I2 BULLETIN NO. 770, U. S. DEPARTMENT OF AGRICULTURE 
smaller wage. Where the truck owner expects to act as his own 
driver, it is only fair that a reasonable wage for this service be entered 
on the books before an attempt is made to calculate profits. 
DEPRECIATION. 
Depreciation as a feature of expense is little understood by the 
average small operator, and there is an almost universal tendency to 
accord too little consideration to this important item. Investigations 
disclose the fact that this constitutes one of the heaviest items of cost 
per mile of operation. Most operators who consider this item at all 
are inclined to set aside from 20 per cent to 33 1-3 per cent of the 
cost of the truck each year to cover depreciation. This is a very simple 
arrangement but it is not entirely a sound one. It is obvious that 
depreciation will be greatest on the truck which makes the greatest 
annual mileage. It will be seen, therefore, that unless the annual mile- 
age, or prospective annual mileage, is considered, the preliminary 
estimate of depreciation is apt to be incorrect. Depreciation under 
actual working conditions varies considerably with different makes of 
trucks and is correspondingly less on better makes. It is impossible 
to set forth a formula which will enable the prospective purchaser of 
a motor truck to estimate in advance his depreciation with any con- 
siderable degree of accuracy. It will be necessary for each owner to 
consider carefully his own conditions and on the basis of past per- 
formance of trucks of the same size and make as his own, draw his 
own conclusions. The operator who is just considering the route 
will do well to study very seriously the importance of this item of 
cost. If he will tentatively estimate depreciation in terms of dollars 
and cents per year, estimate his prospective yearly mileage, and divide 
his annual depreciation cost by the annual mileage, he will be sur- 
prised at the cost of depreciation per mile of operation. 
INTEREST ON INVESTMENT. 
While interest on investment is a matter of controversy in corpora- 
tion accounting there can be no doubt that the motor truck operator 
must give serious consideration to the fact that he will have invested 
considerable money in the motor truck that can not be used for other 
purposes. Most operators are content to estimate six per cent as a 
fair rate of interest per year, but few of them take into consideration 
the depreciating value of the truck. During its second year of opera- 
tion, it is obvious that the motor turck is not worth as much as during 
its first year. For this reason, a charge of six per cent for interest on 
the purchase price of the car is not a just one during the second year 
_ of operation. 
A simple formula has been devised by a conference: of truck 
_ owners for calculating the average annual interest to be charged 
against a motor truck. This formula is as follows: ASE] y @XB= 
Z te 
