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 Cost Behavior and Cost
Estimation
photo: © Tischenko
Irina/Shutterstock

Unit Summaries
Unit 2.1 – Cost Behavior Patterns
This unit examines four cost behavior types – variable, fixed, mixed, and step.

Unit 2.2 – Cost Estimation

This unit focuses on using knowledge of cost behaviors to develop cost functions and estimate total costs. The
high-low method and the EXCEL functions for regression are illustrated as means for analyzing mixed costs.

Unit 2.3 – Contribution Margin Analysis

The contribution margin and the contribution format income statement are introduced.

Continuing Case Recap

This is the first chapter in the text that uses the running case. In this chapter students are introduced to Universal
Sports Exchange, one of C&C Sports’ customers.

Motivating the Chapter with The Business Decision and Context

Martin Keck, Universal Sports’ vice president of sales, wonders why a 10% decrease in sales volume did not result
in a 10% decrease in net income. The 10% decrease in sales volume also resulted in a larger than expected ending
inventory of baseball jerseys. Martin needs to know how to predict the changes in income when sales volume
changes.

Assignment Classification by Learning Objective

Learning Objective Exercises Problems Cases
1. Identify basic cost behavior patterns and explain how changes in 1, 2, 3, 4, 5, 6, 19, 24 27, 29
activity level affect total cost and unit cost. (Unit 2.1) 7
2. Estimate a cost equation from a set of cost data and predict 8, 9, 10, 11, 12 20, 21, 22, 28
future total cost from that equation. (Unit 2.2) 23, 25
3. Prepare a contribution format income statement. (Unit 2.3) 13, 14, 15, 16, 24, 26 28
17, 18
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed.

Assignment Characteristics
Difficulty Minutes to Bloom’s AICPA AICPA Ethics
Item Description L. O. Level Complete Taxonomy AACSB FN PC IMA Coverage
EXERCISES
2-1 Identify cost behaviors 1 M 12 C AN R C CM
2-2 Identify cost behaviors 1 D 15 C AN R C CM
2-3 Identify cost behaviors 1 M 12 AP AN M PS CM
2-4 Identify cost behaviors 1 M 15-20 AP, C AN M PS CM
2-5 Identify cost behaviors 1 M 10 AP, AN AN M PS CM
2-6 Explain use of fixed costs in 1 D 5-7 AN AN M PS CM
calculating unit cost
2-7 Understand the effect of changes in 1 D 8 AP, AN AN M PS CM
volume on costs
2-8 Use a scattergraph to estimate a cost 2 M 15-20 AP, AN AN M PS CM
function
2-9 Use the high-low method to estimate a 2 M 20 AP, AN AN M PS CM
cost function
2-10 Use the high-low method to estimate a 2 M 12 AP, AN AN M PS CM
cost function
2-11 Develop cost functions 2 D 20 AP AN M PS CM
2-12 Develop cost function and estimate 2 D 10-15 AP AN M PS CM
total cost
2-13 Prepare a contribution format income 3 M 10-15 AP AN M PS CM
statement
2-14 Find missing amounts in a contribution 3 E 10-15 AN AN M PS CM
format income statement
2-15 Prepare a contribution format income 3 D 10-15 AP AN M PS CM
statement
2-16 Prepare a contribution format income 3 M 15 AP AN M PS CM
statement
2-17 Prepare a contribution format income 3 E 20-25 AP AN M PS CM
statement
2-18 Interpret contribution format income 3 M 10 AP, AN AN M PS CM
statement
PROBLEMS
2-19 Identify cost behavior using unit cost 1 E 20-25 AP AN M PS CM
information

2-2
 Chapter 2 – Cost Behavior and Cost Estimation

Difficulty Minutes to Bloom’s AICPA AICPA Ethics

Item Description Develop L. O. Level Complete Taxonomy AACSB FN PC IMA Coverage
2-20 cost function using scattergraph 2 M 20-25 AP, AN AN M PS CM
and high-low method, estimate
total cost
2-21 Develop cost function using high-low 2 D 15-20 AP, AN AN M PS CM
method, estimate total cost
2-22 Develop cost function using high-low 2 M 20-25 AP, AN AN M PS CM
method, identify cost outliers
2-23 Develop and evaluate cost function 2 D 30-35 AP, AN AN M PS CM
using high-low method
2-24 Identify cost behavior, prepare 1, 3 D 20-25 AP AN M PS CM
contribution format income statement
2-25 Prepare a contribution format income 2, 3 D 20 AP AN M PS CM
statement, estimate total cost
2-26 Prepare a contribution format income 3 D 20-25 AP AN M PS CM,
statement, evaluate changes in cost DA
behavior
C&C CONTINUING CASE
2-27 Identify cost behavior 1 E 5-7 C AN M PS CM
2-28 Determine operating profit equation, 2, 3 M 10 AP, AN AN M PS CM
prepare contribution format income
statement
CASES
2-29 Identify cost behavior, estimate total 1 D 20-25 AP AN M PS CM
cost
2-30 Evaluate ethical issues M 10-15 AN AN, E R C BA 

Difficulty: E = Easy, M = Moderate, D = Difficult

Bloom: K = Knowledge, C = Comprehension, AP = Application, AN = Analysis, S = Synthesis, E = Evaluation
AACSB: A = Analytic, C = Communication, E = Ethics
AICPA FN: DM = Decision modeling, RA = Risk Analysis, M = Measurement, R = Reporting, RS = Research, T = Technology
AICPA PC: C = Communication, I = Interaction, L = Leadership, P = Professional demeanor, PM = Project Management,
PS = Problem Solving and Decision Making, T = Technology
IMA: BA = Business applications, BP = Budget Preparation, CM = Cost Management, DA = Decision Analysis,
PM = Performance Measurement, R = Reporting, SP = Strategic Planning

