S* 1 "[•>,, A Publication of The College of Agriculture „ \ \: U N Up/71/ IVERSITY OF CALIFORNIA The Fifth Report in o Series on Efficiency in Fruit Marketing BUILDING AND EQUIPMENT COSTS, APPLE AND PEAR PACKING L. L. Sammet and I. F. Davis UNIVERSITY OF CALIFORNIA 1 DAVIE L CALIFORNIA AGRICULTURAL EXPERIMENT STATION GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS Mimeographed Report No. 141 December 1952 FOREWORD This report is the fifth of a series aimed at improved efficiency and lowered costs in the local marketing and packing of deciduous fruits. The present report deals with one segment of the packing costs—the fixed costs for buildings and equipment. In a typical plant, the fixed costs per packed standard box amount to roughly 10 per cent of the total packing cost and thus represent a significant area for study. Data are given in this report from which replacement costs can be estimated for the buildings and equipment required for olants of different capacities and involving the use of different types of equioment. The cost data are applicable to well-organized plants of current design rather than to "ideal" or optimum-efficiency plants. The report also includes data for estimating annual charges for buildings and equipment. Indices of replace- ment cost for buildings and equipment are given which show the variation in such costs for the period 192$ to 1951. These studies were made cooperatively by the Giannini Foundation of Agricultural Economics, California Agricultural Experiment Station, and the Bureau of Agricultural Economics, United States Department of Agriculture. They were made under the authority of the Research and Marketing Act of 19U6. I 1 I \ 9flJ ii /t.fc ne rd-' i& grtxv ".•.fiOSqR:. "XeafcJf srii Jans f no,M"B£3 .fns Efficiency in Fruit Marketing BUILDING AND EQUIPMENT COSTS — APPLE AND PEAR PACKING L. L. Sammet and I. F. Davis-^ Packaging and loading fresh fruits and vegetables for shipment to distant markets require heavy investments for buildings and equipment. For a typical pear packing plant with capacity to ship 2 cars per 8-hour day, the replacement cost at the 1950 price level was approximately $1|0,000. For a plant with capacity to ship 8 cars per day, this cost was about $130,000 for plants equipped to operate with hand trucks; if equipped for operation with fork trucks, the cost would be approximately $160,000. Plant investments of this magnitude are particularly important in view of the short operating season for many packing houses. The length of the shipping season varies from year to year and with the crop and the locality. For pear packing plants in California, the season ordinarily ranges from U to 8 weeks. For most California apple packing plants, the season of full scale operation is only about h weeks, although in some plants there may be an additional period of about 3 months operation at a reduced level. As a result of the short period of operation per year, the fixed costs for buildings and equipment are high in relation to annual volume of output. PLANT COSTS AS DEVELOPED IN THIS REPORT In an accounting sense, expenses for buildings and equipment enter the calculation of costs as charges for insurance, taxes, repairs, inter- est, and depreciation. Such charges vary widely from one plant to another. Aside from the size of plant, they depend on the type of building construc- tion and equipment used, the local tax rate, insurance rates and the firm's policy in regard to insurance coverage, and — perhaps most important — the price level at the time of purchase. Because these factors vary so much from plant to plant, a study of efficiency must include the fixed costs for buildings and equipment on a comparable basis for all plants. This is 1/ L. L. Sammet is a Cooperative Agent of the California Agricultural Experiment Station and the Bureau of Agricultural Economics, United States Department of Agriculture. I. F. Davis is a Research Assistant in Agricultural Economics, University of California. a 190 <: [u»x.f*tBis[ 3i£ 9by*ifiga«! cidt Jo ei f.t£w bna tea^ at ibstj aretl as lis*; nit i&znio'iiSs'O ni ed/saXcr fjnxMoj&c eXqqs SifltQlfcraD .£203 foT ..a^s; .82iS!>w 4 txrods "^Ino ec fiox«jsTaqo I surras oi tioiti&L&f, ni. rfgirrf ->ii? tn< ?*tci3 JnoflKXxupa bnfi asnibXlyd " r r»1 aeeaaaxs "snse ni confix t st x&q vi .asjxsj" , 9t>fTSHfP.nx lot. fissifif''.) cs s^-rc It c-n& o.f irirtXq ano ittoif. TX6bxv7 visv assiaxic douS ,xr< tftmac gnxhXiud 1«> oq^il arid - xro bn?qsJb ^rftf .irxsXq Jo '.ii aricf hnUi .;:>.jTii sonuu/Sft-c kfjijxt xs^. XsooX ddcf bos.: tdt—'tpBt'roqat iettra aqsjilpq— bra; < sgsnavb-p sorwiaenl 3S .9RBri.".TI«t tn snr 2. done by estimating fixed costs on the basis of the replacement cost in a given year, using standardized cost-rates for the several cost components. This report provides data from which estimates of the replacement cost of buildings and equipment can be made for plants of different size and for plants employing different types of equipment. A separate treatment is given plants designed for hand-truck equipment in contrast with those equipped with fork trucks. This applies to building costs as well as to costs for equipment, as the use of fork-truck equipment has an important bearing on the type of building construction used (Figure 1). The estimates are based on standards derived from a study of the quan- tities of equipment and building space used for the various operations in several of the more efficient plants. Through this procedure, schedules of space and equipment requirements were drawn up for plants of different capacity. These schedules form a standard specification which may be used as a basis for comparison. The standards are appropriate for well-organized plants of current desipn rather than for "ideal" or optimum-efficiency 3/ plants. - From the standard specification, engineering estimates of construction costs were prepared, based on representative prices for northern California in 19^0. Although these estimates show the general level of building and equipment costs that may be expected in plants of different size and type, they cannot be expected to indicate the construction or "replacement" cost for a particular plant. For a given plant, details of building construc- tion, the quantities and types of equipment, and the amounts of space re- quired for the various plant activities may vary from those used in these estimates. Such variations will cause the replacement costs in a particular plant to differ from the standardized costs presented in this report. 2/ As an intermediate type of plant, one should also consider facilities in which the major part of the in-plant transportation work is performed with power conveyors. For this type of plant, the replacement costs for buildings and packing equipment would be similar to those for the hand- truck plant; the costs for in-plant transportation equipment would lie be- tween those for the hand -truck and fork-truck plants. For simplicity, the conveyor-type plant is not considered in detail in this report. 