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The return on investment for orchards, building and equipment recognizes the cost 

 of having capital tied up in the business. If a grower is relying on borrowed capital 

 to finance the ownership of the orchards, buildings and equipment, this cost of capital 

 is an easily identified cost. It is the interest he must pay his lender. However, this 

 cost exists, even if a grower is using his own money. The dollars invested in the business 

 have an earnings potential of their own. These dollars could be invested in the bank 

 or elsewhere and produce some income. This earnings potential must be recognized 

 as an opportunity cost of capital, when a grower invests his money in his own business. 

 His business must earn a profit, over and above the basic earning potential of his capital, 

 to be profitable in a real sense. In this publication the return on investment or 

 opportunity cost of capital is calculated at the rate of 1296 of the value of orchard, 

 buildings and equipment. 



The value of the orchards, buildings and equipment was obtained by asking each 

 grower to estimate the market value of bearing orchards, buildings used in the growing 

 phase of the business and equipment used to grow the apple crop. The return on 

 investment for the orchards and buildings is included in the orchard overhead group. 

 The return on investment for the equipment is included under equipment on Table 

 2. 



The real estate tax represents the taxes actually paid on the bearing orchards and 

 the taxes on the buildings used to store growing equipment and materials. In most 

 cases it was necessary to break these out from a total tax bill. 



Rentals includes the payment made for orchards or buildings not owned by the 

 grower. Five of the participating growers rent some orchards and/or buildings. 



The category "other" under orchard overhead in Table 2 includes insurance, short 

 term interest, and any miscellaneous cost associated with the growing phase of the 

 business. The short term interest includes only the interest on loans made to produce 

 the crop, typically they might include loans for pruning, materials, etc. It does not 

 include interest on loans for the purchase of equipment, buildings, orchards, etc. This 

 type of interest would be covered under the return on investment. 



The labor costs in Table 2 includes the gross wages paid the employee plus the 

 employer's share of social security, workmen's compensation, unemployment insurance 

 and the cash cost of any fringe benefits. 



Harvesting Cost 



Table 3 illustrates the costs associated with the harvest operation. Many of these 

 costs, unlike those in the growing costs, vary directly with the amount of fruit harvested. 

 Therefore, they are shown on a per bushel basis, rather than a per acre basis. 



The picking and other labor categories includes the gross wages paid for harvesting 

 apples plus any bonus and/or incentives. They also include the employer's share of 

 social security, workmen's compensation, unemployment insurance and any other benefits 

 paid other than housing and transportation. The harvesting costs include the cost of 

 harvesting all fruit, including drops. 