2-3
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Chapter Summary
Unit 2.1
LO 1 Identify basic cost behavior patterns and explain how changes in activity level affect total cost and unit
cost.
The two basic cost behavior patterns are variable and fixed. Costs that are a combination of these two basic
patterns are referred to as mixed. The following table shows how these costs change with changes in
activity:

AS ACTIVITY INCREASES AS ACTIVITY DECREASES

Cost Behavior Total Cost Cost per Unit Total Cost Cost per unit
Variable increases remains constant decreases remains constant
Fixed remains constant decreases remains constant increases
Mixed increases decreases decreases increases

Unit 2.2
LO 2 Estimate a cost equation from a set of cost data and predict future total cost from that equation.
Total cost can be expressed in the form y = mx + b, where y is the total cost, m is the variable cost per unit,
x is the number of units, and b is the total fixed cost. Given a set of costs and activity levels, you can
estimate a cost equation using one of the following methods: scattergraph, high-low, or regression.

Unit 2.3
LO 3 Prepare a contribution format income statement.
A contribution format income statement is an income statement that categorizes expenses by their behavior.
It follows the structure:

Sales Revenue
- Variable expenses
= Contribution margin
- Fixed expenses
= Operating income

Besides showing total sales revenue and expenses, the contribution format statement should also show per
unit amounts for sales revenue, variable expenses, and contribution margin.

Related Reading
James Fantus, “Understanding Cost Behavior in the Lab: The Key to Financial Success,” Medical
Laboratory Observer, July 1997.
This article discusses fixed and variable costs in a medical laboratory setting. It can provide the basis for
discussing cost behavior in a service setting. Available online at
http://www.thefreelibrary.com/Understanding+cost+behavior+in+the+lab%3A+the+key+to+financial+succe
s
s.-a021145718.

Douglas MacMillan, “Turning Smartphones Into Cash Registers,” Bloomburg Businessweek, February 14
– February 20, 2011, 44-45.
This article provides information about the costs incurred to use Square, a mobile payment system that plugs

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

into smartphones. The cost information in the article provides an example of a mixed cost, with a fixed
monthly base charge and a variable charge per transaction. One interesting twist on this mixed cost is that

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

there are two variable components – one based on the number of transactions and one based on the sales
revenue.

Alex Colon, “New Ipad 4G Data Plans: AT&T Vs. Verizon,” PCMag.com, March 15, 2012,
http://www.pcmag.com/article2/0,2817,2401618,00.asp
The data plans discussed in this article provide a good example of a step-variable cost.

Additional Cases
Susan P. Convery and Amy M. Swaney, “Analyzing Business Issues – With EXCEL: The Case of
Superior Log Cabins, Inc.,” Issues in Accounting Education, February 2012, 141-156.
This case provides an opportunity to practice cost estimation using scattergraphs, the high-low method, and
regression. It also provides the opportunity to practice and improve EXCEL skills. The assignment contains
several components, some of which have not been covered at this point in the text, so you will need to
provide revised instructions to students about which components to complete.

Shane S. Dikolli and Karen L. Sedatole, “Delta’s New Song: A Case on Cost Estimation in the Airline
Industry,” Issues in Accounting Education, August 2004, 345-358.
This case provides an opportunity for students to make and test hypotheses about cost drivers and cost
behavior. Using quarterly operating data from Delta Airlines, students are asked to identify possible cost
drivers for salary costs and to establish a salary cost formula using high-low, single regression and multiple
regression. The data, which covers 1993 – 2002, may appear a bit old, but the exercise does not depend on
the newness of the data. The case also offers limited data for the first years of Jet Blue Airlines’ operations,
allowing a comparison of the cost functions of two airlines with different operating strategies. If you have an
alumnus with experience in the airline industry, the case offers an excellent chance for team teaching.

L. Melissa Waters and Teresa M. Pergola, “An Instructional Case: Cost Concepts and Managerial
Analysis,” Issues in Accounting Education, November 2009, 531-538.
This case illustrates basis cost concepts using a library setting. Students must identify cost drivers, identify
the relevant range of activity, identify can classify costs by behavior, and calculate unit cost. One of the case
requirements does require knowledge of cost traceability, which is not covered in the text until Chapter 3.
However, the case can be used at this point by omitting that requirement.

Critical Thinking Exercises

Read Anton Troianovski and Thomas Gryta, “Verizon Overhauls Wireless Plans,” The Wall Street
Journal, June 13, 2012 (available online at
http://online.wsj.com/article/SB10001424052702303901504577462241394886300.html) or Roger Yu,
“Verizon Wireless Overhauls Service Plans With New Options,” June 12, 2012 (available online at
http://usatoday30.usatoday.com/tech/news/story/2012-06-12/verizon-data-service-
plans/55542720/1).

Questions
Verizon’s previous tiered pricing plans charges customers based on the number of minutes talked and the
data volume consumed. For instance, a customer would pay $40 for 450 minutes of air talk time and $50
for 1 GB of data access, for a total monthly fee of $90. How would a consumer on this plan classify the
cost in terms of its behavior?
As long as the customer did not exceed the contracted air time and data access, the consumer would
classify this plan as a fixed cost of $90 per month.

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Under the new pricing plan, Verizon will offer a low-usage plan for $40. While the plan provides 700
minutes of air talk time, texts are billed at $0.25 each. How would a consumer on this plan classify the
cost in terms of its behavior?