3/ For greater detail regarding the method of establishing these stand- ards", see Appendix A. to etfttelq 'to'l -©bate sti nao tfrisfrq fc'tfp© fens esMilWiw^-lo- * A ' ..tris/irqiups' In f.aqi* : tfH&**nxb gnftpfqae ain&fq iu .tvjsnKix.upti ilsxri^-bhfiri' to 1 * bejfd.leftb' scrnBjq noviv aqlxrp© rfbirttf-Mtoi "io eerc ©it*' as ^.rwiaqlwp©. nol ainoo I) b©axr noWDirt-tenoo gaxbliM lo ©oitf ©di no gnxised sia ofrflftMttUtl oxfT .noeiifi'qBtO'O 16" «ebf tt to^ nfi'rij- '3C?ad , fooTeqoiq ©ro\7 b^soo o 1»7qI .F.stert'j§ ©rij vfbrfa ? ©dr. rot. ©*s©rtt flgcrod-tl/i ni jnensaxl© it) sJtlsIq ni bs^beox© ->d yuijp #srfj %&%oo ■fn^mtypo 9t to nox'totro-enco ©dj dtfaoxbfix o-t bs^oscrx© ©d jeanso v;orf^ j-xud i.* jsmx.i3© rii ni be^n^Rw niaoo f»s£jtasb;ttvte ©dcf-jnoii isxi'xb trt&ta (A) Fork-truck plant: (concrete floor on earth base; con- (B) Hand-truck plant: (wood floor construction at truck- crete side walls; wood frame roof construction). bed height; wood frame sidewall and roof construction). Figure 1. Typical California pear and apple packing houses. Cannery truck ft OUT IN Full Empty lugs lugs Grower's truck Empty lugs Full lugs y L Cannery-cull setoff Box Making Shook Storage Box supply to packers 1 Sorting Packing Shook car or truck _ Temporary ^ I Storage I Car or truck Figure 2. Process chart for major operations in packing fresh fruit. u. The actual investment in a given plant also is affected by local prices for construction labor and materials, local variations in equipment prices, variations in the builder's profit for facilities constructed under contract and by other factors. The replacement cost data given in this report, how- ever, should indicate reasonably well the level of replacement costs in most plants. Although prepared primarily for use in studies of efficiency, the data regarding replacement costs should also be useful in connection with the appraisal of existing facilities or in making preliminary cost estimates when planning new construction. In the following discussion, data are given for estimating replacement costs. This is followed by estimates of expected use-life for various types of buildings and packing house equipment. Cost-rates for estimating annual fixed costs from replacement costs are given, and the calculation of fixed costs per unit of output of the different categories of fruit is explained. An index of replacement costs for buildings and equipment is presented which shows the variation in replacement costs of typical Dlants since 192$. MAJOR PACKING HOUSE OPERATIONS The cost data which follow are presented in terms of the various opera- tions performed in the packing process and the quantity of fruit handled in each operation. The major types of operations are represented in the process chart given in Figure 2, from which the operations may be classified broadly as follows: (a) Unloading and storage of incoming fruit; storage of empty field lugs; loading of grower's trucks. (b) Dumping field lugs; sorting field-run fruit; distributing the sorted fruit to the positions for packing and for filling cannery and cull lugs. (c) Sizing and packing; conveying the packed frait to the lidder; temporary storage of packed fruit. - (d) Boxmaking; storage of shook and boxes. (e) Loading packed fruit, cannery fruit, and culls for ship- ment. \x/ A minimum delay prior to shipment is assumed; facilities for cold storage or precooling are not considered in this cost analysis. .asoJiq d^Qj^xace nx Mio^teiw UsoL % slBi?2tem fens to^sl n< ♦■"fori {•tiiKTaT fiiui* ni fisvi'S jGirsb J^or^ Ht&Bao&Ltisi- ^d 15,1 „-.^, fw i*fKfa If ni /annac end gftr^QVnao :.*nxjbaq bsus .^nisif. (o) . K.3Xod brcn -^acfie To s^sicd - ?, • ;yox3isl3»q tsaq on'j trl to. cost per equipment unit. These characteristics are summarized for each type of equipment in Table 1. Thus, for a tub-type packing line used for pack- ing apples, the normal capacity rate of output is about 9,000 pounds of fruit wrap-packed in standard boxes per hour. The floor space required — including space for the packing equipment, work space for the packer, and space for the packed-box conveyor — is 1,700 square feet per line for the first unit and 1,100 square feet per line for each additional unit. The replacement cost of the packing line is estimated as $5,100 per unit; the cost for the packed-box conveyor is estimated as $2,100 for the first unit and 11,100 for each additional unit. These estimates include the cost of installation. The cost estimates for the packed-fruit conveyors are based on the use of power conveyors in all cases except with the bin-type equip- ment. Conveyor costs for the bin-type equipment are based on the use of a gravity conveyor, the packed boxes being moved along the conveyor by the bin boys commonly employed to assist the packers with the bin-type equip- ment. Other Equipment Although the packing line forms the core of the packing house opera- tions, a large amount of supplementary equipment is required. The replace- ment cost of such equipment for a typical plant is given in Figure 3. The diagram is divided into two parts. In Part II, replacement costs are given for the equipment required to transport fruit and materials at the packing house with fork-truck equipment or with hand-truck equipment. In Part I of Figure 3, replacement costs are given for four additional categories of equipment. In regard to each category, the replacement costs in a typical plant are given in relation to the capacity rate of output per hour for the particular class of equipment. The equipment grouping for each of the cost lines in Figure 3 and the category of fruit to which each cost line is re- lated are summarized below. Line A ; gives the replacement cost of supplementary packing equipment, including the following: boxmaking machine; equipment for the distribution of empty boxes to the packers; packing stands and miscellaneous packing equipment; and lidding machine. The replacement costs indicated are related to the quantity of fruit packed per hour. TABLE 1 Estimates of Normal Capacity Output, Floor Space Requirements and Replacement Cost of Various Typos of Pear and Apple Sizing Equipment Type of equipment:-/ a/ Estimated normal packing capacity per unitJV Estimated replacement cost Floor area required ' for equipment j Conveyor First | Each addi- Packing I for first pounds per hour | Apples Tubs: lach unit composed of two sections placed end to end. Each section contains 10 tubs per side, making a total of 40 tubs per unit. Tubs 27 to 30 inches in diameter. Fruit sized by weight. Over-all dimensions of grader and tubs, 17 feet x 67 feet. Pears Belts: Each unit composed of a packing belt 2 feet wide and 60 feet long, with a return belt for unpacked fruit Z$ feet Y.dde. Space ade- quate for 16 packers. Fruit sized by packer. Bins: Each unit composed of a double line of bin's. Bin length per side 42 feet. Fruit sized mechanically with a rope sizer. Over-all dimen- sions of grader and bins 