7 - 



In the example at hand there are no added returns (A) or added 

 costs (D) . The only categories o£ relevance are reduced costs (B) 

 and reduced returns (C) . Therefore, the profitability relation 

 reduces to the comparison of (B) and (C) . If (B] exceeds (C) tlie 

 alternative is profitable. 



The values comprising reduced costs (B) are: 



Spray materials $60.00 



Tractor and sprayer 6.25 



Labor 5.75 



Total (B) $70.00 



The only value appearing in (C) , reduced returns, is a reduction 

 in the value of fruit of $10. 



The value of (B) exceeds (C) by $60 which is the indicated 

 increase in profit per acre which would result from the adoption 

 of the alternate row spraying method. 



"Determination of the Economic Parameters" 



The above procedure is quite simple in concept and application 

 but it avoids the issue of how some of the economic parameters are 

 obtained. Specifically, the entire question of how equipment costs 

 are estimated and placed on an hourly basis is not treated. Two 

 classes of costs are involved: (1) fixed or "ownership" costs and 

 (2) variable costs. The ownership costs include depreciation, 

 interest on investment, taxes, insurance, and repairs. Variable 

 costs include fuel and lubrication. Ownership costs are essentially 

 a given value for a year and do not vary with acreage while variable 

 costs are directly proportional to use. 



*************** 



POMOLOGICAL PARAGRAPH 



Apple Production Costs in Pennsylvania in 1975 were found to be 

 $679.68 per acre, according to a study made in Adams and Franklin 

 Counties by B. Wayne Kelly, Farm Management Extension Specialist 

 at Pennsylvania State University. Harvesting costs were $196.37/acre 

 for an average yield of 402 bu/acre, giving a cost harvested at 

 $2.18/bu. Spraying materials were $91.44, and all labor (less 

 harvesting) was $212 . 70/acre. In Western Michigan, a study by Myron 

 Kelsey, Agricultural Economist at Michigan State, indicated that 

 production costs for a semi-dwarf planting were $518.22/acre and 

 harvesting costs, $236.19/acre for a yield of 400 bu/acre, giving 

 a cost harvested at $1.88/bu. Spray materials were $97.49/acre, and 

 all labor (less harvesting) was $133.27. Although the studies were 

 not completely comparable (differing somewhat in values and charges), 

 their results are surprisingly close. -- L. D. Tukey, Penn State , 

 Horticultural Reviews. 26 (No. 2). 1977. 



