54 QUESTIONS OF PRINCIPLE 



the quality of the labour may vary very much in different 

 branches, and with it the amount paid in wages, the time 

 during which the labour is employed is adopted as the basis 

 rather than the amount of wages. In farming the fluctua- 

 tions in the quality of labour used in the departments of the 

 farm are generally very slight, and the principle of distribu- 

 tion of general expenses adopted in the examples given later 

 is that of a percentage on the labour of all kinds, that is 

 on manual, horse, and tractor labour together, the assump- 

 tion being that the department which has had the greatest 

 expenditure on it of labour has benefited to the greatest 

 extent by the general expenditure. 1 



On the farm establishment expenses as distinguished from 

 on-cost are very few. Clerical assistance employed is usually 

 nil, and not infrequently there is scarcely any other item 

 of any magnitude. Messrs. Gar eke and Fells point out that 

 whereas establishment expenses are most certainly elements 

 in the cost of production, yet in industry they are more 

 properly left out of calculations of cost price. ' A large 

 increase in the value of orders received would not necessitate 

 a like augmentation of the office staff, nor would a sudden 

 and serious falling-off in trade enable a firm to effect an 

 immediate or proportionate reduction of general expendi- 

 ture.' 2 In agriculture, however, there is not this dependence 

 upon orders, and the fluctuations in manufacturing costs 

 due to the changes in the cost of labour are also very little 

 felt in normal times. Thus, there is not the objection to 

 thejnclusion of establishment charges in the cost price of 

 farm products which arises in the case of factory products, 

 and on-costs and general establishment expenses may well 

 be included in one account in the books , and distributed 

 together over the productive branches of the farm. Only the 

 productive accounts are concerned in this apportionment, 



1 In the first edition of this volume a distribution on the basis of labour and 

 materials was advocated, and this method was used in the illustrations given. 

 Further consideration has led to adoption of the cost of labour alone, as it appeared 

 not infrequently that certain heavy charges for material (i. e. stock bought in) 

 had, quite obviously, no direct connexion with the charge for on-cost. 



2 Op. cit., p. 93. 