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

This plan would be a mixed cost to the consumer. The cost function would be:
($0.25 × number of texts) + $40.

Another option under the new pricing plan charges smart phone users $40 for unlimited voice and text
access plus an amount based on the volume of data access. The data plan is available at six levels,
ranging from $50 for 1 GB to $100 for 10GB. How would a consumer on this plan classify the cost in
terms of its behavior?
This voice component of the plan would be a fixed cost to the consumer while the data plan would be a
step variable cost.

Read Quentin Fottrell, Ryanair Aims to Bank off Rivals’ Pains, The Wall Street Journal, February 1, 2010.
(available online at
http://online.wsj.com/article/SB10001424052748704722304575038351927396866.html)

Visit http://www.ryanair.com/en/news/passenger-figures and find the number of passengers that flew on

Ryanair in October 2009, November 2009, and December 2009.

Questions
The headlines on each of the monthly passenger reports states that traffic has grown during the month.
What period is the company using for that comparison?
Ryanair is comparing each month to that month in the previous year, 2008. Passenger traffic actually
fell from October 2009 to December 2009.

What costs do you think the reduced passenger volume would affect?
The reduced passenger volume would affect all variable costs that are driven by passenger volume. This
could include costs related to items such as baggage handling and on-board food and beverages.

The article mentions a 37% decrease in fuel costs. Based on the passenger data, does fuel appear to be a
variable cost driven by passenger volume?
Since fuel costs have decreased while passenger volume has decreased, it might be a variable cost that is
driven by passenger volume.

What other non-volume related factor could account for the 37% drop in fuel costs?
If the price Ryanair paid for a gallon of jet fuel decreased during that period, the fuel cost would be
reduced, even without a reduction in the number of passengers. Looking at historical jet fuel prices at
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EER_EPJK_PF4_RGC_DPG&f=D this
appears to be a reasonable explanation for at least part of the fuel cost savings.

Read “Hot or Not,” CFO Magazine, June 2009, 16. (available online at
http://cfo.com/article.cfm/13720112.)

Questions
The “Keep It Up” graphic shows costs that companies believe are important to maintain in difficult
financial times. Would managers at the companies surveyed consider these costs to be committed or
discretionary?
These costs would be considered to be committed, since the managers are not willing to reduce the level
of spending. They apparently believe that cutting these costs would be detrimental to the companies’
long term success.

Why do you think more managers consider information technology expenditures to be committed than
those who consider travel expenditures to be committed?
Information technology tools gather data and provide information to support managerial decision
making, and making good managerial decisions is critical if the company is going to survive in the long
run. Business travel probably does not have as great an effect on long run success. In fact, investments
in technology may allow business to be conducted using technology tools rather than requiring travel
expenditures for a face-to-face meeting.

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

PowerPoint Slide Notes

The Business Decision and Context is based on Universal Sports

Exchange’s (a C&C customer) vice president of sales wondering what net
income would have been if the company had reached its planned jersey
sales. Ask students to use this income statement to come up with an
answer for Universal. After getting some answers, point out that some of
the costs won’t change. For example, selling more jerseys wouldn’t
increase the company’s utility bill. Set the stage by telling students they
will learn how to identify which costs will change with additional sales
volume and how to prepare a different income statement to help answer
this type of question.

Inform students that there are four general types of cost behavior that will
be studied in Chapter 2.

Use this and the following slides of familiar scenarios to illustrate cost
behaviors.

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Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Point out that each can of soda costs $0.75 and that doesn’t change as
more friends show up.

Define variable cost. Point out that the graph shows the same
information as the table in the previous slide. Review the concept of the
slope of a line and how the slope of the cost line is the cost per unit.

Ask students to identify variable costs for each of these industries. The
hotel chain is a good example to use to talk about activity drivers. For
instance, the cost of laundry is driven by the number of guests registered.
However, the cost of maid service is driven by the number of rooms
rented. A room with four people will require more laundry than a room
with one person. However, each of the rooms will require approximately
the same amount of cleaning.

Continue the study break example.

Point out that one pizza was ordered, and the cost of the pizza will not
change as more friends drop in.

2-8
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Define fixed cost. Point out that the graph illustrates the data from the
table in the previous slide. Discuss the concept of relevant range.

Emphasize that if students will always work with the “constant” form of
the costs, they will be less likely to adjust costs incorrectly for changes in
volume or activity. For variable costs, this is the cost per unit; for fixed
costs, it is the total cost.

Discuss the concepts of committed and discretionary costs. Relate the

concepts to students’ lives by using apartment rent and movie tickets to
illustrate committed and discretionary costs, respectively.

Discuss step-variable costs. This illustration assumes an academic

support person for online courses is paid $70,000 per year and can handle
500 students. Make sure students understand that while step variable
costs appear fixed, they steps are relatively small compared to the
relevant range over which fixed costs are fixed.

Discuss mixed costs and present the definition. The graph shows the
total cost a banquet that requires a $200 charge for the room and then a
$10 per person charge for food.

2-9
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Using the same pizza example, point out how total cost increases and
cost per person decreases as more people are added to the pizza party.

This graph illustrates the fixed and variable components of a mixed cost.
Point out the line intercepts the y-axis at the level of the fixed component
of the mixed cost and that the slope of the total cost line represents the
variable cost per unit.

This is a scattergraph of the delivery cost example in the textbook. Ask

students how they would use this data to find the fixed and variable
delivery cost. Then show the next slide.

