190 FOREST VALUATION 



are automatically relieved of profit and depreciation, and the 

 charge upon the other timbers for these items proportionately 

 increased. 



The same result is readily obtained on a thousand foot basis, 

 using the per cents of the different species in the cut. That 

 is, to obtain the average margin (of sale value above operating 

 costs), multiply the margin for each species by the per cent of 

 this species in total cost: 



45 per cent sugar pine at $10.00 $4.50 



33 per cent yellow pine at $8.00 2.64 



22 per cent white fir at $6.00 1.32 



Total $8.46 



Depreciation and profit per M feet ( -^^ 1 $3.80. 



V 9000 / 



Q = $.045, to be taken from each dollar of margin for 



0.40 



these items. 



This method of adjusting the prices of the more and less 

 valuable species is believed to accord with customary business 

 practice. Volume of money handled, rather than quantity 

 of this or that product, is the usual basis for figuring carrying 

 charges, depreciation and returns. In logging, improvements 

 are frequently constructed primarily to take out certain valua- 

 ble species. Inferior timbers may be cut or left as the market 

 warrants. In such cases operators will usually cut inferior 

 species if a profit can be netted over bare operating costs, figur- 

 ing that the cost of improvements is borne wholly by the better 

 stuff. The foregoing is believed to be a logical and rational 

 application of this principle." 



For a mixed stand, the method proposed is, therefore, to com- 

 pute the operating costs on the basis of the total amount to 

 be logged, including inferior species. The profit and deprecia- 

 tion are then determined as a lump sum, sufficient to pay the 

 required per cent on the total investments. Finally, this sum 

 is charged as an additional "cost" against the sale value pro- 

 rated as outlined above between the different species. The 



