A poultryman might wish to consider alternatives such as installing an 

 automatic water system or an automatic feeder, rearranging pens for greater 

 efficiency in gathering eggs and feeding, installing central heating in brooding 

 facilities, increasing flock size, or purchasing new egg-marketing equipment. 

 A dairyman might have alternatives such as rearranging barn facilities to 

 reduce chore time and travel distance in milking, hay or silage feeding, 

 barn cleaning, to buy additional forage harvesting machinery, or to increase 

 herd size or improve herd quality. Whatever the possibilities for improving 

 efficiency seem to be, they should be thoroughly analyzed in terms of addit- 

 ional costs and additional returns. The procedure below may be used as a 

 rough guide to the appraisal of the cost component of such analysis. How- 

 ever, with some of the alternatives such as automatic watering or feeding 

 systems, substantial operating and maintenance costs, in addition to depre- 

 ciation and interest, must be taken into account. 



It may be helpful to operators who are concerned with building bins 

 to review a method for m.aking economic decisions on the basis of additional 

 costs and additional returns. Some of the costs are not out-of-pocket and 

 some of the benefits are personal and intangible. 



In estimating additional costs, the operator's time and the labor of 

 regular hired men can be omitted especially if the construction work is done 

 in slack periods and does not interfere with their production in daily work. 

 For example, if the installation involves a cash outlay for materials of $200, 

 and for skilled carpenter services of $50, plus 100 hours of available farm 

 labor, the total additional cost might be considered as $250. 



One farmer hired a carpenter to make a complete installation including 

 storage bins and elevator to service 4,000 layers in a two-story house. In 

 this installation the automatic feeders were filled directly from the elevator. 

 The cost was $472.55 for the bulk handling installation, not including the 

 automatic feeders, which represents an investment of 11.8 cents per layer. 

 The annual cost of this installation will be the sum of the estimated costs 

 of depreciation, interest, other fixed charges, and operating expenses. 



The annual depreciation can be estimated by the following formula: 



Annual depreciation = Initial Cost — Junk Value 



length of life 

 Assuming a length of life of 10 years and a junk value of $50: 

 $472.55 — $50 = $42.25 = Annual depreciation 

 10 



The annual interest charges can be estimated as follows: 



Annual Interest = Cost x rate of interest (5%) 



2 

 $472.55 X 5 = $11.81 



100 



The expected benefits from the installation can also be inventoried and ap- 

 praised. There may be very apparent benefits such as: discount on bulk 

 delivery, elimination of bag costs, release of usable space in the grain 

 room, or saving of time. Less apparent benefits may be a decrease in the 

 physical burden and more flexibility in the use of labor. The value of these 

 will vary according to the situation on each farm. But having made a rough 



10 



