economic planning. The ministries and departments,
in conformity with these quotas, approved or adjusted the consumption
norms submitted to them by their producing plants. These official
norms were then disseminated to the production level.. Individual norms
that had been coordinated with Gosplan, USSR, were formally confirmed
by the ministries. A, ministry could subdivide group norms that had
been coordinated with Gosplan, USSR, into differentiated norms appli-
cable to its various main administrations and producing plants. These
differentiated norms could deviate from the group norm but, when
.averaged together, had to conform to the group norm.
b. Amortization Norms
The amortization norm is used to establish the amount by which
the initial value of machinery and equipment is to be written off
annually. In the majority of cases the annual amortization norm in
(Sf R-L)100
percent is determined by the use of the formula where
DC where
Sf is the full initial value of the fixed capital,
R is the value of capital repair and expenditures
connected with liquidation,
L is the residual value of the machine or piece
of equipment being amortized, and
D is the length of service.
* This description is based on the procedure followed under the minis-
terial form of organization. It is Lfootnote continued on p. 717
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?
Since 1938 the Soviet government has confirmed for the separate
branches of the national economy (and for industry in particular)
'average norms of .amortization deductions, expressed as percentages of
the initial value of existing machinery and equipment. In view of the
heterogeneous composition of fixed capital in industry as well as dif-
ferences in the degree of utilization and consequently differences in
the depreciation period, differentiated amortization norms exist within
the individual industries and plants. The differentiated amortization
norms established for producing plants fall within the limits of the
deductions and appropriations approved for their industry as a whole.
The plant, in turn, may use differentiated norms for each type of ma-
chinery and equipment within the limits of the amortization norms ap-
proved for the plant. Plants calculate amortization monthly (at the
beginning of the month) by computing the percentage of the annual
amortization norm or the percentage of work completed.
believed that the same procedural principles are followed today, with
the difference that the regional economic councils and the councils of
ministers of the various republics have replaced the main administra-
tions and ministries, respectively. It is believed that the regional
offices of the CSA and Gosplan now play a more decisive role than
heretofore by exercising a closer check on data and analysis.
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APPENDIX C
THE NORMATIVE METHOD OF CALCULATING THE UNIT COST OF OUTPUT*
1. Determination of Deviations from Material Consumption Norms
Plants that use normative accounting usually determine deviations
from current norms for the materials consumed in the manufacture of
given groups or types of similar articles by the method that follows.
The bookkeeping office of Plant X, for example, draws up a monthly
Record of the Movement of Materials in Production of a given type of
machine.** This report establishes the balances of materials on
hand at the beginning of the month, the flow of materials to the
shops of the plant during the month, and (on the basis of an inven-
tory) the balances on hand at the end of the month. With the use of
these data, the actual consumption of materials is computed for the
month -- Columns (9) and (10) in Table 5 -- the result is compared
with the consumption norm for the month -- Columns (11) and (12) 7-
and deviations from the current norms are computed -- Columns (13)
and (14). The deviations from material consumption norms shown in
Columns (13) and (14) are then transferred to a worksheet on which
the consumption norm and the deviations from the consumption norm
are recorded for each of the items of calculation appropriate to
production of the given type of machine.***
2. . Monthly Worksheet for Computing Basic Production
Where the normative method of accounting is used in machine build-
ing, an index of deviations from current norms is computed as a pre-
requisite to calculating the actual unit cost of individual articles.
Such an index is computed separately on monthly work sheetst for each
group of similar articles before monthly cost calculation reports are
submitted. In Columns (10) and (22) of the worksheet shown in Table 6,
the ruble values of deviations from current norms for Type S machines
are entered opposite the respective items of calculation. Column (20)
shows the ruble value of outlays for the month that can be charged to
commodity output. The ruble values of the deviations from the norms --
Column (22) -- are then divided by the value of the outlays chargedtt
* 23/
** For a sample of such a monthly record, see Table 5, which follows
on p. 75.
*** See Columns (7) and (8), (9) and (10), and (21) and (22) of the
sample worksheet in Table 6, which follows on p. 77.
t For a sample worksheet, see Table 6, which follows on p. 77.
tt Text continued on p. 79.