Discuss the pros and cons of each of these possible lines drawn through
the delivery cost data points. Ask students which is the best line and
what makes that line the best.

2-10
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

This shows one potential total cost line that could be used to define the
cost function. Once again, point out the y-intercept and the slope of the
line.

This is the basic linear cost function definition. Remind students that this
is the same line equation they learned in high school algebra.

Point out the steps for developing the equation of a line. 1. Select two
points from the data. 2. Draw the line through the two points. 3. Find
the y-intercept. 4. Calculate the slope of the line using the two points.
5. Write the equation of the line. Have students compute the equation of
the line before you reveal the answer.

Discuss the usefulness of the high-low method as a quick way to estimate

the fixed and variable components of a mixed cost. Point out that the
change in the total cost is a result of a change in volume (the cost per unit
or slope of the cost line).

Verbally walk students through the steps of the high-low calculation.

Many students will stop after step 2, so remind students that they are not
done until they complete the last step to calculate fixed costs.

2-11
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

Have students identify the high and low points in this data set. Remind
them that the high and low points are based on activity level, not total
cost. Once students have tried the problem, walk through the
calculations with them.

Have students calculate the estimated cost, then work through the
calculation with them. Ask why their answer differs from the actual cost
when 1,500 deliveries were made.

Tie back to the calculation from the previous slide and point out the
actual March data point. Emphasize that the high-low method of cost
estimation is just that – an estimate. Point out how many actual points
fail to fall on the high-low line. But remind students that this doesn’t
mean it isn’t a good tool to use.

If students have completed a statistics course, they should be familiar

with regression. Talk about using regression to determine the intercept
(total fixed cost) and slope (variable cost per unit) of a set of cost data
points. You may want to create a spreadsheet with the delivery data
points and show the students how to use a spreadsheet program such as
Excel to compute the regression analysis.

This slide shows how to calculate the variable cost per unit using
EXCEL’s SLOPE function.

2-12
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed. Chapter 2 – Cost Behavior and Cost Estimation

This slide shows how to calculate the variable cost per unit using
EXCEL’s INTERCEPT function.

Have students work Problem 2-16 or work it as a class.

Answers for part A will differ depending on what line the student draws
through the data points.

2-13
Davis and Davis, Managerial Accounting Instructor’s Manual, 2nd ed.

Define contribution margin and point out how it differs from the term
gross margin that the students are familiar with.

Walk through the contribution margin income statement. Point out that
expenses are classified by behavior rather than function. Illustrate how a
mixed cost will appear in both variable and fixed sections of the income
statement. Emphasize that operating income will not change when
recasting a functional income statement into a contribution format
income statement. Expenses are not changing, they are just being
rearranged.

Have students recast Universal Sports Exchange’s income statement

(Exhibit 2-9) into a contribution format income statement using Exhibit
2-9 and the information on page 66.

Work through Universal’s contribution format income statement.

Emphasize that including the per unit amounts for sales, variable
expenses, and contribution margin, along with their percentages, will
create a more useful income statement to support decision making
efforts.

