164 MANAGEMENT OF DAIRY PLANTS 



purposes and not used for manufacturing. Often the office is 

 located in the most desirable part of the building. If the proper 

 rent were charged for the office room it might impress the 

 creamery owner that the office would be of just as much service 

 to the company if located in a part of the building less service- 

 able for factory purposes. 



B. DEPRECIATION 



The depreciation deducted for wear and tear of machinery, 

 equipment and building should be great enough to cover the 

 natural decrease in value of the property. The average life 

 of the various kinds of machinery and equipment should be 

 determined and the rate of depreciation estimated in propor- 

 tion thereto. The amount depreciated should always be such 

 that the book value of the property is equivalent to the real 

 value thereof. 



The life of a creamery boiler and engine is about fifteen years. 

 Suppose the original cost of the boiler and engine were $500, 

 then the monthly depreciation of the boiler and engine would be 



^°° -$2.78 



ISX 12 



A chum if properly cared for should last for five years. In 

 some of the larger plants it may not last for more than three 

 years. The life of a milk can, including both wear and loss, is 

 about three years, and of ice-cream containers and tubs from 

 three to four years. 



The building, if built from hard-burned brick, cement blocks, 

 or similar material, should last for forty years or more, if a 

 frame structure, twenty years will be the life thereof. If the 

 location is favorable it is often possible that the value of the 

 groimd on which the building stands will increase in proportion 

 to the depreciation in the value of the building. It is safe, how- 

 ever, to be conservative and not place fictitious values on any 

 of the property. Such items as good will, advertising, etc., if 

 considered as a financial asset of the company should be liberally 

 depreciated, as such assets are not always marketable. 



