STUMPAGE VALUES 



I8 9 



depreciation and profit over the difference between operating 

 cost and selling price, for each species, in the quantities entering 

 into the annual cut. 



To illustrate: 



A yearly cut is made up of 4 million feet of sugar pine, 3 mil- 

 lion feet of yellow pine, and 2 million feet of white fir (giving a 

 total of 9 million feet).* The margins between selling prices and 

 costs of production, exclusive of depreciation and profit, are: 



The total net value, or sum of the margins over which depre- 

 ciation and profit may be pro-rated, is thus: 



Sugar pine $10.00 X 4000 M $40,000 



Yellow pine 8.00 X 3000 M = 24,000 



White fir 6.00 X 2000 M = 12,000 



Total $76,000 



The annual sum of depreciation and profit (investment 

 method) which must be paid out of this total has been computed 



as $34,200. Hence 3 4 ' 200 = $0.45. That is, every dollar of 

 76,000 



margin between operating costs and selling price must pay 

 45 cents toward profit and depreciation. Put in quantitative 

 terms, by species, we have the following charges per M feet for 

 depreciation and profit: 



Sugar pine 10 X $0.45 = $4.50 



Yellow pine 8 X 0.45 = 3.60 



White fir 6 X 0.45 = 2.70 



By this method inferior species which yield no margin between 

 operating costs and selling price, or a negative margin, but 

 which must be included in the sale for silvicultural reasons, 



* The bracketed material does not appear in the original quotation and has 

 been inserted as additional explanation. 



