n 



fcoiKiiiiie.s of .scale. Fuitheniioit*. iiiaiiagemeiit has little rleeisioii-iiiakin 

 power with respeet to some cost items. 



Hence, the cost items iti Tables 2 and "^ can he divided into two cate- 

 jiories: (i) those which cannot he affected materially by manacrerial de- 

 cisions of firms within particular size groups; and, (2) those wherein man- 

 agement can influence efficiency greatly. Table 4 represents such a regroup- 

 ing of cost items. Supplies and materials, utilities and miscellaneous items 

 fall within the first category; plant wages and salaries (management) and 

 costs of capital ownership and use in the second category. Utilities include 

 electricity, water, heat, and telephone. Costs of capital ownership and use 

 include all repairs and maintenance, all depreciation, taxes, interest, and in- 

 surance. 



Supplies and materials rank second to wages and salaries among process- 

 ing plant cost groupings. Utilities and miscellaneous items constitute the 

 smallest cost group. The decrease in unit cost for supplies and materials, 

 over the full range of plant sizes studied, is .08 cents per pound, or 10 

 percent. While the relative decline for utilities and miscellaneous items is 

 37 percent, these costs aggregate only 5 percent to 6 percent of total costs. 



Factor prices for supplies, materials, utilities and miscellaneous items 

 are fixed by firms or agencies external to the processing plant. Further- 

 more, such items are consumed in processing at rates required by trade 

 practices, sanitary requirements, or machine capacities. Hence, plant out- 

 put per unit of input of these items cannot be materially affected by man- 

 agerial decisions of firms within particular size groups. 



Plant wages and salaries (management) and costs of capital ownership 

 and use account for 78 percent of the unit costs of a broiler plant of 150 

 birds per hour capacity and 63 percent for a 10,000 broilers per hour unit. 

 The total decline from the 150 to 10,000 plant sizes is 2.488 cents per 

 pound. Of this amount, the above items account for 93 percent, or 2.312 

 cents per pound. Over the range of plant sizes studied, unit costs for wages 

 and salaries decline 60 percent; capital costs 36 percent. 



The balance of this chapter is devoted to a detailed discussion of costs 

 of capital ownership and use and wages and salaries. Capital costs involve 

 long-term investment in buildings and equipment. Allocation of limited 

 capital among alternative uses involves a major area of decision-making. 

 Plant management also has the opportunity, through organization of the 

 working force and determination of optimum combinations of labor and 

 capital, to realize major economies of scale. 



Capital Investment 



The estimated capital investment rc(juirctl ltd the model plants is sub- 

 stantial. For the two smallest model plants, 150 and 300 broilers per hour, 

 the investment in the building and other related items, which depreciate 

 over a relatively long period of time, exceeds that in equipment. At the 

 600 size, where mechanization begins to replace hand operations, the re- 

 verse is true. As plant size increases, investment in equipment climbs much 

 more rapidly than investment in buildings and related items (Table 5). 



Building Costs 



There were two basic requirements in the planning of buildings for model 

 plants: (1) to provide adequate working room for functi(jns carried out 



2?, 



