Cost item Basis for allocation 
Variable costs 
Salaries Redrying wages as a proportion of total wages 
Wages: 
Receiving Redried tobacco as a proportion of total - 
tobacco received 
Coopering Hogsheads required for redried tobacco as a 
proportion of total hogsheads made 
Utilities Same as salaries 
Office supplies Same as salaries 
Repairs and maintenance Same as salaries 
Hogshead materials Material required to package tobacco redried 
Fixed costs in general were charged to tobacco redrying except where records 
provided a different allocation. 
Storage and Services 
Fixed costs 
1. Building depreciation: Based on area devoted to tobacco storage and 
total warehouse area as shown on warehouse records. Included as tobacco storage 
area was clearances and aisles as provided for in CCC storage contracts plus 
2 feet of the main aisle space. The ratio of storage area and working area to 
total area was used as a basis for determining depreciation costs allocated 
directly to storage and services. 
For example, assume that 90 percent of the warehouse was used for storage. 
In this case 90 percent of the total depreciation was chargeable directly to 
the storage operation. The remaining 10 percent would then be allocated to all 
services, including storage, based on the volume handled in each function. 
2. Equipment depreciation: Cost for equipment could be identified with a 
particular function or allocated directly. For example, scales were allocated 
directly to weighing. Motorized equipment (autos, trucks, forklifts) was 
allocated according to use. A weighting system was devised using estimates 
from each firm involved and was checked with industry people to determine if 
these relative weights were realistic. 
3. Insurance and taxes: Building insurance was allocated to functions in 
the same manner as depreciation in Item 1. Insurance on machinery and equipment 
was allocated to functions based on use. 
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