10 MASS. EXPERIMENT STATION BULLETIN 173. 



thought indicates that an allowance of one-half cent per quart for whole- 

 sale milk dehvered by a retail dealer covers the cost of this service in most 

 instances; consequently this figure has been uniformly used. 



This method of accounting, which very evidently lays the burden of 

 costs on the retailed milk and rather arbitrarily estabUshes the costs of 

 incidental wholesale distribution, is presented with full recognition of its 

 weakness and its limitations. It does not mean that wholesale milk can be 

 delivered at this cost, nor that a mixed business should not be considered 

 on its merits; but it is manifestly unfair to assume that it costs as much 

 to dehver 200 quarts at wholesale to two customers as to deliver 200 quarts 

 at retail to 200 customers; and, since three-fourths of the quantity is 

 retailed and nine-tenths of the equipment is for retailing, the arbitrary 

 figures given are very reasonable interpretations of the facts. 



The same question arises as to the delivery of retail cream. Based 

 somewhat on the cost of dehvering retail milk and estimating filling, cap- 

 ping, boxing and icing, loss of bottles and other contingent expenses, a 

 charge of 3 cents per quart is deducted for its distribution. These deduc- 

 tions may be open to criticism but they were reached after making full 

 investigations and obtaining the opinions of many distributors. 



Analysis of Costs. 



Cost data may be grouped under comparatively few heads: — 



1. Investment in land, buildings, horses and all equipment that is 

 more or less permanent in its nature. 



2. Depreciation on buildings and equipment. 



3. Maintenance of plant and equipment. 



4. Circulating capital, i.e., current operating supplies used but once — 

 fuel, soap, ice, etc.; and " overhead," i.e., fixed charges, rent, insurance, 

 taxes, etc. 



5. Labor. 



As previously noted these items may be assigned to processing, delivery 

 and overhead or to processing and delivery. 



Investment. 



Investment includes the inventory value of real estate, horses and 

 equipments used in the processing or delivery of mUk and the housing of 

 the horses and equipment. Depreciation was reckoned on all items of 

 investment and was charged for one year. Some specific problems may 

 be mentioned. 



Depreciation Problems. 



Horses. — No hard and fast rule was followed in determining the depre- 

 ciation of horses. It was asserted by many that a horse worth $300 after 

 giving ten years' service could be sold for $100; after five years' service, 

 for $200, thus giving an annual depreciation in each case of $20. Some 

 distributors affirmed that no depreciation of horse flesh could honestly be 



