August, 1916. 



American l^ee Journal j 



eluded in the inventory. Next, do >!o/ 

 include the bees. Why ? Are they 

 not the whole thing ? What would the 

 supplies be worth for honey produc- 

 tion without them ? Look at it this 

 way and see if I am not right; see if 

 omitting an estimate of the possible 

 value of the bees does not simplify the 

 figuring of tbe invesment beside being 

 correct. 



First, a man buys a colony of bees at 

 say $10. Then he buys hives, supers, 

 etc., from time to time, increases his 

 bees by swarms or by division and 

 ultimately has say 500 colonies. What 

 have the bees cost him ? As soon as 

 the number of his colonies was above 

 perhaps 25 they returned enough cash 

 for honey to pay for the time he spent 

 in handling the colonies, in getting the 

 honey. The increase is found to be 

 incidental to the other work, and it 

 would be difficult and useless to deter- 

 mine what part of the time was devoted 

 to it, so we won't try. In other words, 

 it is a necessary incidental of honey 

 production, and we can very properly 

 let it go into the cost of production. Or 

 if you still insist, then tell me how 

 much a swarm of bees costs you ? Aside 

 from the hives and supers to house it 

 and the working capital to operate it, 

 how much cash does it cause you to ex- 

 pend for it ? None. 



Here is another way of showing the 

 reason for not including the bees. The 

 .500 colonies and equipment can be sold 

 for how much ? Just about the first 

 cost of the equipment, seldom more, 

 often less. The equipment without the 

 bees would bring very little as com- 

 pared with first cost. In other words, 

 the bees have a productive value; they 

 can gather honey or help us sell our 

 equipment for what it is really or nearly 

 worth, but they have no cash value. 

 You may say you can sell the bees " by 

 the pound." Yes, but deduct packages 

 and labor and the reduced price the 

 hives, etc., will bring and see where 

 you stand. 



The value to place on your equip- 

 ment you must determine for yourself. 

 If it is all fine new factory stuff, well 

 made up and painted, that is one thing. 

 If it is box shop or home-made stuff it 

 is another. If it is old and has been 

 long in use, what is its present worth ? 

 Whether it is "standard" or not is 

 not of so much consequence. How 

 much did it cost you or how much is 

 it worth ? That is, what is the amount 

 of capital you have in equipment ? 



An estimate based on the factory- 

 made outfit of some^.big eastern opera- 

 tors is in round figures about $4.50 for 

 each hive with its necessary supers and 

 brood foundation, and .50 cents as its 

 share in the other equipment such as 

 extractors, smokers, tanks, etc., making 

 a total of $5.00. Next comes an item 

 which I have seldom found to be in- 

 cluded or considered by beekeepers, 

 and that is working capital. It should 

 be at least equal to the fixed invest- 

 ment of $5.00. In other words, every 

 colony of bees in a commercial apiary 

 should be considered as representing 

 an investment of $10. In this figuring 

 the few odd hives, etc., usually on hand 

 are included in the general estimate. If 

 a considerable portion of one's hives 

 were empty, one would have to figure 

 them in at $5.00, because it is capital 

 tied up, and when they go into service 



again by being stocked with bees, $5.00 

 of working capital should be added for 

 each one. 



If you have not the working capital 

 you must not figure it, but you should 

 have it. Failure to have sufficient 

 working capital is the cause of trouble 

 in many lines of business besides honey 

 production. To the beekeeper it means 

 trouble in getting needed supplies at 

 the most favorable time and price. It 

 also means the necessity of selling the 

 crop quickly for most any offer. Work- 

 ing capital is needed to pay for labor, 

 insurance, taxes, freight, containers, 

 sections, super foundation, living ex- 

 penses and most important of all, to 

 carry the business and its owner over a 

 year or two of whole or partial crop 

 failure. The annual per colony charge 

 against working capital at 6 percent is 

 30 cents. The loss to the operator 

 who does not have working capital is 

 quite apt to be several times 30 cerits, 

 50 bear in mind that proper working 

 capital reduces cost. 



Having found the amount of the in- 

 vestment the next step is to determine 

 the operating costs. To figure the ex- 

 pense of conducting the business the 

 following items are to be included : 

 interest on the investment, insurance, 

 taxes, labor, owner's salary, and depre- 

 ciation and upkeep. The owner should 

 charge the business for his services at 

 least as much as he could earn in any 

 other gainful occupation in which he is 

 skilled. If all or a major part of his time 

 is devoted to bees, this is easyto figure, 

 but if they take only a minor part of 

 his time (as a side line) it is more 

 difficult, still a satisfactory estimate can 

 be arrived at by a little pains. The 

 business should only be charged with 

 what he is worth, what he can earn in 

 some other business in which he is 

 skilled. All returns over that and the 

 other charges is "profit" on the invest- 

 ment. 



