panded 40 percent, one-fourth as many units as exist today could process 

 the larger volume with only a 10 percent increase in total dollar costs 

 above 1957 actual levels. 



Processing plant costs can be separated into four groups: variable oper- 

 ating; constant-unit operating; fixed operating; and fixed overhead. For 

 any given size of plant, unit costs decline in direct relation to increasing 

 volume for the fixed operating and fixed overhead groups. Unit costs in 

 the variable operating group, of which plant labor is the main component, 

 decline at a decreasing rate as volume increases to 100 percent of capacity. 

 Beyond full capacity, unit costs of this type increase. 



Prices of many items used in processing are determined by forces ex- 

 ternal to the poultry industry. Rates of use of supplies, materials, utilities, 

 and miscellaneous items are related to trade practices, sanitary standards, 

 and machine capacities. Hence, the main areas in which plant management 

 can make decisions relate to the substitution of capital for labor, organ- 

 ization of the working force, and capital rationing. 



Plants which were built in earlier years for New York Dressing general- 

 ly included substantial holding areas. Utilization of most of such space and 

 alterations at nominal unit costs will enable such plants to convert to pro- 

 duction of an eviscerated product at the same or higher plant capacities. 

 Additional expenditures for equipment should not materially increase unit 

 costs in converted plants. 



Conversion to Federal Inspection should not result in any material change 

 in the unit cost of investment in buildings. Increases required in the number 

 of employees are small. In terms of model plants, output per worker might 

 decrease and costs increase. However, in terms of actual plants and the 

 present system, improved efficiency will probably obscure any such effect. 