12 feet x 42 feet. Tubs— 36 inch: Each unit composed of one section containing 11 36-inch diameter tubs per side. Fruit sized mechanically with a curtain sizer. Over-all dimensions of grader and tubs 8 feet x 75 feet. Tubs — 90 inch: Each unit composed of one section containing 7 90-inch tubs. Fruit sized mechani- cally with a curtain sizer. Over-all dimensions of grader and tubs 8 feet x 85 feet. 9,000 10,000 8,100 8,100 12,000 uni t j tional unit j unit_ unit Conveyor for each additional unit square foet£/ / dollars"/ 1/ 1,700 1,200 1,100 1,100 1,900 2,100 700 800 1,300 1,400 5,100 2,100 1,100 3,100 990 1,020 1,100 290 170 4,300 2,200 1,000 4,950 2,350 1,150 (Continued on next page.) _ j ~r~ • • Si C-Q- ?0 jITGUGC TI7 0XCT'- • Table 1 continued. a/ Some variation exists in the number of tubs per line and in the dimensions of bin and belt type of equipment. " The equipment specified, however, is considered typical. For lengths of packing belt or bin different than specified, the difference in normal capacity output per line would be roughly proportional to the difference in length. Similarly, the normal capacity of the tub-type equipment could be adjusted for lines differing from the above in regard to the number of tubs per line. For more detail as to equipment and packing capacity per unit, see Packing Costs for California Apples and Pears, Mimeographed Report No. 138, C-iannini Foundation of Agricultural Economics, University of California. b/ Assuming fruit is packed in standard boxes only. A somewhat greater output ivould normally be achieved if part ~ of the fruit were packed in Los j\ngeles lugs or San Francisco lugs or were loose packed in standard boxes. c/ .For all types of equipment, oxcopt the packing belt, this includes an area approximately 4^ feet wide parallel to ~~ sizing equipment to provide space for packed fruit conveyors and working space for the packers. With the packing belt over-all space for belt, work space, and conveyor is 10 feet wide; also, an additional aisle 5 feet wide is provided between adjacent units. With all types of equipment, a 4-foot wide "outside" clearance is provided adjacent to each group of sizing units. d/ 1950 price level. t sot ceo j/jga tt -A»5i.c jocsy BeK 10 20 30 40 JO 60 70 80 90 100 40 M I M I I I I I I I 1 I I I I I I I I I I I I I I I I I I i I I I | I I I I I I I I I I I I I I 35 30 25 I 8 1 20 I ? 15 10 EQUIPMENT CATEGORY COST RELATED TO: Fruit packed A. Supplementary packing equipment B. Dumping, sorting, etc. C. Office equipment, tools, scales Total fruit run Total fruit run D. Cannery and cull equip- Cannery and cull E. Transportation (fork truck) Total fruit run F. Transportation (hand truck) Total fruit run I r, , I I I I I I I I I I [ I I I I I I I I I l I I I I I I I I I I I 10 20 30 40 50 60 70 Quantity of fruit— 1 ,000 lbs. per hour SO 90 100 Figure 3. The effect of capacity rate of plant operation on the replacement cost of several categories of equipment for apple and pear packing operations. 10. Line B: gives the estimated replacement cost in a typical plant for the dumping equipment; sorting table; fruit dis- tribution belts; and miscellaneous equipment. Replace- ment costs are related to the total quantity of fruit run per hour . Line C t gives the replacement cost in a typical plant of office equipment; miscellaneous tools; and scales. The re- placement costs indicated are related to the total quan - tity of fruit run per hour . Line D ; gives the replacement cost of cannery and cull fruit belts; equipment for placing the fruit in lugs; and miscellaneous equipment. The replacement costs in- dicated are related to the quantity of cannery and cull fruit run per hour . Line E : indicates the replacement cost of equipment required for in-plant transportation with fork-truck equipment. It includes the cost of pallets but not the cost of con- veyor systems for loose fruit or for packed boxes. The replacement costs indicated are related to the total quantity of fruit run per hour . Line F ? is similar to Line E, except that the replacement costs indicated are for the use of hand trucks for in-plant transportation, rather than fork trucks. The use of Figure 3 in estimating the replacement cost of equipment for a given packing house is illustrated with the following example. Suppose we want an estimate of replacement cost for equipment in a 3-line pear packing house in which the fruit is packed from 90-inch tub equipment of the type specified in Table 1. For this equipment, the normal rate of output of packed fruit is 12,000 pounds per hour per line, which makes the plant rate of output of packed fruit 36,000 pounds per hour. If, in this example, only 80 per cent of the total fruit received is packed, the capacity rate for total fruit run is U5,000 pounds per hour, and the capacity rate for cannery and cull fruit is 9,000 pounds per hour; in-plant transportation is performed with fork trucks. The estimate of replacement costs for equipment in this plant is as follows: b at tVQ3?4aziR:£S&lm'i tii-fmjtt&s sri-t ■•••BeyiTs nqtnpc 8x/c*SftsXi' »3>;±jff fane {-jtfX M - no'i^ixrf iif Jneou iecfoi 'erf fce-lsl^i sis siaoo tfnam :8 9ttLI >£ifp. I. f'r-r. fn -rti etaoo ^ "ton r) tff •ff^'i 1' ei- few. •J" r.-;n..- -r; 11. Item Estimated replacement cost Packing lines: (computed from Table 1) Initial line t 7,300 Two additional lines 12,200 Packing equipment supplementary to packing lines: (Read from Line A, Figure 3 for rate of fruit packing = 36,000 pounds per hour) 20,300 Dumping, sorting and related equipment: (Read from Line B of Figure 3 for a rate of total fruit run = U5,000 pounds per hour) 9,500 Office equipment, miscellaneous tools, scales: (Read from Line C of Figure 3 for rate of total fruit run = U5,000 pounds per hour) 8,000 Cannery and cull fruit equipment: (Read from Line D of Figure 3 for rate of cannery and cull fruit run = 9,000 pounds per hour) 1,000 Transportation equipment: (Read— for fork-truck equipment— from Line E of Figure 3 for a rate of total fruit run « U$,000 pounds per hour) 17,700 Total replacement cost of equipment $76,000 Similarly, estimates of replacement costs for equipment can be made for plants of other sizes and types and with different proportions of packed and cannery fruit. ESTIMATING F T ILDING REPLACEMENT COSTS The data regarding building replacement costs involve two stages. One stage concerns estimates of the amount of floor space required for a given plant, the other, construction cost of the building in terms of the floor areas involved. Two distinctly different types of structures are considered. One type is appropriate for plants using hand trucks for in-plant transpor- tation, the other, for plants using fork trucks for this purpose. In part, the floor space requirements for the two types are identical. This applies to the space occupied by the packing equipment, temporary storage for packed fruit, office space, and miscellaneous storage space. In regard to space used for the storage of incoming fruit, empty boxes, and shook, the space requirements in the two types of structures are different. In these areas, abut! Ssnolfibba cwT >CO t ^ (•/uDf? taq Jtoxn-t-rt'tci T>t — b&->fl ) : r ;< ncy ij jaoilir.qu'iq. tnji iJlib dtt» hat. asqi&b brr* • e>->s ie . ouxkKci 16 aSwafo fipvia? b .left .ttntupw toeqa 30 4ttirom lsr> aatfeail «*e£1 *&t Id eifrxs* ai gnxblcifd -fit Jo iaco mutoiFtfanoci <«*TS*r nl . jsoqioq .exrf^ in'i sjioini tffn") -ifrxar/ einxsftf «*o* a^ilqq/- sidT .l&oijn~bL aoq^ifow* drirf atfrxaraaict"- oxoE»T;iol 93giQi€ TtBToqmt)J ^ftsfflgi^pu gnislasq oil* \;d b?x aoaqe iVsssarj nl .sosqa &ssntfa ai/o-rfjallaoei* bns t; > sosqe.icfJ t iioorf8 bas t e^cod v.