THE DISTRIBUTION OF COSTS AND VALUES IN A 

 LOGGING OPERATION 



By R. Clifford Hall and Dean W. Martin. 



An important element that enters into the determination of 

 stumpage value in a region which includes many species of mer- 

 chantable timber varying widely in value, is the distribution of 

 costs and values between the different species and products so as 

 to secure equitable results. This problem appears especially 

 important in reference to apportioning the construction cost of a 

 logging railroad which must be built to operate a tract in an 

 undeveloped region. 



It is customary to estimate the total cost of building the rail- 

 road and then to divide this figure by the number of thousand 

 board feet of timber that will be taken out in the entire operation. 

 The quotent obtained is the cost of railroad construction per 

 thousand board feet and this figure is added to the other 

 operating costs per thousand. This method is very satisfactory 

 when only one species is involved in the operation, or when there 

 are several species or products of nearly the same value. It is 

 not satisfactory when there is a great variation in the value of 

 the species and products under consideration. In the latter case 

 it may often happen that the cost of railroad construction per 

 thousand plus the other operating costs per thousand may equal 

 or exceed the f. o. b. mill value of an inferior species. Calculated 

 on this basis, the stumpage value of the species would appear to 

 be zero or negative, indicating that there would be no profit in 

 handling it. Such is the situation in the case of black oak in the 

 illustration given later (See table i,) Although no stumpage 

 value is given for this species, the net returns on the entire opera- 

 tion are $20,000 greater if black oak is cut than if it is left in the 

 woods. If it is cut, the operating cost is increased by $220,000 

 (20,oooM. feet at $11 per M), but the total receipts of the opera- 

 tion are increased by $240,000 (20,000 M. feet at $12 per M), 

 while the cost of the railroad remains the same whether black 

 oak is handled or not. It can be readily seen that any low grade 



