MACHINERY COST OF FARM OPERATIONS. 5 
METHOD OF COMPUTING MACHINERY REPLACEMENT COSTS. 
There are a number of ways in which replacement costs may be 
computed and distributed, but a discussion of these methods and 
their application to the various types of business and conditions 
where they are in vogue would be out of place here. 
The method chosen as being best adapted for use on the farm con- 
sists in charging off annually a part of the first cost of the implement 
in proportion to its use on the farm and under field conditions. Thus 
by reference to Table II for walking plows, the service rendered by a 
plow that covers 15.6 acres annually is 12.5 years, so that the part 
that should be set aside annually to provide for the replacement of 
this plow (1^12.5) is 8 per cent of the first cost of the plow. In 
other words, the replacement charge per year, per acre, or per day 
is based on proportional use and not on the market valuation or sale 
price of the equipment at any time during its life. From the stand- 
point of the man on the farm who expects to remain in the business, 
this is a logical method to use. To the great majority of farmers, who 
intend to continue in the farming business for periods exceeding the 
duration of the life of their machinery, the tables which follow will 
be found useful in estimating the machinery cost of proposed work 
and the fair charge against work already done. To the man expecting 
to discontinue farming and sell his machinery, or to the man negoti- 
ating for the purchase of second-hand implements, knowledge of the 
further units of work that may be expected from machinery that has 
already performed a given amount will assist in determining its fair 
value to both buyer and seller. 
METHOD OF COMPUTING THE INTEREST CHARGE. 1 
Where a part of the first cost of equipment is charged off annually 
to provide for its replacement, the average investment upon which 
interest must be allowed is shown in the schedule below: 
Fraction of cost new 
charged off annually. 
Average 
invest- 
ment (per 
cent of 
first cost). 
Fraction of cost new- 
charged off annually. 
Average 
invest- 
ment (per 
cent of 
first cost). 
Fraction of cost new 
charged off annually. 
Average 
invest- 
ment (per 
cent of 
first cost). 
All 
100.00 
75.00 
66.66 
62.50 
60.00 
58.33 
57.14 
56.25 
55.55 
55.00 
54.54 
54.17 
53.84 
53.57 
53 33 
One-half 
53.12 
One-third 
One-seventeenth 
One-eighteenth 
One-nineteenth 
One-twentieth 
52 93 
One-fourth 
52 77 
One-fifth 
One-twelfth 
52 63 
One-sixth 
One-thirteenth 
One-fourteenth 
52 50 
One-seventh 
1 The average investment in equipment, where a fraction of its first cost is charged off each year for re- 
~i j. v * * -u A i_ , • tJDiJ years of service+1 
placement, may be found by the rule: Average investment=flrst costX y ears of ser viceX2 ' 