+qoa «tixn'i ^nxmocnx lo 39, t 8S3ie 3??rf^ nl .Sntne'ilib sta aj'litfoncf-e xc ssenri owi * 12. pallet loads of material can be stacked several tiers high in the fork- truck plants, and the floor space provided can be less than in the hand- truck plants where storage normally is limited to a single tier. These differences are reflected in the data on space requirements. Floor Space Required The floor soace required for the packing lines is given for the various types of equipment in Table 1. For a pear-packing line using 90-inch tubs, for example, the floor soace needed for the first unit is 2,100 square feet, while each additional unit requires 1,1^00 square feet. The space required for activities other than packing can be estimated from Figure k> Part I of this Figure refers to the soace requirements for hand-truck plants; Part II refers to space requirements for fork-truck plants. In both parts of the diagram, space requirements for the various plant operations are given on the vertical scale. For each type of operation, the space required is given in relation to the Quantity of fruit run per hour— shown on the hori- zontal scale. The various categories of space as represented in Figure h for the two types of plants are as follows: Line G ; gives the floor area required for boxmaking and lidding equipment; shook and box storage; and packed fruit setoff. The space required is related to the normal capacity output of packed fruit per hour . Line H ; gives the floor area required for incoming fruit; dump- ing, washing, and drying equipment; setoff and storage of cannery and cull fruit; and temporary storage of packed fruit. The estimate of space is related to the total quantity of fruit run per hour . Line I : gives the space required for aisles in the packing house, office space; and miscellaneous areas. This space re- quirement is related to the total quantity of fruit run per hour . Line J: gives the unroofed area required for the storage of empty lugs. This area is related to the total quantity of fruit run per hour . Line K; gives the amount of paved area adjacent to the building required for receiving and shipping operations. This area is related to the total quantity of fruit run per hour. -r-bnsd s-iy .nx ./j»rj.t -^js;*! nso : b&b£variq $o«<#. •••topXV sd* brt* -XStrrt ■' ..'T&ttt- sljfffcs s ei xlfB^iQ s^bioSb '-^is/fa rJrwXxr^Dfn J f editf rfOii.ir-C? 3fjxBt f : ,:>»6£i»p:i* > 10 20 30 40 50 60 70 80 90 100 20 g i i i I i i i i I i i i i I i i i i I i i i i I i i i i I i i i i I i i i i | u i i I i i i i 30 40 50 60 70 Quantity of fruit— 1,000 lbs. per hour Figure 4. The effect of capacity rate of plant operation on floor space requirements in hand-truck and fork-truck plants for packing apples and pears. With the data on space requirements given in Figure h for the various kinds of plant operations, the total floor area required can be estimated for any specified plant. The procedure can be illustrated for the hypo- thetical plant used above in regard to equipment costs. We first observe that building costs are given in Figure 5 in relation to the roofed area only, although the costs of the open storage and paved areas are given in Figure U and are included in the total construction costs. Our first problem, then, is to determine the amount of roofed area required. This can be done from Figure h, using Part II— the portion which refers to fork-truck plants. The space requirements obtained from Figure h are summarized below. Item Packing lines— three 90-inch tub lines: (Computed from Table 1) Initial line Two additional lines Supplementary packing equipment and storage— boxmaking and lidding equipment; shook and box storages (Read from Line G of Figure h for rate of packing ■ 36,000 pounds per hour) Storage for incoming fruit; dumping, drying, and sorting equipment; setoff and storage for cannery and cull fruit; temporary storage of packed fruits (Read from Line H of Figure U for rate of total fruit run = U5,000 pounds per hour) Aisle space in the packing house; office space; miscellaneous storage and service areas: (Read from Line I of Figure h for rate of total fruit run = h5,000 pounds per hour) Total roofed area, square feet Area required square feet 2,100 2,800 6,000 7,700 19,200 27,800 Building Replacement Costs Estimates of replacement costs are given in Figure 5 for hand-truck and fork-truck plants. The general characteristics of the two types of structure are as follows: M feavso Jbfis j^&re&B i» ncrJointf 5/100 J'sj 000 t o tTtfori voq ebauaq 000 t d£'« 3 •'SfflV'tb .SfljtWUrb 'J'rtrr'l an idJ tit bsbhXaal'Qib bn& J zau^t^ at n$v. *1 gaiBir ^ sna^xl bk.i1 aaob :*J ned aid' i6 sol^axT. II 1 II 1 1 1 1 1 1 1 1 1 1 1 1 1 MM -Z MM / Mil 1 f MM- t — t r - / / 6/ / / / / / / - = tiff /«/ t / i -ft- it h / ✓ / II A' ft / - - Br / / r th 1 1 1 1 f 111! 1 1 1 1 1 1 1 1 M * i i i i 1 MM 1 1 1 1 Mil" 10 20 30 40 50 60 70 80 Roofed area — 1 ,000 square feet Figure 5. Effect of size of building on packing house construction costs (1950 price level). 16 Hand-truck plants : The building replacement costs for hand-truck plants are based on a wood frame structure with a wood floor con- structed at truck-bed height. Exterior walls are surfaced with a single layer of wood sheathing—except office spaces, which have an interior finish. The clear height from the floor to the under- side of the roof trusses is 12 feet. Roof spans are relatively short— 30 to hO feet. All spaces are roofed except the area for storage of empty field lugs, which consists of an open platform. Replacement costs in relation to roofed area are given for this type of structure by Line 0 of Figure Fork-truck plants ; Data for estimating replacement costs are given for three types of construction for fork-truck operation. In all three, the floor consists of a concrete slab at ground level. As in the hand-truck plants, an open storage area is pro- vided for empty field lugs. Costs for three variations of this basic model are given in Figure 5 as follows: (1) Line L rep- resents the cost of a building in which the sidewalls are of con- crete, with the clear height to the underside of the trusses 18 feet throughout the building. A relatively long-span roof con- struction is employed—?