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



In enterprise surveys, such as studies of dairying, beef cattle, 

 and special classes of farm investment, the interest rate is often 

 increased slightly, usually by 1 per cent, as compared with the total 

 farm capital rate, since short-time loans are often made to cover 

 such operations at a rate of about 6 or 7 per cent. This should be 

 charged upon the average capital used in the enterprise during the 

 period of study. On beef cattle it may often run from three to six 

 months, while on dairy cattle it would be for the entire year. 



The point is often raised as to whether interest should be charged 

 on feed on hand at the start of the year and purchased during the 

 year that is fed to live stock. One method of handling this charge 

 is to assume that the farm price from month to month should cover 

 the interest, while another method that has been used is to charge 

 interest at 'the short-time loan rate on one-half the value of the feed 

 which is consumed during the entire period. The same argument 

 might be used for charging interest on the value of seed, the returns 

 from which are not obtained until the crop is harvested. 



The practice of the Office of Farm Management and Farm Econo- 

 mics has been usually to ignore this charge on supplies and feeds, 

 on the assumption that, strictly speaking, only two general kinds 

 of farm property should bear an interest charge for any purpose, 

 namely, the fixed assets and the specific current investments, such as 

 cattle and hogs purchased for resale purposes. 



Overhead. — One of the most difficult phases of cost accounting 

 to the beginner is the composition and distribution of the overhead 

 expense. There are various uses of the term ''overhead." In some 

 instances it may be found to cover a large number of items and to 

 amount to as high as one-third of the costs, or it may embrace only 

 those charges that can not be apportioned directly to the enterprise 

 in hand. 



The latter usage is the proper one, namely, to keep the amount 

 charged to overhead as small as possible and to include under this 

 head only those items of expense that are so general as to preclude 

 direct charging to the various accounts. Common among the cash 

 items that go to make up the overhead in a well-conducted system 

 of cost accounting are general farm advertising, stationery, telephone 

 rents, subscription to farm journals, and postage, while the principal 

 labor expense is made up of the labor that is necessary to maintain 

 the farm business in running order but which can not be charged 

 directly to any particular enterprise, such as work on weed control, 

 road maintenance, picking stones, etc Overhead also includes 

 interest and taxes on the roads and lanes, on the farmstead, and on 

 the headlands of the various fields. 



One of the misuses of this item has been to include the shelter 

 costs of live stock, equipment expense of live stock, sire service, for 



