in cents per pound of live broiler to be processed instead of on a per 

 chick basis to compensate for the mortality losses and keep this cost 

 additive with the other stages. The distribution costs are listed under 

 three headings: truck, labor, and management. 



At the lowest density level considered, the distribution cost de- 

 creases initially from 0.069 cents a pound for firm A to 0.052 cents for 

 firm B. With further increases in firm size, the unit distribution cost 

 increases to 0.070 cents a pound for firm D, the largest firm size con- 

 sidered at this density level. At the 5,000 pound density level, the unit 

 distribution cost also initially decreases with increasing firm size. The 

 cost decreases from 0.058 cents a pound for firm A to 0.033 cents a pound 

 for firm C. Further increases in firm size increase the distribution cost 

 to 0.039 cents a pound for firm E. Increasing firm size from E to F re- 

 sults in the unit cost remaining substantially the same, 0.038 cents a 

 pound. At the highest density level considered, 25,000 pounds, the chick 

 distribution cost decreases from 0.054 cents a pound for firm A to 0.023 

 cents a pound for firm D with only a moderate increase in cost with fur- 

 ther increases in size. Figure 4 illustrates the effect of increasing size on 

 unit cost for the three density levels. 



Figure 4. Chick Distribution Costs per Pound of Live Broiler for Various 

 Size Firms Producing Broilers at Three Density Levels. 



.07 



.06 



.05 

 ■a 



c 



|.04 



A) 



«^.03 

 •02 



/, 



1,000 pound density level 



5,000 pound density level 



25,000 pound density level 



10 20 30 40 50 



Firm size : millions of pounds annually 



60 



70 



The initial decreases in the distribution cost with increasing firm 

 size at a given density level is the result of several factors. The positive 

 effect on costs caused by increasing the size of the producing area is 

 initially more than offset by two cost-reducing adjustments. As hatchery 

 size increases, the number of distribution days is increased and a larger 

 size truck is substituted in place of a smaller size truck. Initially, these 

 adjustments are sufficient to reduce the unit distribution cost. Eventu- 

 ally, the cost-increasing effect of increasing area is sufficient to offset 

 these diminishing-cost reductions. 



14 