^ to 100 feet— to reduce the interference of the roof supports with the operation of the fork trucks (2) Line M gives the estimated cost of a building similar to the above, except that the sidewalls are of wood construction like that described for the hand-truck plant; (3) Line N gives the cost of a building which combines some features of both the fork- truck and hand-truck plants. The sidewall construction is of wood. In the receiving and box storage areas, where pallet loads of fruit and materials are stored several tiers high, the roof is of long- span construction and the clear height to the underside of the trusses is 18 feet. In the remainder of the building, the roof 6/ Whether the additional construction cost for the long-span roof con- struction is justified by increased efficiency in the operation of the fork trucks is not clear, although designers of plants built specifically for fork-truck operation evidently prefer to use roof construction of longer span than is common in hand-truck plants. xoind-bftsri 10I r.4«ot- tr.amot.Lqari gnifclij/d srif igd/tftlq jfotrfd* -nco Vooli boon & At lip stijdo'inds eft*?! bocw b ns 'bassd' ?*tb a'j b ridxv Lnos2'ii/s 3iis eUw ioi*ioj^<3 .dflaiad b-M-tforrxd d£ bat' svsri rioMw t abocq'e ecd21o dqaoxa-- aruritsaHs boow to tayal sj -isbna sxid od tocXi srid mo-il drfsisri is?lo "srif riat-ni*'* -fcr^tr rXavxdsXftt site iol S3iB erfd Xqasxs belobi 9ts fc9:>sq*2 XXA'* .^9?1 Oj oj 0£ dtoria •nnoidfiXq nsqb ha 2o eiax^nco rfoxri v / ,83ijX bXeil ytctm* 2o ansioj-e aXrid no'l nsvxg sis sets bsxoot od noidB£3«i ni adaoo dn ssoDfiXa-jF sift sdaco *»9spr-!06£q?»'r gnxdsiSides -:o2 Bird :?„jfir>£u 3fc?ysd-'rftD' ; ! .n6i*Btf)cTo rtonrcd->»io2 to2 rioidoindenoo to 89qvd tmdd tol r^vi^ "bnxma is tfsXa ^>9ionbo s 2o edeisrTso t<*>X2 sri.t .sstri.t IXb til -otq ei sets sgstoda nsqo rifi .cdfisXcr Motrid-brsrf srid ni Xw?»X ' sxiid lo enoid6i-;sv asuid tk>2 edaoD .agol blsx'r ydaua to! bebxv -qet J ertxJ (X) sawoXXoj cb etosi't nx nwxg sib Xsbom oiaBd -noo' 2o sib eXXs*9bxe srid rfsxrtw ni gatbXxxrd b 2o dsoo srid sdnsest 8X saaaind arid 2c sbici'iabmj 9rid ox drtexBrf t;;<->Xs 'arid ridfvr -noo 2oci nsqs-ancf. itfavi^BXsi'A .gnibXix/d ©rid .taorigx'oW deal eoristsltsdai add soufssrTo* — dss'I OOX bd ?J— bevoXcnns ax jiexdwida -ja^Oir j *ro2 -*rfd 2o irioidBtsqb arid rid ivr adtoqqus 2oot arid \* 9f{d od leliraxe »j/r.tbXxj;d b lo- daos bad anxd as srid aavis M aniJ (S) asfil noxdoindariob 6oow Jo 9t» aXXBvrabxa arid d£rid iqaoxs t &vodB 9rid 39VXB K snM (O ; dfle£q ?(oind-bnBri srfd t<^ bsdiioasb dfirii •:i*io2 arid ridorf 26 S9T[i;iBs2*'9raoT asnxdnioo rfoirto ^nxbXixfd s lo dnoo .bdow 2o 3i noxdoirtianoo IXBvr9bia aril ' .ednaiq iotrit- : x;&tl bit* fouiS ttZfil 2o abso'i doXXBq *xsriw « easts s^stoda xod bnfi gfixvisogi srid rii -anoi. 2o"ex 2odt srfd trfgxri at^xd Istsvsz batbda ' 9ts aleitsdss bns srid 2'o dbietebou'srid od dffcjjfcaii -ibsXo srf.+ W noxdoxftdanon neqa 2oot arid tSnxbXXmj erii 2o tsbnxBmst srid ni ' -dss2 OX aX aweind srid noxdaieqo srid nx vonsi:3x22r> b? \;X1box2x'79ce aXxori adnsXq 2o sisngiasb xj 2e nc.^ toiJtdsnoa 2oot aar; od t^'^Tq v . :.fnr,Xer id-b 17. construction is similar to that for the hand-truck plant and the clearance beneath the roof trusses is only 12 feet.- Estimates of construction costs at the 19$0 price level are given in Figure 5 for the types of buildings described above. In this diagram, con- struction costs for a given size building are represented on the vertical scale in relation to the roofed area of the building, which is shown on the horizontal scale. Although related to the roofed area only, the construc- tion costs indicated include the cost of open storage and paved areas. The construction cost of a railroad siding also is included but not the cost of landi 7 As represented in Figure 5, the relative construction costs for a building of a given size are as follows s The most expensive is the fork- truck plant with concrete sidewalls, followed in decreasing order by the fork-truck plant with wood sidewalls, the "combination" type of building, and the hand-truck plant. The higher level of construction costs in the fork-truck plants results primarily from the more expensive roof construc- tion and the higher sidewalls. These influences are partly offset by the fact that the concrete floor slab laid directly on the ground is less ex- pensive than the wood floor supported above the ground at truck-bed height. Note, however, that a correct comparison of the construction costs of fork- truck and hand-truck plants requires consideration of the floor areas re- quired. In the preceding estimate of floor area requirements for a plant of US, 000 pounds per hour capacity, the roofed area for the fork-truck plant is 27,800 square feet. In contrast, a hand-truck plant of the same capacity would require, about 37,500 square feet. The building construction costs corresponding to these areas may be read from Figure 5 as follows: 7/ In the type of construction most commonly used for the fork-truck plants, the sidewalls are of concrete. No buildings of the "combination" type were observed, although this type of construction should provide a satisfactory building. In contrast with the other construction 9'tu%tt -3flj no flwwla ax rioiriw ^nxbXxtw 9i ij- •*„ eats balooi. o* rtoitfsI'V* ax slsoe -oin^anoo srii. ^no fifcis b9*l/>m 9 rf# 0J . b^iuo? riix'orfjXA ,9lso 8 Isinosxiod 9-iT .as^oe bsvsq bna o^toia nsqo 1o iaoo erf* sbulonx bgjsoxbnx a**oo ho'xj to cfaoo siicf- ion iuri babi/Xonx ai. osXs an/fet* bs^Xiei e io .teoo cioxteirtfeooo \8 a lox eJeoa /xofctoiTrtsnoo -vxjbXo-i srfj ,5 sural** nt bojngas- -*xo*i artfc ax svisasqxa Jsoot sriT tawoXXol as au? as .c 3 navig s slfc vi * iS bi9 :inx8s«»a 3 ob bawollol % *£Ltwehiz 979-toftQO rfjxv: t anlfc£/:xrf xo aq-^r *Ujo^erii*soo" 9*7 ,aXX SW3 bir 9rfj ni :taoo noi-ic-^aar.o ic IsvsX «S9rf 3 xri srfT -oj/xfranoo 3 007 9Viafi9q. ft -:» -to.'? 9tf4 mot'i ^Xx'iBmJ: r 9rfj Yo* 7951*20 x^'lfiq 91.9 saonr^fXlnx sasdl .aJ **s 8B9X ai bnvot% wif no ^Xjjmxb brsl dele i_ .jri^i?rf t^d-jjotrii d-s bnooig 9ii Isi/nrui lo sxasj. o.Ix no bad-i/qmoo s-tb edeoo -ixaii one ^nsmtasvnx an"* ato jzeitini t vtt*qst t >onB«iu?iil t s XBaoq^xb Xani'j lo sonfivba ex box* ei*tf lo eaftijeapp o* stairenA aoxtaxiBv.QXdB^obxanoo ,acaB3i sirf* -iol t bq6 dnaffSbwfc no bnsqob Szim xSte «*S si eiril .awtxl ctoe-iellxb ^Jftftg&rt soxcfr,Bio ecrw ,fr:3mqxqp.9 ftne si£9Y -'a qj OS moil Jse^nsi Mi:jioftt eew ainct sriw =?5jflBi erfT .-rnefflqinpa lo aenvJ' hxioxtbv ioi gifx^os ' • + • + jstB o.OX lo siavs nx; di'xvf t ct69v OS o& i! a 3-tBav 3. 