2-14
Another random document with
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 So I found no difficulty in arranging with Mr. Holley to take a trip
with me, and visit some of my engines in operation, for the purpose
of forming a judgment as to its suitability for the use of his clients.
This he agreed to do as soon as he had finished the report of his trip,
on which he was then engaged. Our inspection took in the engines
running in New York and Brooklyn and vicinity and in New England,
finishing with the engine at the Arlington Mills in Lawrence. They
were all found to be on their best behavior, but Mr. Holley told me
that the engine at Lawrence, which was running there at its intended
speed of 150 revolutions per minute, impressed him more than all
the rest put together; not that it was doing any better, for they all ran
equally well, but solely because it was larger. It made him awake to
the great possibilities of the engine.
On his return Mr. Holley prepared a report on the performance of
the engine, and cordially endorsed it as sure of ultimate general
adoption. But he found capitalists to be absolutely dead. Not even
his great influence could awaken in them the least interest. The time
for the promoter had not yet come. And still my success in winning
Mr. Holley’s support proved to be vital to my subsequent progress.
As a last possible resort I finally thought of Mr. Phillips of Newark.
The firm of Hewes & Phillips had become dissolved by the death of
Mr. Hewes, and so, by purchase of Mr. Hewes’ interest from his
heirs, Mr. Phillips was the sole proprietor of the largest engineering
works in New Jersey. That concern had some time before the death
of Mr. Hewes given up the manufacture of steam-engines, a style
made by them having proved unsuccessful, and confined
themselves to making machine tools. In this line their business was
exceedingly dull, being disastrously affected by the depressed and
stagnant condition of the times.
I found Mr. Phillips ready to listen to me. He said that what he
knew about the engine was favorable, although he had not heard of
it for the last two or three years, but he was willing to consider a
proposition to take up its manufacture. I told him frankly that I had no
proposition of that kind to make. I wished to get the manufacture of
the engine revived, but to retain the business in my own hands, to
carry it on myself in my own name, with the view of gaining for the
engine a reputation that would enable me to command the capital
necessary to establish its manufacture in works that I had long
before planned for that purpose, and in which I could devote myself
to the development and building up of the business; that I hoped to
be able to reach this point in the course of two or three years, when
probably the anticipated financial revival would fill his works with
business in his own line of toolmaking.
He said that my proposal was entirely inadmissible, that he could
not permit any independent business to be carried on in his
establishment, and stated firmly the impossibility of any arrangement
of the kind I suggested, which would be something quite unheard of.
I stood firmly on my own position, but was obliged to leave him
without any sign of yielding on his part. The negotiation was,
however, renewed, exactly how I cannot now recall, but it ended in
my carrying my point. We finally concluded a bargain, in which I held
onto the business, but, of course, had to insure to him pretty much
all the profits. This I did not mind, my object was to obtain a position,
which it will be seen I fully accomplished, but did not know what to
do with it. I was conscious that I could never have made this
arrangement but for the extreme stagnation of the times; but was not
aware of an additional reason which impelled Mr. Phillips to agree to
my terms, when he found he could not do any better. What this
reason was will appear pretty soon.
The arrangement was to go into effect as soon as I got an order.
This was my next job. I learned that Mr. Peters, a manufacturer of
high-grade knit fabrics in Newark, all which, by the way, were sold by
him to importers in New York, was carrying on also a manufacture of
light oilcloths in Newark in temporary quarters, and was building a
large structure for this purpose in East Newark, the building now and
for many years past occupied by the Edison lamp manufactory, and
was in the market for an engine. I called on Mr. Peters, and got from
him the privilege of submitting an estimate for this engine. For this
purpose I went to his then present works, and measured the amount
of power he was using, and found that one of my 8×16 engines
would give him that power with the additional amount he wished to
provide for.
On calling with my estimate early one morning, I found Mr. Peters
ready to bow me out. He told me that he had been informed that the
high-speed engines had proved a failure, and the manufacture of
them had been abandoned three or four years ago. I said to him,
“Mr. Peters, I would like to make you a proposition.” He replied that
he would hear it.
I then said, “Your engineer, Mr. Green, I suppose never saw a
high-speed engine, but he strikes me as a fair-minded, cool-headed
man. I have three engines made by me in Harlem, and which have
been running from four to six years, two in New York and one at the
J. L. Mott Iron Works at Mott Haven. These can all be visited in one
trip. I propose that you send Mr. Green to see them in operation, and
talk with the engineers and owners and learn all about them, and
that you suspend your decision until you get his report.” “That is a
fair offer,” said he. “I will send him to-day.” I called again the next
day, and found Mr. Peters ready to throw the order into my hands.
Mr. Green told me afterwards what his impressions were. In the most
cool manner, entirely free from any excitement, he said: “My only
wonder is that everybody does not use this engine and that all
builders don’t make it. I got the same report everywhere. Would not
have anything else. Costs less money, occupies less space, burns
less coal, needs less attention, never cost a cent for repairs, never
anything the matter, never varies its speed.”
And so I began business in Mr. Phillips’ shop, where I continued
for four years, the most delightful period in my active life. I had Mr.
Goodfellow in his old place as my foreman, and three or four of my
best men back again at the work they loved. Everything went
smoothly and harmoniously, and the business grew steadily until the
orders thrust upon me became larger than I could have filled if I had
had the whole works to myself. In re-introducing the engine to the
public, I determined to change its name. I had been asked
occasionally what I had to do with the Allen engine. It struck me that
I had a good deal to do with it. Starting from Mr. Allen’s single
eccentric link motion, and four-opening equilibrium valve and my
own governor, I had, with the help which I have been happy to
acknowledge, created the high-speed engine, had solved every
problem, theoretical and practical, which it involved, and designed
every part of it. So I felt it to be proper that it should thereafter be
known as the Porter-Allen engine.
 The following incident illustrates the ease with which everything
down to the smallest detail may unconsciously be prepared to insure
a disaster at some time.
Mr. Peters’ engine-room was a long, narrow room on one side of
the boiler-room, from which was the only entrance to it directly
opposite the guide-bars of the engine. The door opened inward, and
the latch was not very secure. They burned soft coal, which was
wheeled in on an elevated plank and dumped into a heap in front of
the furnace.
One day, about a year after the engine was put in, there was a
great wind blowing. A gust of unusual force blew the engine-room
door open at the instant when a barrowful of coal was being
dumped, and carried a cloud of its dust over the guide-bars. The
engine was soon brought to a standstill. All the faces of cross-head
and guide-bars were deeply scored. It was found, however, that
when these were cleaned up and scraped over to remove all
projections that they ran as well as ever, the grooves proving good
oil distributors, but they were not so pretty to look at.
One day, two or three weeks after we commenced work on this
engine, Mr. Phillips’ bookkeeper came to me and said: “Mr. Peters’
engine is contracted to be running on the first of May, is it not?”
“Yes.” “Do you think it will be ready?” I replied that the work was in a
good state of forwardness, and I thought most likely it would be
running before that time. I should say that was a size for which I had
made the revised drawings already, and the old cylinder pattern had
been readily altered to the new style. “Well,” said he, “Mr. Phillips is a
little short to-day, and he would be much obliged if you would give
him your note for a thousand dollars to come due, say, the fifteenth
of May.” So I gave him the note, the engine was ready on time,
accepted and paid for, and the note met at maturity.
This was the beginning of a uniform process, which continued for
four years. It was disclosed that Mr. Phillips’ financial position was
the same as my own, neither of us had a cent of money. The way we
managed was this. I always afterwards required payments in
instalments, one quarter with the order, one quarter when the engine
was ready for shipment, and the balance when running satisfactorily.
Thus with my notes we got along famously. My orders were always
from first-class parties, engines always ready on time, always gave
satisfaction, and promptly paid for. I had many thousands in notes
out all the time, and never had to renew a note. Mr. James Moore of
Philadelphia, the celebrated builder of rolling mill machinery, once
long after remarked to me, “I keep my bank account in the shop.” It
occurred to me that I had always done the same thing.
Directly after we got running I received a letter from William R.
Jones, superintendent of the Edgar Thompson Steel Company,
running a rail mill recently started at Braddocks by Carnegie
Brothers, saying that they were in need of an engine to drive a
circular saw at a very high rate of speed to cut off steel rails cold.
They had been recommended by Mr. Holley to get one of mine, and
if I could furnish a suitable engine immediately he would order it.
Fortunately I could. While I was building engines in Harlem, the city
of Washington, D. C., went into the system of wooden pavements,
and the contractor obtained an engine from me for sawing up the
blocks. About the very time I received Mr. Jones’ letter I had learned
that the wooden pavement system was being abandoned in
Washington for asphalt and the sawing-mill was closed. I at once
wrote to the contractor making him an offer for the engine. I received
by return mail a reply accepting my offer, and adding most
complimentary words concerning the engine. These I remember
closed by saying that his admiration of it was such that if he were
able he would put the engine in a glass case and keep it there as
long as he lived.
The engine proved just right for Mr. Jones’ use. I went myself to
Braddocks to see it started. All were much interested in the governor
action, I as much as any one, for I had never before seen this
particular application of it. In sawing through the head and web and
bottom flange of the rail, the width of section being cut varied
continually, and the gentle rising and falling of the counterpoise,
adjusting the power to the resistance, while the engine kept, so far
as the eye could detect, a uniform motion, had about it a continual
fascination. The success of this engine brought me several orders
for governors, the most important of which was one from Mr. Jones
himself for governors and throttle valves for his blooming mill and
rail-mill engines. I got up for him balanced piston valves which
operated perfectly. In iron valves and seats of this character it had
been found, where the steam contained primed water, that their
edges wore rounded, and their action in regulating the motion
became less and less satisfactory. I knew that these boilers primed
badly, and avoided this defect by setting brass rings in the edges.
The following illustrations show this regulating valve which I
designed and made in two sizes.

