July, 1930] Operatixg Costs of Grain Stores 21 



cerning the importance of these items for the individual stores. It is 

 not the effect of volume of business on these costs which should be 

 emiihasized, but the fact that some managers are able to conduct sev- 

 eral times as much business on about the same cost. Many managers 

 remarked, "If only I could increase my volume of business, I would be 

 all right." On the other hand, these men seldom mentioned the cut- 

 ting down of labor, delivery, bad debts, interest and the costs which 

 are flexible, so as to be exjual to or in a better position than the av- 



erage. 



INVENTORY TURNOVER 



It has come to be considered a business axiom that the more often 

 stock is sold out and replenished, the larger will be the retuiTi on the 

 investment, because a margin of profit is realized on each invcntoiy 

 turnover. A smaller amount of capital is required to do a given 

 ;i mount of business, and market changes are more easily followed when 

 turnovers are rapid. Other advantages are decreases in spoilage and 

 waste, and in insurance and tax costs because of a smaller inventor\\ 



The inventory turnover of the 41 stores averaged 10.2 times. There 

 were ten stores which had less than 7 in\-entory turnovers, fifteen 

 from 7 to 10, eight from 10 to 13 and eight with more than 13. Store 

 185 with the largest turnover of 22.5 times had a total cost per dollar 

 of sales of $.1081, whereas Store 192 with the lowest turnover of 3.5 

 had a cost of $.1510. When the total costs per dollar of sales are 

 compared with the number of inventory turnovers for all stores, a 

 marked relationship is found; i.e., slow turnovers are associated more 

 often with high costs than are the more rapid ones. The average total 

 cost of 14 stores having inventory turnovers less than 8 times is $.1228 

 per dollar of sales, and for 13 stores having more than 11 turnovers 

 it. is $.1057. 



The slow turnovers suggest that, apparently, some stores are carry- 

 ing much larger stocks than are necessary. Large stocks are due to 

 several causes: e.g., keeping three or four different brands of dairy or 

 poultry feed on hand so as to satisfy the trade; buying in straight 

 carlots to reduce the cost per ton in spite of a small volume of busi- 

 ness; and the handling of miscellaneous goods such as cement, hard- 

 ware and farm implements. 



CREDIT 



Data collected in the state survey showed that 89 dealers had an 

 average amount of $870,521.50 in accounts and notes receivable. 

 There were 48 stores having less than $5000 regularly in accounts re- 

 ceivable, 18 from $5000 to $9999. 13 from $10,000 to $25,000 and 10 

 with more than $25,000, the largest amount carried in this account 

 being $95,629. 



The seriousness of these accounts is better appreciated when their 

 average amount is compared to yearly sales. (This ratio is obtained 

 by dividing the average amount in accounts and notes receivable by 

 the vearly sales). On this basis there were 24 stores having average 