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Table 5
USSR: Sample Record of the Movement of Materials in Production of Type S Machines at Machine Building Plant X a/
July 1957
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (1)+)
Balance at Beginning of Month Flow of Materials to Shop
Total
Balance at End of Month Total Consumed
Consumption Norm Deviations from Consumption Norm
Shop
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Quantity
(Metric Tons)
Value
(Thousand Rubles)
Foundry A
36
570
1,883
30,525
1,919
31,095
14
223
1,905
30,872
2,081
34,216
-176
-3,344
Forge B
5
80
2,758
43,963
2,763
44,043
3
48
2,760
43,995
2,618
41,734
+142
+2,261
Assembly shop C
31
660
2,479
52,639
2,510
53,299
30
64o
2,480
52,659
2,500
53,086
-20
-427
Total materials 1,310 127,127 128,437 911 127,526 129,036 -1,510
a. Based on hypothetical data. Blank spaces indicate that there are no applicable data or that data are not pertinent to the computation.
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to commodity output -- Column (20) -- to derive an index of deviations --
Column (24) -- for calculating the unit cost of various Type S machines
(for example, an S-2).* Because the outlay norms e?tablished for the
individual machines within a group or type may vary somewhat and be-
cause the incidence of rejects among them is not uniform, the index of
deviation (-5.59) calculated for the full unit cost of Type S machines
as a whole in Column (24) of the worksheet is not used as a coefficient
for calculating the actual unit cost of the individual machines within
the group. Before examining how the actual unit cost of a specific
machine is calculated, however, the explanation that follows may help
to clarify the worksheet.
The data in Column (7) through (10) opposite the stub heading
Naterials" have been entered from Columns (11) through (14) of the
Record of the Movement of Materials in Table 5.**
The data on wages in Columns (8) and (10) have been taken from
documents on production and from the supplemental payroll. Deduc-
tions for social insurance are calculated as a percentage of wages.
The entries for shop and general plant expenditures in Columns (8)
and (10) reflect the relationship of actual outlays to the approved
estimate of outlays. Actual shop outlays in July 1957 would have
been 75,910,000 rubles -- Column (8) minus Column (10) -- according
to the data in Table 6. Rejects and any shortages in unfinished
production are written off at norm cost.
Unfinished production at the end of the month -- Column (18) --
given as 16,038,000 rubles, was obtained from separate calculations
based on inventories and/or primary documents. The value of outlays
charged to the commodity output of the plant in production of Type S
machines -- Column (20) -- is derived by subtracting the value of
final rejects -- Column (14) -- test materials -- Column (16) -- and
unfinished production at the end of the month -- Column (18) -- all
valued according to current norms, from the total outlays expended
during the month plus the balance of unfinished production at the
beginning of the month -- Column (12).
In this particular worksheet, only deviations from norms are
shown. Deviations between the actual and planned prices of materials
are entered in a separate calculation sheet. The separation of de-
viations from norms and deviations from prices is of considerable
importance in analyzing the cost of output.
* For a sample report showing the unit cost calculation of an S-2
machine, see Table 7, which follows on p. 80.
** P. 75, above.
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Table 7-
USSR: Sample Cost Calculation Report for the S-2 Machine (Type S) a/
July 1957
(1)
(2) (3)
(4) (5)
Outlays per Unit of Output b/
(6)
(7) (8)
According to Plan c/
According to Current Norms Deviations Actual
Quantity
Itemized Outlays (Kilograms)
Value Quantity
(Rubles) (Kilograms)
Value Quantity
(Rubles) (Kilograms)
Value d/.
(Rubles)
Quantity
(Kilograms) -
? Value
? (Rubles)
Basic and auxiliary materials
Foundry A 452.11
7,360.00 ' 462.62
'
7,462.75 -39.42
-737.32
423.20
6,725.43
Forge B 312.42
40980.61 312.46
4,980.61 +17.15
+273.44
329.61
5,254.05
Assembly shop C 913.0 -
9,700.05 919.92
9,706.40 -6.99
-78.62
912.93
9,627.78
Total materials
22,040.66
22,149.76
-542.50
21,607.26
Reusable scrap..
55.00 .
50.81
50.81
Total materials loss reusable
scrap
21,985.66
22,098.95
-542.50
21,556.45
Basic and supplementary wages
2,915.28
2,846.70
+469.11
3,316.41
Deductions for social insurance
290.52\
242.00
+39.44
281.44
Shop expenditures
General plant expenditures
14,156.00
4,128.17
14,527.10
6,318.90
-1,244.97
-2,253.95
13,282.13
4,064.95
Losses from rejects
+369.44
369.44
Plant cost
43,475.63
4.6,033.65
-3,162.83
42,870.82
Nonproductional expenditures
' 572.25
590.85
+33.48
- 524.33
Full cost
44,047.88
46 524.5o
-1129.35
43 395.15
a. Based on hypothetical data.
b. The cost calculation report also contains information on the planned unit output, the actnal
reported in the illustrative example in this table:
unit output, and the percent of planned fulfillmeni.