8 baaB-jsvs bna e-xea^; OX o* 5 asyr .tnomoiupo.. dXdBT. rJ: oovig 'nio-siinr M Snsaqhipa fwts gnXbXiud a .S9BoqToq 3nX3xt;/oo3£ *tol baair aa*B-i ni nortaXiBv n»troa«ffoo nx bad-rtfitiBw od Y fi ff aXsvsX wa^rt* hoi's. !xasxo9*xqs»b" c>f{,j- ^Bd.t 4"56l aric> no bsefid ci ajWT .vo 19. TABLE 2 Estimates of Use-Life of Buildings and Equipment Required in Packing and Shipping Operations for Pears and Apples Item Years of use-life, from accounting records^/ Selected use-lifeV Range Average Buildings t 36 hoc/ Concrete, reinforced 20-50 Wood frame 20-UO 25 33" Equipment ; 5-10 10 Fork trucks 9 Pallets 5-io 8 10 Packing machinery (grader nailing machine, conveyor, 15 etc. ) h-20 11 a/ Accounting data derived from studies of 19 apple, pear, and grape packing houses. b/ The selected rates are in general intermediate between the averages ~ of rates used by the firms studied and the rates recommended by the United States Bureau of Internal Revenue (see Bulletin "F," United States Treasury Department). c/ Applies also to steel frame structures. 8v»"J 20. rates frequently applied in an accounting sense take into consideration several factors other than the probable use-life of the equipment. One such consideration is the rate of "write-off" that is acceptable for in- come tax purposes; another is the problem of uncertainty, or business risks. The manager of a firm frequently takes a precautionary view toward new in- vestment. This attitude is based on uncertainty in regard to the actual use-life of equipment and as to the future trends in costs or in product prices. The manager operates under a policy that an investment in new equipment will be undertaken only if it will "pay out" within a given time period. When new investments are made, the annual accounting charge fre- quently reflects this precautionary view rather than the probable use-life. When this is the case, the difference between the "depreciation" rate actually charged and the rate that would represent the probable use-life of the equipment may be regarded as insurance against the business risk elements . From the standpoint of efficiency studies, however, the precautionary considerations should be separated from those regarding probable use-life. It is the actual use-life that is significant in the comparison of costs and efficiency with different methods. With this in mind, the "selected" use-life given in Table 2 has been chosen as representing a reasonable ex- pectation of use-life for the general classes of buildings and equipment in- dicated. For particular items of equipment, some variation from the general levels shown should be appropriate. The rates given, in other words, may be thought of as weighted averages appropriate for the equipment groupings in- dicated. In addition to depreciation charges, it is necessary to have some basis for estimating the remaining elements of fixed costs for the physical plant, these being taxes, insurance, interest, and repairs. These costs vary widely from one situation to another, but cost-rates commonly used are summarized in Table 3. These rates reflect differences in anticipated repair costs and insurance costs resulting from the different types of building construction.- Depreciation rates based on the selected use-life given in Table 2 are also included. The fixed cost rates given in Table 3 are the percentage of the replacement cost that is charged annually. 9/ Insurance rates for stationary equipment—for example, a packing line or a sorting table— are assumed to be the same as for the structure in which it is housed. 21. TABLE 5 Annual Fixed Cost of Buildings and Equipment Required for Packing Apples and Pears, Expressed As a Percentage of the Replacement Cost Item (Selected j use-life I Depre- / ' years 'ciation-' — ' " n" -i- \ -v* r*i "r Re- Insur- Interest and Buildings : Concrete, reinforced Steel frame Wood f rame Equipment : Fork trucks Hand trucks Pallets | Packing, machinory (grader, nailing machinery, con- veyor, etc.) 14.5 to 15.2 S/ Selected use-life, from Table 2 . V Repair costs, especially for equipment will ^^^efatSLTo whicT This also is true for depreciation, F ^ f ^/^*^ion of a constant cost per this report applies, however, tfca simplifying assumption season seems reasonable. cV Typical base rates for fire insurance in ^^^f^^l^f^ to a particular building would depend on type of coverage, exposir jacent structures, and other factors. y Taxes 1.0 per cent; interest 3 per cent (interest at 3 per cent equal to ap- proximately 5 per cent on undepreciated balance). e/ use same rate as for building in which equipment is housed. ■I 22. As presented in Table 3, the annual charges for equipment and buildings are constant per year, regardless of the amount of use. This may not be strictly correct, especially in regard to equipment, as the amount of actual use per year would normally affect repair costs and, in many instances, the use-life of the equipment. For the short operating season typical of Cali- fornia pear and apple packing houses, however, the effect of variations in actual use per season would be relatively small. For simplicity, these costs are regarded as a constant cost per season in this report. with the data presented above, an estimate of the replacement cost of buildings and equipment and of annual fixed costs can be made. Thus, using the results of our previous example of a 3-line pear packing house of U5,000 pounds per hour capacity, the estimated replacement costs and annual fixed costs for the buildings and equipment are as given in Table J4. In this summary, all equipment other than transportation equipment is grouped under "packing equipment," and its estimated replacement cost is the same in both the hand-truck and fork-truck plants. Annual fixed costs for this equip- ment, however, are lower in the fork-truck plant, this reflecting the lower fire risks in the fork-truck type of building. The annual fixed costs for transportation equipment are much higher in the fork-truck plant than in the hand-truck plant. This difference reflects both the higher replacement cost and the higher percentage annual charge for the fork-truck equipment, in contrast with hand trucks. The relative replacement costs for buildings for the fork-truck and hand-truck plants depend on the type of construction used in the fork-truck plant. Replacement costs for the hand-truck plant are $62,000, in contrast with $73,000 for the fork-truck plant with concrete sidewalls, $65,000 for the fork-truck plant with wood sidewalls, and $5U,500 for the "combination" type fork-truck plant. In terms of annual fixed costs, the effect of type of construction used for the fork-truck plant is less than is suggested by the differences in replacement cost. This is due to the higher percentage annual charge applicable to the wood-frame construction. The range in annual fixed costs for the fork-truck plants is $6,500 for construction with con- crete sidewalls, $6,300 with wood sidewalls, and $5,300 with the "combina- tion" type of contraction. Thus, if the "combination" type of construction were used for the fork-truck plant, the annual fixed cost for the buildings would be lower than for a hand-truck plant. For the types of construction commonly used, however, it appears that annual fixed charges for the building bits in on y;aM a fx ar.oxisxisv 1c >mne 9.i^ . t £ oldr.T nx fooir li "io eeaifrsBi©** .te^v i3f bsxxl !*r riic i Jtl: xjt no on. TO t •1+ tnt lOXTT^-XIOl lo m "t.