STUMPAGE VALUES 177 



174. Milling Costs and Profits. The cost of milling or 

 manufacture may be standardized for operations of a given 

 size. The current expenses, or operating costs, do not vary 

 greatly. For operations involving a definite quantity of stump- 

 age, the duration of the operation is largely determined by the 

 capacity of the mill. 



The factor which indicates the most profitable size for a mill 

 is the relation between the depreciation of fixed costs or capital 

 expenditures for the plant and machinery, and the period and 

 quantity of output over which this cost must be distributed. 

 The value of the mill when there is no more timber to cut is 

 practically nothing, and that of second-hand machinery, very 

 small. The difference between these final values and initial 

 cost, which represents depreciation, is one of the principal 

 elements of expense ( 173). 



The size of this item of depreciation and the relation which it 

 bears to the total output, and to the total cost of producing 

 each unit of product, evidently depends more upon the total 

 length of time over which the plant can continue to operate 

 than upon its daily capacity. With mills of equal efficiency, 

 the one with a twenty-year cut may be considered as having 

 about half the depreciation expense per unit of output that one 

 with but ten years' cut must write off. 



Provided the supply of logs is assured, and the period over 

 which to distribute the cost of depreciation can be approxi- 

 mated, the requisite profits in manufacturing may be gauged 

 with reasonable uniformity. Uncertainty as to future timber 

 supply makes it necessary to guard against a shortage or com- 

 plete exhaustion of raw material by a correspondingly large 

 appropriation from gross income for depreciation. Should 

 this shortage not materialize, the concern would later find its 



find the proprietors without adequate provision for meeting this loss. The first 

 objection does not apply when the purpose of the computation is to determine 

 profits in advance, since these are not treated as costs. The second objection 

 holds good if it is considered necessary to make the amounts written off for de- 

 preciation agree closely with actual loss in value. The results obtained by 

 this method agree more closely with those of Method A than with Method 

 BorC. 