The proportion to charge to the sun- 

 dry items of expense is estimated as 

 follows: Interest, 6 percent; labor, 10 

 percent ; depreciation and upkeep, 10 

 percent; insurance and ta.xes, XYz per- 

 cent; total, 27 >^ percent. Here I have 

 only figured under labor (at 50 cents an 

 hour) the amount devoted to the bees, 

 in getting ready for and during the 

 harvest, packing the crop, and closing 

 down for the season. The owner's 

 salary for the rest of the year, if he 

 uses that time for no other gainful 

 work, must be added. 



By this figuring you will find that 

 you must get $2.75 (27^ percent on 

 $10) from each colony of bees just to 

 cover running expenses. On an aver- 

 age annual per colony yield of 50 

 pounds, this makes the cost 5K cents 

 per pound. Charging 10 percent for 

 "upkeep and depreciation " against the 

 working capital (cash) is not strictly 

 correct, but as I have omitted specific 

 allowances for loss by " bad debts " 

 and sundry other leaks which are so 

 easy to forget or overlook, and as the 

 beekeeper's outfit deteriorates so much 

 more rapidly than things under cover 

 and having constant care, on consid- 

 eration I decided that charging 10 per- 

 cent against the whole capital would 

 more nearly represent the true condi- 

 tions and at the same time simplify the 

 subject for the beekeepers. 

 The specialist in order to keep costs 



down must make his business big 

 enough so it can carry the expenses of 

 his idle time without adding too much 

 to the cost of operation, per colony. 

 As a rough illustration : The 10 percent 

 charged for labor (or $1.00 per colony) 

 covers only time devoted to the busi- 

 ness. If the man does all the work 

 himself, and has 500 colonies, he gets 

 $500 for his labor. He is idle the rest 

 of the year and needs, and in some 

 other occupation could earn, in a year, 

 $1500, therefore he must charge for 

 cost just $1000 more or $2.00 per hive, 

 making the labor item 30 percent in- 

 stead of 10 percent. On a 50 pound 

 average yield it means increasing the 

 cost of the honey just 4 cents per 

 pound, or, instead of the 5K cent cost 

 prices as given elsewhere in this arti- 

 cle, the cost rises to 9>^ cents. Obvi- 

 ously that man must keep more bees, 

 or raise his average per colony yield, 

 or do both, if he would reduce the cost 

 of his honey. 



Operative costs will be pretty much 

 the same one year with another unless 

 disease breaks out or some other ex- 

 ceptional or abnormal condition arises. 

 After keeping records for a few years 

 you can determine with fair accuracy 

 your average annual per colony cost. 

 Then determine your average per col- 

 ony yield over a period of years and 

 you can easily figure the average cost 

 of honey per pound to you. In excep- 

 tionally good years, those of heavy 

 yields, the per pound cost drops, but 

 the next year may be one of failure, so 

 you must use ai'crage to figure on. 



The figures I have given of cost per 

 pound are tentative only. We should 

 have returns from many persons and 

 many places before we accept any 

 figures as exact. The amount of capi- 

 tal per colony will vary, the average 

 annual yield per colony will vary, the 

 time devoted to each colony will also 

 vary with different individuals. The 

 rate of charge for labor will be debat- 

 able, but until a better figure is found, 

 50 cents an hour will do very well, pro- 

 vided we all use it. This rate is for 

 the owner, not for hired labor. The 

 interest rate may be higher in some 

 sections. The rate for depreciation 

 and upkeep I believe will be found 

 about right. 



Those with whom I have discussed 

 the subject lean towards the belief that 

 my figures of cost are too low, and I 

 shall not b ■. surprised if that proves to 

 be true. Now, go to it and tell us what 

 your figures are. 



Have I taken off some of the glamor 

 of the business ? Have I given you a 

 bad quarter hour ? Console yourself 

 with the fact that in your misery you 

 have much company. Scrutiny of 

 costs is going on in many lines as 

 never before, and we must know ours. 

 Get busy. 

 Providence, R. I. 



Production Costs— How to 

 Figure Them 



BY THE EDITOR. 



WHAT does it cost to produce a 

 pound of honey? The answer 

 depends upon so many things 

 that every man must figure for himself. 