+ snor 5# "noircf 23- TABLE h Effect of Type of Transportation Equipment and Type of Building Construction on Estimated Replacement Costs and Annual Fixed Costs in a 3-Line Pear Packing House of U5,000 Pound Per Hour Capacity Item Replace- a / ment costs- Percentage annual charge i Annual fixed cost j dollars dollars Hand truck Pflpk"i t\p pmiiomsirfc X CX \-/ XV -1,1 1 K Q UU J- KJlllt" *x V 58,300 15.2 8,900 Transportation equipment 1,900 1U.7 300 Buildings: Wood frame 62,000 io.5 6,5oo Fork truck Packing equipment 58,300 H.3 8,^00 Transportation equipment 17,700 18.0 3,200 Buildings : Concrete sidewalls Wood sidewalls "Combination" 73,000 65,000 5U,5oo 8.9 9.7b/ 9.7b/ 6,500 6,300 5,300 a/ At 1950 price level. b/ Average of rates for concrete and wood frame buildings. ' «7c-v>3 OBXLl ^nsmqlxjps no J-tEtaoqennT } ij.OI 000 t Sd t ' ■ , OCf 8 c 1 0.91 . 00T t TX I OOC t d -' -v'i >r.»r.j'i boo:* i>rus ecf&icnoo iol lo 2h. in the example being considered are-at the 1950 price level-approximately the same for both hand-truck and fork-truck plants. Note, however, that the relative prices of the various construction materials and of the dif- ferent kinds of construction labor used in building the hand-truck and fork-truck type plants may change from year to year. Consequently, the relative replacement costs of the two types of construction may be dif- ferent at time periods other than 19^0 (see page 27). Another consideration in comparing replacement costs for hand-truck and fork-truck plants of equal capacity is the size of plant. The relative replacement costs may change slightly as the size of plant is changed. This change in relative costs would not be great enough to change signifi- cantly the conclusion noted above. — Fixed Costs Per Unit Output The calculation of fixed costs on the basis of cost per unit of output is also of interest. Although such unit costs will vary with the size of plant and the type of equipment, the most important factor is the total out- put per season. The general level of the average unit fixed costs can be indicated with calculations pertaining to the 15,000 pound-per-hour pear packing plant on which the preceding examples are based. In estimating fixed costs per unit of output, the entire fixed cost of equipment used exclusively for packed fruit-for example, the packing lines and boxmaking equipment-is charged to fruit packing. Fixed costs for equipment used specifically for cannery fruit is charged to the cannery cost. The fixed cost of equipment used jointly for packed fruit and cannery fruit-for example, trucking equipment for incoming fruit and equipment for dumping and sorting-is allocated to packed and cannery fruit in proportion to the quantity of fruit run in each category. Building fixed costs are allocated on the same basis. 10/ Although building costs for hand-truck and fork-truck plants are approximately the same, the fixed costs for transportation equipment ar e much higher for the fork-truck plant. On the other hand, labor costs for in-plant transoortation are much lower in the fork-truck P^. For a discussion of costs with different types of equipment for in-plant trans portation, see, In.Plant Transportation Costs, as Related to Materials Handling Methods, Apple and Pear Packing, Mimeogr aphed_ Report ^.^2, Giannini Foundation of Agricultural Economics, University of California. -lit sru, jo onn aXaxiatr-n noitfotntfenoa sooiisv y/ii 'io^sBiiq svfcj TO.ceL'Iorio; i Jack", •fcexj/i eij ■ itoxiuoooTq nr litnl vis? si* sJsoo .fcsxil 15 flit : rxo'; L > ■ 25 The allocated annual fixed costs divided by the total quantity of fruit run per season in each category give the average fixed cost per unit of out- put. For a plant operating at a given rate per hour, this calculation thus requires consideration of the length of operating season. Annual outputs of packed fruit and of cannery fruit for the 3-line pear packing plant referred to above are given in Table 5 for various lengths of season. — This table also shows the allocated annual fixed costs for hand-truck and fork-truck plants and the average fixed cost per standard box packed and per ton of 12/ cannery fruit for each level of annual output. — With the fixed charges for equipment and buildings constant for the season, the average fixed cost per unit of output decreases as the annual output increases. The fixed cost per packed box, for example, decreases from ftO.190 per box in the hand-truck plant with 100 hours capacity opera- tion per season (75,000 standard boxes packed per season) to $0,038 per box with 500 hours capacity operation per season (375,000 boxes per season). Similarly, the fixed cost for cannery fruit in the hand-truck plant de- creases from #3.18 per ton with 100 hours operation per season to %0.6h per ton with 500 hours operation per season. At UOO to 500 hours operation per season, the major benefits through expansion of annual output appear to have been realized, although some re- duction in fixed costs per unit output would result from further expansion. 11/ The actual period of operation per year for a particular plant varies from year to year and with the plant location. For a given plant, the area from which fruit is drawn is relatively small, and the period of plant operation is limited to the harvest period for the crop in that locality, although in some instances a shift in market conditions may terminate the fresh pack operation before the harvest is complete. If a plant packs only one variety of fruit— say, Bartlett pears— the operating season may range from 2 or 3 weeks in some areas to 6 or 8 weeks m other areas. A longer season may be expected in plants packing several varieties. For example, in plants packing both early summer and fall varieties of apples, a packing season of 3 months per year would not be unusual. 12/ In these calculations, it is assumed that the capacity rate of output is maintained for the period indicated or that the plant is operated oyer a longer period at a reduced rate to produce the annual output shown. It is also assumed that all packed fruit is in standard boxes. The unit costs would be different if a portion of the packed output were in other types ol packages and if the proportions of packed and cannery fruit were different than those specified in this example. The general level of costs would not be greatly different than those indicated, however, for plants differing considerably as to type of package and the proportions of packed and cannery fruit. ASM i 5 olds? ai nsvxs ais svorfs otf X3 1 uo 'CCI dtfiw &ta '.&B'iOOO Vd" COS 'f ■■■»cr r'oJ-tA'f .I'MXEl/lSCP hf f>A«r 'to J bnc £>9>br.q ^o»n»xt*ioq 26. TABLE 5 The Effect of Annual Output on Average Fixed Costs Per Standard Packed Box and Per Ton of Cannery and Cull Fruit in Typical Apple and Pear Packing Plants (California, 1950 Price Level) Packed fruit Hours of operation per season Season pack, 1,000 boxes Fixed cost, dollars/box Hand-truck plant Fork -truck plant Cannery fruit Total tons per season Fixed cost, dollars/ton Hand-truck plant Fork-truck plant 50 100 150 200 250 300 1*00 500 Pear packing^/ 37.5 75-0 112.5 150.0 187.5 225.0 300.0 375.0 .379 .190 .127 .095 .076 .063 .01*7 .038 .1*25 .217 .11*2 .106 .085 .071 .053 .01*2 225 U50 675 900 1,125 1,350 1,800 2,250 6.36 3.18 2.12 1-59 1.27 1.06 0.79 0.61* 9.20 1*.60 3.07 2.30 1.81* 1.53 1.15 0.92 Apple packings 0/ 50 1*2.8 .355 .393 225 100 85.7 .178 .197 U50 150 128.5 .118 .131 675 200 171.1* .089 .098 900 250 211*. 