FOREST SERVICE STUMPAGE APPRAISALS 723 



under "Fixed investments (logging)." From lO to 20 per cent of the 

 average annual manufacturing investment is set aside as a profit mar- 

 gin. This amount, divided by the annual cut, gives the profit rate per 

 thousand feet of lumber. Depreciation per thousand feet is figured 

 similarly. 



Where it is necessary to construct a new^ mill and develop a new 

 market a margin of 20 per cent is generally allowed, but in established 

 manufacturing regions from 10 to 15 per cent is considered adequate. 



Logging and manufacturing are usually figured separately and a 

 higher rate of margin is allowed on logging than manufacturing. 



In established manufacturing regions operating costs are much less 

 variable from year to year, methods are more uniform, and there are 

 not so many factors involved which afifect costs. 



Logging is subject to widely varying degrees of risk, caused by 

 climatic conditions, many combinations of topographic features, and 

 methods of operation. 



Manufacturing costs can be standardized for different species and 

 for difTerent-sized mills. The standard manufacturing cost generally 

 used in this region in appraisals is $6 per thousand feet board measure, 

 lumber tally, for white pine, yellow pine, and other species which are 

 manufactured into a highly finished product, and about $5 per thou- 

 sand for larch and Douglas fir, which are largely manufactured into 

 timber and dimension material. 



DEPRECIATION 



Depreciation is such a variable factor that it is somewhat diflficult to 

 determine. A brief discussion of this item of cost will show how it is 

 determined. Flumes, railroad grades, camps, and other improvements 

 which have no residual or wrecking value must be depreciated in the 

 appraisal at a rate that will wipe them out at the completion of the 

 operation. 



Railroad steel will last from lo to 20 years on a logging railroad, 

 depending on the class of road, weight of steel, weight of locomotive, 

 curvature, and number of ties used per mile. 



Horses are figured to have an average life of usefulness for woods 

 work of about five years, consisting of 200 working days each, or a 

 total of 1,000 days. This figure is sufficiently conservative to take care 

 of all losses caused by sickness and accidents. Depreciation on horses 

 is figured at the rate of 20 per cent per annum. This, however, is not 

 strictly correct for the reason that depreciation does not take place at a 



