Storage and Services 

 Fixed costs 



1. Building depreciation: Cost was based on area devoted to tobacco 

 storage and total warehouse area as shown on warehouse records. Included as 

 tobacco storage area were 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 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 depreciation was in item 1. . Insurance on machinery and 

 equipment was allocated to functions based on use. 



4. Leases and rentals: Building leases were allocated to functions in 

 the same manner as building depreciation in item 1 and leases of equipment 

 was allocated in the same manner as equipment depreciation in item 2. 



5. Interest on capital investment: Cost was allocated in same manner as 

 costs for leases and rentals. 



Variable costs 



All variable costs except direct labor, machinery repairs, office supplies, 

 and hogshead material were allocated on the same basis as building depreciation. 

 Direct labor and hogshead materials were allocated according to labor use. 

 Machine repairs were allocated according to machine use. Office supplies were 

 allocated according to clerical salaries. 



DEFINITION OF TERMS 



Tobacco Processing 



Machine redrying : Receiving tobacco, weighing, segregating, blending, 

 plucking, hanging, redrying by redrying machine (some of the tobacco in these 

 types is hung in buildings and redried by air), packing into hogsheads, 

 coopering, weighing and loading out hogsheads. 



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