182 FOREST VALUATION 



expressed on the basis of a thousand board feet, cord or other 

 unit of product. 



The surplus after subtracting costs from the average price 

 of the product is the net profit, from which is paid the returns 

 on the invested capital and the enterpriser's gain for services 

 (39). If the cost of stumpage is fixed, this, added to other 

 costs, determines the logger's profit. In appraisals of stumpage, 

 on the other hand, the net surplus after paying all other expenses 

 must "be divided between stumpage and profit, and the deter- 

 mination of legitimate profit must precede that of stumpage 

 value. 



On small ventures, where the enterpriser depends almost en- 

 tirely on his individual efforts and the amount of capital invested 

 is insignificant, most of the annual costs are met from income, 

 depreciation is a small item, and profit is usually gauged by the 

 margin of income over costs for each unit. Logging contractors 

 are satisfied if they realize, say, $i profit per thousand board 

 feet log scale above their computed expenses. Profits may 

 always be expressed in this manner, whether or not the calcula- 

 tion stops at this point. This has been termed the overturn 

 method of expressing profits, since the working capital used for 

 wages and other current expenses is turned over or used once 

 for each unit of output. 



The contractor bases his profit on costs of logging, exclusive 

 of stumpage. 



Let Lc = logging costs. 



Me = milling costs. 



. f LD for logging, 

 D = depreciation costs { .,_ , .. 



\MD for milling. 



5 = sale value of lumber or of logs. 



P = profit. 

 Y m = stumpage value of 1000 board feet of 



manufactured lumber. 

 q% = legitimate profit. 



Then P = q% (Lc + D}. 



Y m = S-(Lc + D}- q% (Lc 