Mr. Porter’s Regulating Valve.

The brass liner for the lower seat was passed through the upper
seat by being made thinner than the upper liner. Those for the valve
were made ¹⁄₈ inch too long, and guttered in the lower edge. They
were then driven down by a set and sledge on an anvil. By going
around them three times the lower edges were spread out to fill the
chamfer, and the flanges brought down to their seats. Those for the
lower valve were put in in halves.
William R. Jones
 CHAPTER XXIII

Experience as Member of the Board of Judges At the Philadelphia Centennial

Exhibition.

ne day in April I was surprised to receive by mail a

commission as a member of the Board of Judges in
Group Twenty of the Philadelphia International
Exhibition. I was at a loss to know how I got it, but
learned afterwards that I had been appointed on the
recommendation of Mr. Holley, who was consulted by
the commissioners about the judges in several groups. The
exhibition was opened on May 1, but the judges were not to
assemble until the 24th, and on that day we had quite a ceremony in
the judges’ hall. The American judges were seated at one side of the
hall and rose to receive the foreign judges who filed in from some
place where they had been corralled, while a fine band played the
national airs of all nations that had any airs. After a time spent in
welcoming and responsive addresses, we were marched to a large
café and given luncheon, after which the different groups were
organized. There I had the pleasure of first meeting Mr. James
Moore, also Professor Reuleaux of Berlin and Colonel Petroff of St.
Petersburg; and Emil Brugsch the interesting Egyptian
commissioner, also serving as a judge in our group. I observed that
these foreigners used the English language more accurately than I
did. We organized by the election as president of Horatio Allen,
formerly president of the Novelty Iron Works (then extinct), he being
the oldest and the biggest man among us. Under Mr. Allen’s
administration we had a fine illustration of how not to do anything—of
endless preparation and never getting to work. He had an
interminable series of subjects for discussion and was accustomed
to say: “These questions must be all settled before we can enter
upon the discharge of our duties, gentlemen.” This had the effect
upon our foreign judges that they absented themselves from our
meetings. I remember Mr. Moore saying to me: “Porter, if you and I
had had this work to do we would have had it half done by this time.”
Directly after that Mr. Moore resigned, ostensibly pleading want of
time to attend to it, but really disgusted at the waste of time. Our
work was in a state of chaos. The field was very extensive, as it
embraced all exhibits pertaining to steam and water except
locomotives. One morning I came to the meeting with a copy of the
catalogue on which I had divided the exhibits into three classes,
lettered A, B, and C: class A embraced steam-engines and their
accessories, class B boilers and their accessories and class C
pumps and their accessories; I had prefixed these letters to the
names of all our exhibits according to their class. At this meeting, at
which I had procured the attendance of the foreign judges, this
classification was unanimously adopted, and the judges formed
themselves into these classes accordingly. Our work was then
undertaken in earnest; it was found to be really too extensive to be
accomplished otherwise.
Mr. Charles E. Emery was appointed a judge to fill the vacant
place made by Mr. Moore’s resignation, and he proved most efficient.
As is well known, medals were not awarded, but brief written reports
were made on those exhibits which were deemed most deserving;
these reports were signed by all the judges.
 Professor Francis Reuleaux

