34 
BULLETIN 1411, TJ. S. DEPARTMENT OF AGRICULTURE 
price averaged about 15 cents per pound, had a prevailing size of sale of but 1}4, 
pounds. For the three illustrative commodities, the retail price of each per pound 
and the number of pounds per retail sale were found to be: 
Mean 
retail price 
per pound 
Cents 
Northern cabbage 1 5. 20 
Barreled apples 7.97 
California oranges 10.95 
When these commodities are arranged in ascending order of retail price per 
pound, it is observed that size of retail sale is in descending order. This is rep- 
resentative of the general tendency for all commodities, as shown in Figure 4. 
A means is now at hand for explaining what determines retail price per pound, 
and the price spread per pound. The difficulties arising from the unsuitableness 
of the pound as a unit for comparison of distribution factors are removed by 
using the standard retail sale as the unit of distribution. With the size-of-sale 
data, price spread may be computed per mean retail sale. The spread per sale 
is the product of the price spread per pound and the number of pounds per sale. 
For the three illustrative articles the mean spread per pound, the mean size of 
retail sale, and the mean spread per sale, are: 
Mean 
spread per 
pound 
Mean size 
of retail 
sale 
Mean 
spread per 
retail sale 
Northern cabbage 
Barreled apples^.. 
California oranges 
Cents 
3.02 
3.87 
4.47 
Pounds 
4.0 
3.0 
2.5 
Cents 
12.1 
11.6 
11.2 
When the commodities are arranged in ascending order of spread per pound, 
the size-of-sale series is seen to be in descending order, as was true in the preceding 
instance with the price-per-pound series. In consequence of the inverse relation- 
ship of the spread-per-pound series and the size-of-sale series, the mean spread 
per retail sale, which is the product of these two, is nearly constant (fig. 13). 
This is illustrative of the general tendency for all 14 commodities, as shown in 
Figure 5. The general conclusion is therefore that retail prices are set at such 
levels above wholesale prices as will tend to make the spread between wholesale 
and retail values of the standard retail sale the same for all commodities. 
This theory of a constant spread per sale throws light upon several perplexing 
problems. It explains why the portion of the consumer's dollar which is ab- 
sorbed in the expenses of city distribution should be greater for some articles than 
for others. It indicates the existence of a peculiar price-setting practice which is 
based on the prevailing size of the consumer's individual purchase. Further- 
more, it shows that any significant relationship between physical volumes end 
margins may be traced to associated differences in size of sale. 
SUMMARY OF APPLICATION OF THEORY 
Steps in application of the theory of a constant spread per retail sale as an 
explanation of contrasts in percentage margins among the 14 commodities are 
shown graphically in Figure 13. The interpretation of these steps is set op- 
posite the respective diagrams. 
Differences in percentage margins within the commodity series, ranging from 
37 for northern potatoes to 63 for white onions, come about from use of the 
dollar's worth of goods as the unit of measurement. These differences are merely 
a reflection of the fact that to distribute a dollar's worth costs more for some 
commodities than for others. The assumption that distribution expense per 
dollar's worth should be uniform for different commodities is illogical, because it 
ignores the fact that more service is absorbed with a dollar's worth of some articles 
than with a dollar's worth of others, in consequence of differences in their pre- 