The following data were
Planned output
Actual output
Percent of fulfillment
c. Presumably the planned quarterly average.
d. Because of rounding, components may not add to the totals shown.
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5,435 units
5,906 units
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The entire column of deviations from monthly outlay norms --
Column (10) -- is carried over to Column (22) in computing the index
of deviations for commodity output -- Column (24) -- so that devia-
tions may be fully allocated to the cost of output in the reporting
period.
3. Calculation of the Unit Cost of an Article
Reports on the unit cost of each major article* produced at a
plant are submitted monthly, using the index of deviations shown
in Column (24) of the worksheet (Table 6)** to calculate the cost.
The cost calculation report is intended to provide a comparison of
the actual unit cost of a specific article -- Column (8) in
Table 7 -- with both the planned quarterly average cost -- Column (2) --
and the current (monthly) norm cost -- Column (4).
To calculate the actual unit cost of the S-2 machine in July 1957,
the current norm costs in Column (4) of the cost calculation report
were multiplied by the respective deviations computed for Type S ma-
chines as a group in Column (24) of the worksheet. The results were
divided by 100, and the quotients were entered in Column (6) of the
* cost calculation report opposite the appropriate item of calculation.
Column (6) shows the ruble value by which the actual costs of each
S-2 machine deviated from the normed costs. Actual costs are then
entered in Column (8) after the deviations have been added to or
subtracted from the norm costs. According to the data in Table 7,
the full norm cost of the S-2 machine in July 1957 was 46,524.50
rubles. The deviation from the norm cost was -3,129.35 rubles, rep-
resenting a saving of 6.7 percent above the norm cost and resulting
in an actual unit cost of 43,395.15 rubles. In the example of the
S-2 machine, the actual unit cost was not only lower than the monthly
norm cost but also was lower than the planned quarterly average cost
of 44,047.88 rubles. Since July is the first month of a quarter, it
is doubtful whether or not the actual unit cost in July would often
be lower than the planned quarterly average cost.
* For a sample report showing the unit cost of an S-2 machine in
the month of July 1957, see Table 7, p. 80, above.
** The worksheet (Table 6) is on p. 77, above.
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APPENDIX D
COST DATA FROM THE 1941 STATE PLAN
FOR THE DEVELOPMENT OF THE NATIONAL ECONOMY OF THE USSR*
Although the State Plan for the Development of the National
Economy of the USSR in 1941 is now primarily of historic interest, it
is believed that the method of planning cost at the national level has
not changed substantially since that time. A copy of the 1941 state
plan is the only such document that is known to have reached the West.
Accordingly, data pertaining to cost in the machine building indus-
tries have been extracted from this plan to provide a graphic example
of the manner in which cost data are derived for national industries.
For purposes of comparison, Table 8** shows summary data on the
planned level of the cost of commodity output and the planned percent-
age reduction in the cost of comparable output established for indi-
vidual industries, including the machine building industries, as well
as for industry as a whole. It should be noted that, in the 1941
plan, the percentage by which the cost of comparable output was to be
reduced in the principal machine building industries was uniformly
high, ranging from 6.0 percent to 11.1 percent, compared with other
industries. It also should be noted that, with a range of 64.9 to
87.0 percent and a weighted average of 70.2 percent in the machine
building industries, the percentage of comparable output in the total
commodity output was much lower in machine building than in other
industries.
Table 9*** illustrates the detail with which the central planners
provided individual industries with cost data in the 1941 plan. In
addition to giving the full cost of commodity output, the plan listed
for each major industry (except the defense industry) the outlays for
production broken down by conventional primary elements. The over-all
cost, of each primary element, established on a national scale else-
where in the plan and allocated among the individual industries, was
based primarily on the level of cost reported by these industries in
the previous plan period but was adjusted to reflect planned reduc-
tions in the cost of comparable output and the estimated cost of non-
comparable output (new articles) programed for 1941.
