.69 acres for Mill A to 2.68 acres for Mill F. Land was assigned a cost of 

 $5,000 an acre. 



10. Total Investment — Total investment for the mill sizes con- 

 sidered varies from $105,718 for Mill A to $923,397 for Mill F and are 

 shown in Table 6. Approximately half of the investment is for equip- 

 ment, and another quarter of it is for the mill building. The other cate- 

 gories account for the remaining quarter of the total investment. 



The investment per ton of annual capacity decreases discontinuous- 

 ly over the range of mill sizes considered from a high of $19.46 for Mill 

 A to a low of $10.20 for Mill F. A discontinuity occurs at Mill B' where 

 substantial changes in manufacturing technology are incorporated. 



Ownership Costs 



The initial cost of the durable input is spread over its productive 

 life as depreciation. In addition, there are several other costs such as in- 

 surance, taxes, maintenance, and interest on investment. In the short 

 run. these costs are fixed, since they do not vary with output. The level 

 of ownership costs for each firm and each item is given in Table 7. 



1. Depreciation — Depreciation is the cost of time, wear, and 

 obsolescence. Rates for determining annual depreciation costs for the 

 model firms were developed from information provided by mills and 

 equipment manufacturers. 



Obsolescence appeared to be the primary consideration in the es- 

 tablishment of the equipment depreciation rate. Firms indicated that 15 

 years is the maximum period for depreciating equipment, and most were 

 using a shorter time period. All equipment for the model mills is depre- 

 ciated by the straight-line method over a ten-year period, except the 

 lioiler which is depreciated over a 15-year period. 



Firms indicated that mill buildings and other facilities are being de- 

 preciated over a longer time period. These facilities have not been ren- 

 dered obsolete by the numerous technological developments in feed 

 manufacturing equipment, and firms apparently do not expect obsoles- 

 cence to become an important factor. For the model mills, all buildings, 

 the grain storage, rail siding, and finished feed storage are depreciated 

 by the straight-line method over a 25-year period. 



2. Interest on Investment — A rate of six percent on the undepre- 

 ciated balance or three percent on the initial investment in equipment, 

 buildings, and other facilities was used to determine the annual cost for 

 interest. In addition, a rate of six percent was used on the nondepreciat- 

 ing land investment. 



3. Taxes — Property taxes vary considerably between communities 

 as well as between states. In some New England states taxes may be 

 levied on all property, while in others equipment may be exempted. Fur- 

 thermore, communities in most states are allowed to establish the per- 

 centage of total value to be assessed. 



The method of establishing the annual tax cost for the model mills 

 was to apply a charge of $5.00 per hundred dollars on 50 percent of the 



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