8 BULLETIN 412 



Some of the methods used have been criticized at various times and by 

 various persons as not being a correct basis of cost. The principal criti- 

 cisms have been concerning the inclusion of a return for operator's labor 

 and for interest on investment, particularly land; and the practices of 

 charging home-grown supplies from one enterprise to another, and credit- 

 ing by-products, at market value and not cost. 



In considering these criticisms, the purpose for which the cost figures 

 are to be used must be kept in mind. The primary uses of cost figures 

 as here calculated are to compare different enterprises on the same farm, 

 or the same enterprise on different farms or groups of farms, and as a basis 

 for studying the relative efficiency of different methods of production. In 

 order to be useful for these purposes, cost figures must include common ele- 

 ments. If on one farm the operator does all the work and on another all the 

 labor is hired, unless the operator's time is included on the one, the two can- 

 not be compared accurately. Similarly, in the case of land, if one farmer 

 uses land valued at $50, and another land valued at $100, profitable com- 

 parisons cannot be made without including interest on the varying values. 

 Land is often held to be different from other productive factors because its 

 value is determined by the prices of its products and does not determine 

 their prices. This is true, and the same is true of any other factor in 

 production, varying only in the degree to which it can be put to other uses. 

 The value of a factory having one use will depend, after it has been con- 

 structed, on the price at which its product can be sold. But if a factory 

 that has more than one use is being studied to determine to what use it 

 will be put, and if one product involves equipment costing $5000 while 

 another involves equipment costing $10,000, unless returns on this capital 

 are included in the comparison of costs such a comparison is of little 

 value in determining which product should be manufactured. 



The practices of charging home-grown supplies transferred from one 

 enterprise to another, and crediting by-products at market value instead of 

 at cost, are followed by most manufacturing enterprises having comparable 

 problems when they desire to calculate the cost of a particular product. 

 In order to compare the different enterprises on a farm, the returns must 

 be comparable. If one farm raises oats for horse feed and another farm 

 buys them, the costs of horse labor will not be comparable unless oats are 

 in both cases charged at market value. 



THE CANNING INDUSTRY 



The canning industry in New York is based on a large volume of a variety 

 of high-quality products. The climate and soil conditions prevailing in the 

 canning sections of the State are such that a variety of fruits and vege- 

 tables can be economically produced. 



Canning factories usually are located close to the land which produces 

 the principal crops that are canned. Most of the factories in New York 

 State pack a variety of products. In some cases the area in which the 

 factory is located is not particularly well adapted to raising all the prod- 

 ucts that are canned, but the larger companies, operating a number of 

 plants, have distributed them so that they have one or more plants located 

 in a section well adapted to each crop. 



