2 BULLETIN 994, U. S. DEPARTMENT OF AGRICULTURE. 



consuming centers. Here, again, it was apparent that there was 

 little accurate information by which to judge prices and on which 

 to base findings as to cost of production. The result has been an 

 insistent demand from producers and farmers' organizations for the 

 cost of production data necessary to a full understanding of the 

 farmers' problem of production. 



The same urgent demand for cost figures has arisen in foreign 

 countries, especially in England and Scotland. The authorities in 

 these countries have appointed cost findings com m ittees to develop 

 accounting methods on the farm in order to obtain representative 

 cost figures that will aid in a more complete understanding of the 

 farm business. 



The complicated details involved in the farmer's method of pro- 

 duction and distribution make it inevitable that any hasty attempt 

 to collect cost data will result in superficial, misleading, and usually 

 inadequate information. This was apparent in many instances 

 during the war. Out of the hodgepodge of estimates of costs and 

 profits, often made for a specific purpose by various agencies, there 

 has sprung a general misunderstanding as to the function and purpose 

 of cost data and also considerable skepticism as to methods and 

 results. There is no thorough understanding of the value and uses 

 of cost of production data, and little material concerning methods 

 of attacking the problem from its economic side is available. 



The purpose of this bulletin is to throw some light on the funda- 

 mental concepts of cost data and to describe methods of study and 

 the uses to which the data may be put. 



THE USES OF COST STUDIES. 



Absolutely accurate or universally applicable cost of production 

 figures do not exist. This is apparent with farm products because 

 of the many joint costs involved in the production of most of the 

 staple products, and the necessarily more or less arbitrary allocation 

 of some of the cost factors. The extreme variation from farm to 

 farm in the cost of producing the same product, and the variations 

 from field to field and in different animal units on the same farm 

 become at once apparent in the tabulation of farm cost data. How- 

 ever, the value of the results of careful studies of cost is not impaired 

 by this fact; for what the farmer needs in the reorganization of the 

 farm business is figures which show the comparative profitableness 

 of competing enterprises. For such purposes the figures obtained 

 by the methods now used in farm cost of production studies are 

 probably as satisfactory as are the results obtained in commercial 

 accounting for similar purposes. 



