COST OF PRODUCTION 803 



operation. A plow costing $15 if used to plow only 10 acres a year, would 

 cost 24 cents per acre, but if the same plow is used to plow 50 acres, the 

 cost is reduced to 5 cents per acre. It is necessary, therefore, to estimate 

 carefully whether or not, in the purchase of farm machinery, it will be 

 used enough to make it a paying investment. 



Land Values. — The value of land has a rather definite relation to 

 cost production. Since the interest on its value or the rental is definite 

 for any particular locality, the higher the price of land, the greater is 

 the interest or rental as an item in the cost production. Increased land 

 values generally call for a gradual increase in the intensity of the type of 

 farming. The more intensive the type of farming, the less important 

 land becomes as a factor in the cost of production. In the production of 

 such crops as mangels and potatoes, land rental usually constitutes only 

 10 or 15 per cent of the cost production. In the raising of hay it may be 

 50 per cent or even more of the cost production. For such crops as the 

 cereals, it will usually range from 20 to 35 per cent of the cost. 



Taxes, Insurance and Depreciation. — These items, while of minor 

 importance, have a direct effect upon the cost of production, and vary 

 with the nature of the product in question. Taxes and insurance will be 

 fairly uniform, 1aut depreciation is quite variable. In case of buildings 

 and equipment, it is usual to allow about 10 per cent annually for this 

 item. For some farm implements 5 per cent is sufficient, while for others 

 that wear out quickly or go out of date because of rapid change in improve- 

 ment, 10 per cent is not sufficient. 



The depreciation of work animals and cows is also variable, and is 

 largest in case of the more valuable animals. In figuring depreciation on 

 cows, it is necessary to first take into account the difference in the value 

 for milk and beef purposes. A cow as a productive animal may be worth 

 $200, while she would not bring more than $40 when sold for beef. The 

 average milking life of a cow is about seven years. The difference between 

 the milk and beef value, which in this case would be $160, divided by 7, 

 the number of years in milk, would give the major portion of the annual 

 depreciation. To this should be added the mortality in cows, which 

 averages about 1.2 per cent annually. Likewise, the interest on the valu- 

 able cow is much greater than on an ordinary one. This all increases the 

 cost of production. 



Intensity. — In every locality and for each type of farming there is 

 an optimum degree of intensity that will bring maximum profit or mini- 

 mum cost of production per unit of product. In general, the higher the 

 price of land and the higher the value of product, the greater may be 

 the intensity. High-priced labor has just the reverse effect. Cheap labor 

 encourages intensity. Each producer must carefully consider the amount 

 of labor and the value of fertilizer that can be applied to each acre of land 

 in order to bring the largest profit. 



Size of Business. — Careful investigations show that it costs less per 



