20 EIGHTEENTH REPORT. 



fied cost finding sj^stem, he will be able to determine in connection 

 with his dairy, for instance, whether it is more profitable to sell 

 whole milk or to sell the cream and use skim milk for feeding hogs 

 or calves or poultry. 



The jH'inciples of cost finding on the farm are in reality no 

 different from those in the factory, i. e., the underh'ing theory 

 of cost finding is the same. Any system of cost accounting requires, 

 (1) an accurate determination of direct wages paid, (2) an ac- 

 curate determination of materials used and (3) an apportionment 

 of the indirect expense over the entire products. Practically all 

 of the labor on the farm is direct i. e., specifically applied to a cer- 

 tain job or process. The labor of the farm superintendent is indi- 

 rect or as sometimes referred to in accounting practice non-produc- 

 tive — which term is, however, inconsistent with Economic termin- 

 ology — and must be closed into the indirect expense account or 

 allocated separately to the various farm enterprises. 



Horse hours and machine hours are also all items of direct charge. 

 By separate accounts with each of the several kinds of farm ma- 

 chinery according to purpose or use, a more exact estimation of 

 costs may be made, e. g., the keeping of a separate account with 

 highly specialized and expensive machinery such as a corn har- 

 vester is advisable. Otherwise directly charging the various de- 

 partments from a single account kept with machinery and equip- 

 ment, upon tlie basis of horse hours would give certain inaccurate 

 results, as tlie cost of the crops requiring the expensive machinery 

 may be underestimated and tlie costs of others overestimated. 



The materials expense, consisting of such items as fertilizers, 

 seeds, etc., presents few difficulties. This year's fertilizing must 

 be apportioned to the several crops succeeding depending on its 

 lasting qualities. The accountant must rely upon the agriculturist 

 for this information. 



The farm or indirect expense items such as indirect labor, sun- 

 dries, taxes, insurance, depreciation on buildings, etc., are pro- 

 portionately charged to the several departments. 



A logical and intelligent interpretation of the results obtained 

 by this method is quite as essential as the results themselves, for 

 an unwise interpretation may nullify the effort put forth. Whether 

 it is more profitable to pasture a woodlot or to cultivate for a crop 

 between the rows of an orchard can only be determined by a com- 

 parison of the results with woodlots and orchards under exactly 

 similar conditions that are not pastured or cultivated. That a 

 certain crop pays for all exi)ens(^s including tlie expenses of the 



