Labor cost . --Productivity and labor cost are the same as for the banding operation. 



Wrapping materials cost .--The cost of wrapping materials is a function of 'unit 

 length and is not dependent upon production volume. A 2- by 4- by 16-foot unit requires 

 160 square feet of wrapping material. Using a price of $11.46 per M square feet, the 

 wrapping material costs $0,955 per M board feet for a 16-foot unit. The cost of staples 

 is estimated at $0,035 per M board feet. Total materials cost for wrapping is $0,990 

 per M board feet. 



Machine cost . --The installation cost of the wrapping facility has been included in 

 the banding machine installation. Hence, amortization charges for wrapping have been 

 included in the banding cost. Such an allocation is permissible because the wrapping 

 storage rack is built as part of the banding installation. In practice, the wrapping 

 materials storage rack is a minor expense since it is usually made of scrap materials. 



The cost of the forklift operation has also been charged against the banding 

 operation. We did this because a forklift is needed for the banding operation whether 

 or not the package is to be wrapped. 



iNfhere the banding machine operator is used in the wrapping operation, overall 

 productivity is reduced from 12 units per hour to 7 units or 13 M board feet per hour. 

 This is because the banding operator has a break in continuity and he must move back 

 and forth between the banding and wrapping stations.-^ 



Using this method to wrap lumber units, the cost per M board feet is 



Labor cost. --The labor charge of $0,576 per M board feet is derived by using an 

 opportunity cost analysis as follows: Using four men for the combined banding and 

 wrapping operation (Alternative 1), the total labor cost is $0,694 per M board feet. 

 Where three men are used (Alternative 2), the combined total labor charge is $0,923 

 per M board feet. The charge of $0,5 76 per M board feet to wrapping assumes the 

 difference in total labor costs for the two different methods is attributed to the 

 wrapping method that results from reduced productivity for the combined operation. 



Materials cost. --The cost of wrapping materials is the same as in Alternative 1. 



Machine cost. --There is no charge for machine amortization or operation as in 

 Alternative 1. 



^In this instance, three men are used instead of four for combined transport, 

 banding, and wrapping. Productivity is reduced to 4.48 M board feet per man-hour for 

 three men as compared to 5.76 M board feet per man-hour for four men. 



Alternative 2 



Labor 



Materials 



Machine 



$0,576 

 0.990 



$1,566 



4 