* 24/
** Table 8 follows on p. 84.
*** Table 9 follows on p. 85.
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Table 8
USali; Data on the Planned Cost of Commodity Output of. Industry a/
1941
Peoples Commissariats
Planned Cost of Total
Commodity Output 12/
(Million Current 'Rubles)
Planned
? Comparable Output c/
(Percent) '
Planned Change in Level of Cost
of Comparable Output 1/
(Percent) ?
Planned Annual Savings
(Million Current Rubles)
:
Coal industry
6,206
97.8
-6.3
4o8
Petroleum industry
3,674
92.0
-1.0
35
Electric power stations
Ferrous metallurgy
3,395
14,621
99.1 "
96.4
-2.8
-3.5
98
507
Nonferrous metallurgy
7,800
97.0
-2.0
154
Chemical industry
7,992
92.2
? -4.o
305.1
Construction materials
3,160
93.8
-5.3
166
Heavy machine building
4,44o
70.0
-6.o
198
Medium machine building
8,750
87.0
-8.o
662
General machine building
- 2,44o
66.0
-7.o
122
Electrical industry
3,676
80.0
-6.o
188
Defense industry
32,838
64.9
-11.1
2,675'
Timber industry
Procurement
4,093
100.0
-6.7
295.4
Processing
3,287
86.5
-2.6
76.3
Paper industry
1,320
95.0
+0.5
-6
Light industry
20,300
93.0
-1.7
326
Textile industry
28,080
96.0
-1.1
300
Food industry
39,666
97.9
-1.2
472
Meat and dairy industry
8,012
96.0
-1.4
112
Fish industry
3,534
96.4
-3.1
107
Total industry 2/
1
213,473
89.3
-3.7
7,397
a. 25/. Machine building commissariats are underscored.
b. The ratio between 1941 rubles and 1941 US dollars was 5.3 to 1. Total commodity output is the sum of comparable and noncomparable output.
c. Comparable output consists of those goods and services produced in a given year that also were produced in the preceding year.
d. In terms of average annual costs in preceding year (19)10).
e. Components do not add to totals shown, because totals include the industrial output of local industry, nonindustrial commissariats, and committees and
main administrations of the Council of Peoples Commissars, USSR, in addition to the industrial commissariats listed above.
-- 84-
$p.
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Table 9
USSR: Data on the Planned Cost of Commodity Output
in Machine Building Commissariats 2./
1941
Planned Costs of Commodity Output
Unit
Peoples Commissariats
Heavy Machine
Building
Medium Machine
Building
General Machine
Building
Electrical
Industry
Outlays for production
Materials
Million current rubles12/
2,271
5,300
1,190
2,236
Fuel and electric energy
Million current rubles
275
328
88
130
Wages and deductions
Million current rubles
1,400
2,352
886
1,057
Amortization
Million current rubles
136
250
56
75
Other expenditures
Million current rubles
248
360
150
182
Subtotal
Million current rubles
4 33o
8,590
2,370
3 68o
Nonproductional expenditures
Million current rubles
4o
105
52
66
Full cost of commodity output 2/
Million current rubles
4 44o
8,750
2 44o
3,676
Of which:
Cost of comparable output 2/
Million current rubles
3,108
7,612
1,610
2,941
Of which:
Costs arising from price change
effective 1 January 1941
Million current rubles
5
lo
3
36
Change in level of cost of
comparable output
Percent
-6.0
-8.0
-7.0
-6.0
Annual savings from change in
level of cost
Million current rubles
198
662
122
188
a. J. This source does not contain data of the above type for the Peoples Commissariat of Defense Industry except as shown in Table 8, p. 84, above.
b. The ratio between 1941 rubles and 1941 US dollars was 5.3 to 1.
c. Totals given in the source do not agree with the sums of the components given in the source.
d. Comparable output consists of those goods and services produced in a given year that also were produced in the preceding year.
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?
APPENDIX E
SOURCE REFERENCES
The Soviet documents used in this report included official plans,
statistical handbooks, an encyclopedia, textbooks, periodicals, and
newspapers.
1. USSR, Bollshaya sovetskaya entsiklopediya (The large Soviet
Encyclopedia), vol 38, Moscow, 1955, p. 292-293. (hereafter
referred to as USSR. Bollshaya)
Brown, Samuel R. Costs and Prices, Sydney, Australia, 1953.
Levine, Carl T. Cost Accounting and Analysis, New York, 1950.
Kantor, L. M. Sebestoimosti v sotsialisticheskoy promysh-
lennosti (Cost in Socialist Industry), Moscow, 1958, p. 5-8.
