4 BULLETIN 660, U. S. DEPARTMENT OF AGRICULTURE. 



The expense of operation. — This includes the wages of operators 

 and helpers and the cost of supplies during the periods of operation. 

 Usually these are charged directly against the work done and not 

 included in the plant rental. It is only necessary that they be 

 charged in one place or the other, and it is important to specify 

 what is included in rental when leasing equipment. 



The average cost of repairs. — There is a difference of opinion among 

 cost accountants as to how repairs and renewals to plant should 

 be charged. One view is that renewals may be of such a nature 

 that the useful life of the machine has been increased and therefore 

 the expense of such renewals should be looked upon as an offset to 

 depreciation. Another view is that there is no difference between 

 repairs and renewals, except in degree, and that they all should be 

 considered in the same light; i. e., independent of depreciation 

 charges. It appears that the latter consideration permits simpler 

 accounting and does not rely so much upon individual judgment as 

 to whether the expenditure is for repairs or for renewals. 



After a machine has been rebuilt or repaired extensively with the 

 intention of increasing its serviceable life, it should be considered 

 as a piece of new equipment valued at its depreciated value, plus the 

 cost of renewals. This necessitates the computing of a new rate 

 of depreciation on the basis of the new value and assumed new 

 useful life. 



The approximate average cost of repairs, including extraordinary 

 repairs, often can be arrived at by casting up old accounts and 

 finding what a similar piece of machinery used on similar work has 

 cost for repairs over a term of years. 



Charges for time spent in idleness. — To arrive at a fair and equitable 

 daily charge for rental some allowance must be made for time spent 

 in idleness, because on these daj^s the fixed charges still are con- 

 tinuing and certain supplies are necessary even though the machine 

 be not in operation. The usual way of arriving at the charge for 

 lost time through idleness is to bring together all of the charges 

 for a year and divide them by the number of days the machine 

 actually was in use. By dividing the sum total of expense by the 

 number of days the machine was available for use even though no 

 work existed on which it could be used, the result would be a daily 

 rental with no allowance for lost time. The difference between 

 these two rentals will show what a considerable factor in the fixed 

 charges this item of lost time may become. In all contracts or agree- 

 ments on rental of equipment care should be taken to specify whether 

 the rental is "per day" or "per day of service." 



Charges for depreciation. — Equipment is consumed in production 

 just as truly as material. This loss is called natural depreciation. 

 Depreciation maybe either natural or functional. "All equipment 



