INTERPRETATION OF COST ACCOUNTS 34-3 



accounts kept should not be misinterpreted with respect 

 to the cost of production and operation. 



When one is asked by his neighbor, "What did it cost 

 you last year to raise a bushel of corn?" he naturally 

 quotes a figure obtained from his Corn account as de- 

 scribed under "Operation of Crop Account," Chapter 

 IX. If both men in question have kept accounts, a dis- 

 cussion and a general comparison of costs is likely to 

 arise. Before they start such a comparison, the first step 

 should be to make sure that both have the same thing in 

 mind when speaking of "cost." Unless such an under- 

 standing is reached first, one man might have in mind 

 all the charges to the Corn account, while another might 

 have in mind only the cost up to the time of harvest. It 

 has been pointed out that the cost of production is found 

 in the field account and transferred to the crop account 

 as a single item. The cost of handling, storing and selling 

 is shown in the crop account only. The aggregate cost 

 up to the time the crop is sold or fed is called the "Total 

 Cost." The production cost and the total cost per bushel 

 are both figured on the number of bushels harvested. 



In order to compare costs intelligently, care should be 

 taken that the total cost of any productive element does not 

 include extraordinary losses due to fire, runways, disease 

 and similar causes. For example, under ordinary condi- 

 tions, the various elements might be charged with horse 

 labor on a basis of the net expense and loss in connection 

 with horses. If such expense and loss consists of, say, $500 

 for loss of horses due to disease, this $500 should be trans- 

 ferred directly to Loss and Gain account as an extraordi- 

 nary loss. 1 In this way, the crop accounts would not be 

 called upon to assume this loss in the form of increased 

 cost of production or selling.- A loss of this nature is a 



1 See Death of Livestock and Illustration 32, Chapter VII. 