Lasser, J. K., edr. Handbook of Cost Accounting Methods,
New York, 1949.
Mitchell, Kenneth B. Cost Accounting and the Engineer,
London, 1954.
Organization for European Economic Cooperation. Cost Account-
ing and Productivity -- The Use and Practice of Cost Account-
ing in the USA, Paris, 1952.
Sotsialisticheskiy trud, no 10, Oct 59, p. 58-63.
Soviet Weekly, London, 31 Oct 57, p. 7.
Troitskiy, P. A., and Stuchevskiy, M. P. Planirovaniye sebestoi-
mosti na mashinostroitel'nom zavode (The Planning of Cost at a
Machine Building Plant), Moscow, 1959, p. 10-20.
Yezhov, A.I. Statistika promyshlennosti (The Statistics of
Industry), Moscow, 1957, p. 260-262.
2. USSR. Bollshaya (1, above), vol 46, Moscow, 1957, p. 264-268.
Ganshtak, V.I. Sebestoimost' produktsii v mashinostroyenii
(The Cost of Output in Machine Building), Moscow, 1956,
p. 125-134. (hereafter referred to as Ganshtak, Sebestoimosti)
USSR, Moscow State Economics Institute. Ekonomika sotsialis-
,ticheskoy promyshlennosti (The Economics of Socialist Industry),
Moscow, 1957, p. 520-524. (hereafter referred to as USSR, Moscow
State Economics Institute. Ekonomika)
USSR, Moscow State Economics Institute. Problemy khozyayst-
vennogo rascheta (Problems of Cost Accounting), Moscow, 1959,
p. 3-90.
3. USSR. Bolishaya (1, above), vol 46, Moscow, 1957, p. 264.
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4. Bocharov, G.G. Ubhet proizvodstva i kal'kulyatsiya v mashino-
stroyenii (Production Accounting and Calculation in Machine
Building), Moscow, 1957, p. 3-36.
USSR. Bol'shaya (1, above), vol 32, Moscow, 1955, p. 355.
Ibid., vol 35, Moscow, 1955, p. 66-67.
Margulis, A. Bukhgalterskiy uchet v otraslyakh narodnogo
khozyaystva SSSR (Accounting in the Branches of the National
Economy of the USSR), Moscow, 1957, p. 3-17.
Yezhov, A.I. Soviet Statistics, Moscow, 1957, p. 40-41,
125-128.
Yezhov, A.I. Statistika promyshlennosti (The Statistics of
Industry), Moscow, 1959, p. 20-34, 67-69.
5. USSR. Bolfshaya (1, above), vol 42, Moscow, 1956, p. 40.
Yefimov, A.N. Perestroyka upravleniya promyshlennostiyu i
stroitellstvom v SSSR (The Reorganization of the Administra-
tion of Industry and Construction in the USSR), Moscow, 1957,
p.85.
Yezhov, A.I. Organizatsiya gosudarstvennoy statistiki v SSSR
(The Organization of State Statistics in the USSR), Moscow,
1957, p. 36-37, 125-126.
Yezhov, A.I. Soviet Statistics, Moscow, 1957, p. 33-41.
6. USSR. Bol'shaya (1, above), vol 39, Moscow, 1956, p. 397.
Ganshtak, Sebestoimost' (2, above), p. 5-31, 254-256.
USSR. Kratkiy ekonomicheskiy slovarl (A Concise Economics
Dictionary), Moscow, 1958, p. 304. (hereafter referred to as
USSR. Kratkiy)
7. Bocharov, 22. cit. (4, above), p. 5-31, 254-256.
USSR. Bol'shaya (1, above), vol 19, Moscow, 1953, p. 462-463.
Ganshtak, Sebestoimostl (2, above), p. 24-29.
USSR. Kratkiy (6, above), p. 108-109. -
?,Yellyashevich, A.B., et al. Ekonomika sotsialisticheskogo
mashinostroyeniya (The Economics of Socialist Machine Build-
ing), Moscow, 1957, p. 448-455. -
8. ?Bocharov, 22. cit. (4, above), p. 20-21, 265-286.
USSR. Bol'shaya (1, above), vol 30, Moscow, 1954, p. 180.
Margulis, op. cit. (4, above), p. 168-178.
9. Bocharov, 22. cit. (4, above), p. 18-20, 297-306.
USSR. Bol'shaya (1, above), vol 33, Moscow, 1955, p. 467-468.
