6 BULLETIN 1442, IT. S. DEPARTMENT OF AGRICULTURE 
from gross margin represented profit accruing from the operation 
of the business. In this study the profit figure included not only 
the profit above estimated wages of the proprietor but also interest 
on investment. In this connection investment consisted of amounts 
invested in equipment and stock, cash used in the business, and the 
difference between average amounts owed to the business for goods 
sold on credit and amounts owed by the business on credit purchases 
of merchandise. No building investments were included, since allow- 
ance had been made for these items through the setting up of esti- 
mated rentals in those cases where the buildings occupied by the 
business were also owned by the business. 
It should be made clear in connection with this definition of profit 
that in those cases where a loss is shown the proprietor was credited 
with an estimated salary and rent in the case of an owned building, 
so that where a loss was indicated the proprietor may not have had 
an actual out-of-pocket loss, but rather failed to meet entirely the 
estimated wage and rent prevailing for stores of similar class and 
situation. 
SALARIES AND WAGES 
Salaries and wage amounts consist of (1) amounts actually paid 
to employees other than the proprietor or members of his family, 
and (2) estimated wages for the proprietor and members of his 
family in those cases where the amounts allowed by the proprietor 
were not in agreement with the prevailing rates of payment for 
similar services in the locality. The determination of the amount of 
salaries and wages paid to full-time or part-time employees of the 
business presented no particular difficulty. However, the second 
portion of the salary and wage expense,' that of estimated salary and 
wages for the proprietor and family was of special importance. 
This arose from the fact that the widest possible variations were 
observed in the methods of treating this item of expense. It was 
desirable, therefore, to adopt some uniform method of procedure 
which would render comparable the salary and wage expense in 
various stores. 
The primary consideration in setting up such a wage was that the 
amount so determined should not be in excess of the amount neces- 
sary to hire an employee to perform the routine duties involved. 
In other words, the method of determining the proprietor's wage 
should not result in the including of any portion of the profit which 
might accrue to him as owner of the business. It seemed reasonable 
to believe that the proprietors of the smaller shops should receive 
from their business a wage amount at least equal to the usual salary 
paid meat cutters in the immediate locality. It further appeared 
reasonable to assume that up to an annual volume of sales of $20,000 
the usual wage paid cutters should be an adequate wage for the 
proprietor. 
Accordingly the basis of estimating a wage for the proprietors of 
stores whose annual volumes of sales were $20,000 or less was to 
include as proprietor wage expense amounts equal to the usual wages 
paid meat cutters in the locality. In stores where the annual sales 
volumes were between $20,000 and $100,000, the basic wage for 
cutters was allowed for the first $20,000 volume of sales and an 