The firm of E. P. Allis & Co. of Milwaukee, exhibited a sawmill. This

exhibit consisted of two large circular saws, each driven by a
horizontal engine. The two engines were united by a common shaft
on the ends of which the cranks were set at right angles with each
other. The center lines of these engines were nearly 20 feet apart;
the shaft carried two belt drums 8 or 10 feet in diameter, one of them
near to the bed of each engine; at the middle of the shaft was a fly-
wheel about 16 feet in diameter. The rim of this fly-wheel was in
eight or ten segments, with an arm attached to the middle of each
segment; the segments were bolted together and the arms were
bolted to a hub on the shaft. The saws were set behind the cylinders,
and the belts were carried from the drums on the shaft past the
cylinders to smaller drums on the saw arbors. On starting these
engines the two bearings of the main shaft heated so badly that the
engines had to be stopped. The gentleman in charge of the exhibit
applied to me for advice. I told him that although his shaft was large
it was long, and the weight of the fly-wheel bent it so much that the
two journals ran on the inner edges of their bottom boxes, which
caused the heating. I told him he did not need the fly-wheel at all; the
cranks being quartering, the momentum of the belt-drums was amply
sufficient to maintain uniform motion, and I advised him to take off
the fly-wheel. This he did at once, leaving only the hub on the shaft;
the engines then ran with cold bearings and uniform motion
throughout the exhibition. They had made a cut-off gear for these
engines, but it was found not to suit the purpose and was taken off.
This firm then did a great stroke of business: they came to the
sensible conclusion that they could do a great deal better than to
attempt to work out a new system of engineering for themselves, so
they offered to Mr. Edwin Reynolds, the manager of Mr. Corliss’
works, and to his head draftsman, inducements sufficient for them to
leave Mr. Corliss’ employment and take the same positions in the
Allis works at Milwaukee for the manufacture of the Corliss engine
there. With the magnificent result of this action the engineering world
is familiar.
 We had all sorts of queer experiences. One day I was demanded
by Mr. Jerome Wheelock to tell him why the engine exhibited by him
was not a perfect engine. I glanced over the long slender bed, a
copy of the Corliss bed without its rigidity, and declined to answer his
question. Mr. Emery was more compliant; on receiving the same
demand, he kindly pointed out to Mr. Wheelock one respect in which
his engine could hardly be considered perfect; the steam was
exhausted into a large chamber embracing the lower half of the
cylinder from end to end. This comparatively cold bath produced the
condensation of a large quantity of the entering steam. From the
middle of this chamber a pipe took away the exhaust from the
opposite ends of the cylinder alternately. Mr. Wheelock admitted the
defect, and said in future he would avoid it, so, as I learned, having
two exhaust pipes instead of one, he gave to each pipe one half the
area of the single one.
I had the pleasure of renewing my acquaintance with Professor
Sweet, who was superintending the exhibit of the mechanical work of
his boys at Cornell; this was very creditable and included quite a
show of surface plates.
The Corliss engine in this exhibition was far the most imposing,
and to the multitude the most attractive single exhibit ever shown
anywhere. It consisted of two distinct engines, each having a
cylinder 40 inches in diameter, with 10 feet stroke of piston, the
motion of which was transmitted through cast-iron walking beams to
cranks set at right angles with each other on the opposite ends of a
common shaft. This shaft made 36 revolutions per minute and
carried a gear-wheel 30 feet in diameter; this wheel engaged with a
pinion 10 feet in diameter on the line of shaft under the floor, giving
to this shaft a speed of 108 revolutions per minute.
One day I said to Professor Sweet: “Do you know, Professor, that
an engine with a single cylinder of the same bore as these and 5 feet
stroke directly connected with a line shaft and making 150
revolutions per minute, with a fly-wheel 10 or 12 feet in diameter,
would exert more power than is afforded by this monster and would
run with far greater economy, because the internal surfaces to be
heated by the condensation of the entering steam would be one
piston instead of two, two heads instead of four, and 5 feet length of
exposed cylinder instead of 20 feet?” He replied: “That is all very
true, but how would you get the steam in and out of the cylinder
properly with a piston travel of 1500 feet per minute?” I was not
prepared to answer that question on the instant, but I afterwards
found no difficulty about it.
The accompanying figures illustrate this engine and my high-
speed equivalent drawn to the same scale; it will be seen that the
small engine occupies about one tenth of the floor space needed for
the large one, and would cost less than ten per cent. of the money. It
would also have a more nearly uniform motion, the impulses
received by the crank being 300 per minute, against only 144 per
minute received by both cranks of the large engine, besides which in
the latter the full force of the steam is exerted at the commencement
of each stroke and falls to nothing at the end, while in the smaller
engine, by the inertia of the reciprocating parts, the forces exerted at
the opposite ends of the stroke would be practically equalized. The
reader will doubtless inquire, as Mr. Green did why, with these
enormous advantages, does not everybody use the high-speed
engines and every builder make them?
 The Corliss Engine Exhibited at the Centennial Exhibition.

Porter-Allen Engine Equal in Power to the Exhibited Corliss Engine.