Margulis, op, cit. .(4, above), p. 178-179.
10. Bocharov, 22. cit. (4, above), p. 20, 286-297. ,
USSR. Bol'shaya (1, above), vol 34, Moscow, 1955, p. 152.
11. USSR. Bol'shaya (1, above), vol 33, moscow, 1955, p. 603-604.
Ibid., vol 38, Moscow, 1955, p. 293.
Ganshtak, Sebestoimosti (2, above), p.,29-38.
Kantor, op. cit. (1, above), p.
USSR. Kratkiy (6, above), p. 248, 354-355.
USSR, Moscow State Economics Institute. Ekononika 2, above),
p. 488-493.
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12. Ganshtak, Sebestoimostt'(2, above), p. 110-125.
Troitskiy and Stuchevskiy, op. cit. (1, above), p. 3-20,
239-250.
Yefimov, 2' cit. (5, above), p. 74-117.
Yurtyev, N.M., and Kirilloy, I.A. Tekhpromfinplan mashino-
stroiteltnogo zavoda (The. Tekhpromfinplan of a Machine Build-
ing Plant), Moscow, 1957, p. 3-14.
13. Troitskiy and Stuchevskiy,'op. cit. (1, above),, p. 7-8.
14. Ibid., p. 5-20, 36-5.
15. Kantor, 2p. cit. (1, above), p. 192-209.
USSR. Kratkiy (6, above), p. 319.
USSR, Moscow State Economics Institute. Ekonomika (2, above),
p. 504J516.
Troitskiy and Stuchevskiy, op. cit. (1, above), p. 224-226.
16. Margulis, 2p. cit. (4, above), p. 265-275.
17. USSR, Central Statistical Administration. Narodnoye khozyaystvo
SSSR v 1958 godu (The National Economy of the USSR in 1958),
Moscow, 1959, p. 172.
Finansy SSSR, no 10, Oct 59, p. 48-55.
Ganshtak, V.I. Ocherki po ekonomike mashinostroiteltnoy
promyshlennosti (Essays on the Economics of the Machine Build-
ing Industry), Moscow, 1957, p. 397-409. (hereafter referred
to as Ganshtak, Ocherki)
Pravda, 8 Feb 59, p. 4.
USSR, Ministry of Finance, Financial Scientific Research
Institute. Rezervy povysheniya rentabeltnosti mashinostroitelt-
nykh predpriyatiy (Reserves for Increasing the Profitability
of Machine Building Enterprises), Moscow, 1957, p. 14, 144-164,
166.
Vestnik statistika, no 3, Mar 57, p. 20-28.
Ibid., no 7, Jul 59, p. 29-38.
Yeltyashevich, et al., op. cit. (7, above), p. 442-443.
18. USSR, Central Statistical Administration. Narodnoye khozyaystvo
SSSR v 1959 godu (The National Economy of the USSR in 1959),
Moscow, 1960, p. 161-162.
19. Ibid.
USSR, Central Statistical Administration. Narodnoye khozyaystvo
SSSR v 1958 godu (The National Economy of the USSR in 1958),
Moscow, 1959, p. 171.
USSR, Central Statistical Administration. Narodnoye khozyaystvo
SSSR v 1956 godu (The National Economy of the USSR in 1956),
Moscow, 1957, p. 100.
Ganshtak, Ocherki (17, above), p. 374.
20. Ganshtak, Sebestoimostt (2, above), p. 42-50.
21. USSR. Boltshaya (1, above), vol 46, Moscow, 1957, p. 264-268.
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22. Ibid., vol 30, Moscow, 1954, p. 166-170, 180-184.
Ivanov, N. Normativnyy uchet proizvodstva (The Normative
Accounting of Production), Moscow, 1956.
Karpenko, A.P. Tekhnicheski-obosnovannyye normy i ikh roll v
povyshenii proizvoditellnosti truda (Technically Based Norms
and Their Role in Raising Labor Productivity), Moscow, 1956.
23. Margulis, 22. cit. (4, above), p. 168-178.
24. American Council of Learned Societies. Russian Series Reprint
No. 30, Gosudarstvennyy plan razvitiya narodnogo khozyaystva
SSSR na 1941 god (The State Plan for the Development of the
National Economy of the USSR in 1941), Baltimore, p. 566-567,
575-576.
25. Ibid., p. 566-567.
26. Ibid., p. 575-576.
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