At this exhibition the Bell telephone was first shown to a select

company, among which were President Grant and Dom Pedro, the
last emperor of Brazil. This exhibition was given on Sunday, that
being the only day when silence could be had. Human speech, both
in talking and singing, was transmitted through the whole length of
the main building, about 1800 feet; it has since been transmitted
somewhat further.
The exhibitors of hand pumps all talked about the ease with which
their own pumps could be worked; one man touched bottom in this
respect. He had set his pump so that the spout was nearly on a level
with the surface of the pool from which it drew its water; he boldly
claimed that his pumps required no power at all. I was invited, as I
suppose multitudes were, to take hold of the handle and see for
myself that his claim was true. I never heard of but one man who I
think would be satisfied with this demonstration; that was the
engineering editor of the New York Tribune. Shortly before this he
had published an account of a wonderful pump invented by a Mr.
George, which he concluded by saying that the superiority of Mr.
George’s pump lay in the fact that at each stroke not the whole
column of water had to be lifted, but only that which was to be
discharged. We had a waterfall maintained by a centrifugal pump,
which received its water on one side only; the maker evidently
knowing nothing about the method of balancing these pumps by
admitting the water equally on the opposite sides.
The boiler-makers abounded. My old acquaintance, the Harrison
boiler, turned up. Mr. Allen urged a favorable award to Mr. Harrison
because of the motives of humanity by which he knew Mr. Harrison
was actuated in designing that boiler. A Mr. Pierce invited all the
judges to visit his boiler and hear him explain it. He informed us that
this boiler had been the subject of three scientific tests by Professor
Thurston, but he did not tell us the results of those tests.
As we were coming away Professor Reuleaux said to me: “That is
foolishness, isn’t it?”
An inventor named Smith came several times to our judges’ room
to urge upon us the merits of his boiler. He had two on exhibition,
one in use in the boiler-house and the other in Machinery Hall; these
were quite different from each other. One day not long after the close
of the exhibition I received a note from a stranger requesting me to
call upon him at the Astor House. I thought, “This man doubtless
wants an engine, but his time is too precious to come out to
Newark,” so at the hour appointed I was there. When I entered the
room the first object I saw was a sectional model of this Smith boiler,
and I found that the gentleman wanted to know our reasons for
overlooking that boiler. I replied to him that I had a question to which
I would like an answer at his earliest convenience; we observed that
the two boilers exhibited by Mr. Smith were quite different from each
other, and I saw that this model differed in essential details from both
of them, and I would like to know which one he wished us to approve
of and bade him good afternoon.
One day afterwards I happened to be in Mr. Holley’s office in New
York when a man came in with a drawing of a boiler which he wished
Mr. Holley to recommend. Mr. Holley turned him over to me, and he
explained to me that the great novel feature of his boiler was that the
feed-water was admitted by spraying it into the steam space, thus
avoiding the cooling of any part of the boiler by its admission at one
point; so I found one freak boiler that was not at the exhibition.
We had a fine exhibit of steam fire-engines. I think every maker in
this country was represented, and we had a trial of these engines
lasting three or four days. The committee desired to make a
thorough comparative test of their performance, but the man (a
lieutenant in the navy) appointed to keep the record put down so few
items that we found we had no record at all. We could only guess
how he came to do this.
An exhibitor from Canada brought an engine that presented a very
fine appearance; it was made up of a collection of what he believed
to be the best features of every steam-engine made in the United
States. The experts looked his machine over and saw where he had
got every one of them, but his different appropriations did not work
well together; his engine broke down every day and he worked all
night to be ready for the next day’s trial. It afforded a good
commentary on the narrow-minded laws of Canada, which forbade a
citizen of the United States from taking out a patent there.
The show of steam-engines was not large, and the indicator was
not applied to any engines, so I had no use for the indicators I had
imported from England. If I remember rightly, we had only two
engines from abroad, one of these sent by the Government of Brazil.
This was what was called a “table” engine, in which the cylinder
stands on a table in a vertical position and two connecting-rods
extend down from the cross-head and connect with the crank under
the table. It was copied from a Scotch elementary drawing-book from
which I learned mechanical drawing. One of these engines had been
made by Mr. Hoe to drive the press of the New York Daily Times
when that paper was started in 1851 or 1852. The other foreign
engine was made by a Brussels manufacturer with the assistance of
the Belgian Government. It had an American cut-off which was used
by Mr. Delamater on his engines, and it had the eccentric between
the main bearing and the crank, giving to the latter therefore three or
four inches of unnecessary overhang; it had my condenser, which I
learned was then coming into considerable use on the Continent.
Col. Alexis Petroff
 The only American engines I now recall besides the Corliss were
the Buckeye and the Brown engines, and our awards to these
engines did not do them any harm; the Corliss engines were not
within our jurisdiction and we were not permitted to say anything
about them; Mr. Corliss was not a competitor but a patron of the
exhibition.
Mr. Frederick E. Sickels made an extensive exhibit of his various
inventions, the models of which had been loaned to him for that
purpose by the Patent Office. Only two of these inventions came
within our province: the first was what is known as the celebrated trip
cut-off, patented by him in the year 1842; the latter an arrangement
patented in 1848. The former invention was an improvement on the
Stevens cut-off, already in general use in steamboats on our Eastern
waters. The Stevens invention was applied to equilibrium valves,
rising and falling in a direction vertical to their seats. It enlarged the
opening movement of the valve in a degree increasing as the speed
of the piston increased, by means of the device known as the wiper
cam; but the closing motion of the valve, being the reverse of the
opening movement, grew slower and slower, until the valve was
gently brought to its seat. It was found that during the closing of the
port a great deal of steam blew into the cylinder through the
contracting openings, with very little addition to the useful effect. Mr.
Sickels conceived the idea of liberating the valve just before the
opening movement was completed and letting it fall instantly to its
seat, which would effect a sharp cut-off and a great economy in the
consumption of steam. This action involved the difficulty that the
valves would strike their seats with a violent blow, which would soon
destroy both. This difficulty Mr. Sickels met by the invention of the
dash-pot. This apparatus performed two functions: when its piston
was lifted above the water it left a vacuum under it, so the pressure
of the atmosphere on this piston was added to the weight of the
valve and the pressure of the steam on it to accelerate its fall. This
was arrested by the piston striking the surface of the water just in
time to prevent the valve from striking its seat, but not soon enough
to prevent the complete closure of the port. This nice point was
determined by the ear. The engineer first let water out of the dash-
pot gradually, until he heard the valve strike its seat faintly; then he