2 .071 .079 1,125 300 257.1 .059 .065 1,350 Uoo 3U2.8 .01*1* .01*9 1,800 2,250 500 1*28.5 .035 .039 9.20 3.20 U.60 2.13 3.07 1.60 2.30 1.28 1.81* 1.07 1.53 0.80 1.15 0.61* 0.92 */ Based on a plant containing 3 90-inch tub-type packing lines (see Table 1). Ca- pacity rate per hour = 1*5,000 pounds total fruit run; 36,000 pounds per hour packed, 9,000 pounds per hour cannery and cull fruit. Standard boxes of ho pounds net weight each packed per hour = 750; tons of cannery and cull fruit per hour = 1*.5« |.j Fixed costs per season allocated as follows: Hand-truck plant— $1U, 200 to packed fruit, f 1,1*00 to cannery and cull fruit; fork-truck plant— $15,900 to packed fruit, $2,100 to cannery and cull fruit. *>/ Based on a plant containing 1* tub-type apple packing line? (see Table 1). Ca- pacity rate per hour = 1*5,000 pounds total fruit run; 36,000 pounds per hour packed, 9,000 pounds per hour cannery and cull fruit. Standard boxes of U2 pounds net weight each = 857; tons of cannery and cull fruit per hour = 1*.5« Fixed costs per season allocated as follows: Hand-truck plant--' 15, 200 to packed fruit, $1,1*00 to cannery and cull fruit; fork-truck plant--$l6,800 to packed fruit, $2,100 to cannery and cull fruit. ,6? » sxaj xocj x^tf 1 iXo.fr • ."tTrcV* frsx.^* L — JSP 1 * J — . _ 8TI. • io.O J -A < t <^_i ■ ■ 16 afl&t jH ■ iirtl I. HHH| *iif^l feG.H^scr 27. Annual fixed costs per unit of output for an apple packing plant are also shown in Table 5. In this case, a U-line plant is considered in which the capacity output of packed fruit is 36,000 pounds per hour and the total fruit run per hour is 1£,000 pounds. The rates of output are thus the same as in the example relating to pear packing, although the number of boxes packed per hour is greater in the apple packing plant because of the smaller weight per box (U8 pounds net per standard box for pears and U2 pounds net per standard box for apples). Replacement costs for a given capacity rate are slightly higher in the apple packing plant, but due to the lighter package the fixed costs per box are not much greater than in the pear pack- ing plants. The estimated fixed costs per ton of cannery and cull fruit are the same for both kinds of fruit. Comparison of the unit fixed costs for fork-truck and hand-truck plants in Table 5 shows the unit fixed costs in the fork-truck plant to be appre- ciably higher when the season is short, but this difference becomes pro- gressively smaller as the length of season increases and the difference in annual fixed costs is spread over an increasingly larger output. INDICES OF REPLACEMENT COSTS FOR FOLDINGS AND EQUIPMENT Over a period of time, large variations in the price level result in corresponding variations in replacement costs of the buildings and equipment required for fresh fruit packing. The extent of such variations can be shown approximately by means of a replacement cost index, which expresses replacement costs in a given year as a percentage of the replacement cost in a base year. Indices of replacement cost for buildings and equipment are given in Figure 6, with 1950 as the base year. In each case, the index for 1950 is 100 and replacement costs in other years are expressed as a percentage of the 1950 purchase costs. Index of Building Replacement Costs Indices of building replacement cost are given in Figure 6 for hand- truck and fork-truck plants for the period 1925 to 1951. As with prices in general, these indices show a strong upward trend since 19U0. For example, with 1950 - 100, the index of building replacement cost for hand-truck plants in 19ti0 is only 1*2. This general effect is also true of the building replacement cost for fork-truck plants, although the rise is less pronounced. •TS *ws iaalq gnia'csq siqqa no rrol iaqiifo lo Stair tea z&zao b^xil Xsi/nnA rfatrfw ni foentabxaaod ai inciq s t »gao aitfi. nl .3 altfaT rtl nworte oa£s Xsioi ad* fm tirorf ir>q aixwoq O00 t de 'si iiinl fcaWosq lo i,yq*i/o viioaqso sxi* Sfflsa erfi eorfi toft .tuctiib fcs aacto arft .efawoq OCX), 54 si to*. *jq runt iiircl asxod lo isiimsa ortt &%tsottoLR ^nblo&q tsoq oi aniisXsT olomsxs adi ni es X&U60SI srii to 98u-609d -*hslq S ni7{opq r,Xqqc srij ni -reieg-ra ai -wort laq fcsjtosq ■ton ebmraq S*i fans aissq *ol xod fn.-bnsia *ieq ic/t abni/oq 8ii) xod -isq *rf$*sw 9*m V-toeqso navis' s -col: aiaoo inanradsXq^T . (esiqqs tol xocf b-tcbnsi?? teq •tsidVil srti oi' 9j)6 tad t tax5Xq gftfafefiq ©Xqqs -rft ni isrfgiri ^Xin-jiXa 31s -Tioaq -is«.q atfl ftl nodi -ratae-ts Son xod -xocr etfsoo byxi"* arij : =>§s>!oeq Hw*3 Ji;. 0 Ibrts -vriennso lo no* ttaq stabs fasxil bafaaitas srfT .ainsXq S ni .tfinl ttf abftibi dtad tot smsa-edi sts sirwXq xoini-bnsd ens ifowiwfcsol tol aieoo baxxl tiny «di l Q nosi-iscrmoO -stqqs sd oi*" irtsXq jJo/ni-jfrol 6H& ni n.tfcoo baxil ixrw sdi zmiis 5 oXsfsT ni -otq 89iaooed sanrartib sirfi .jytf O f-toda si noaAsa »t& fen* -iedsirf ^Idsto ni aon^sllifa 8ftt fans ee&as-xwi noassa lo rfi 3 n 9 X srtt as .lalisme ^feviaaois .iuqtao lagrtsX ^Xaniac^oni ns iavo bsyiqe si siaoo b^xil Xeorar.s TKSjfiitifjs wk soman "a aoi aTaoo THFHaoAi^ eaoicwi ni dXxresn XgtfsX soltq sfSit ni snoiiexisv agnil ,emiJ 1c boifjq s i&rQ -nmqlrjp* bn & e^sibiiad erit lo aJsoo .tnsmaasXq^ ni aaoi*«^ grttfafoqe ottoo 9d nso enoxitciisv" riows lo &9«g» oril- .gitfafqsq- tl-frtl riee-tl iol boilitpei aue^qxs doxrfw «xsbnr isoo inamsosXq^ e to snsam.^^X-^snixxotrqqs nwrie nr nsvJ:^ u-xs tnoimkupt bnc. aanxbxiud 10I j-sot tmateoi ai 05?X iol xsbni an* am dose ni tsev ssj*d PP n>or r/+; ^ sbscj s nx 3-jr-ibnT , i> atxn|i'?. boo tataiBsSeXqei fans OOX srJ-soo 3SSffir!am 05?X 3di -fensri -Told 3.r I 30 the period 1935 to 1950 are summarized in Table 6. These costs indicate a substantial variation in relative cost for the hand-truck and fork-truck plants over this period. In 1935, the building replacement cost for a fork-truck plant was about 1.58 times that of a hand-truck plant of the same capacity; in 1950 this cost ratio was only 1.18. TABLE 6 Relative Cost of Replacement for Typical Hand-Truck and Fork-Truck Pear Packing Houses (Buildings Only), 1935 to 1950 1 Estimated replacement cost Relative cost, 1 Year Hand-truck plant Fork-truck plant fork-truck versus hand-truck plant dollars 1935 22,800 36,000 1.58 19U0 26,000 39,UOO 1.52 19U5 33,800 1*6,000 1.36 1950 62,000 73,000 1.18 Index of Equipment Cost An index of variations in replacement costs for equipment for the period 1925 to 1951 also is given in Figure 6. The trend in the index is similar to that indicated in regard to the indices of building replacement costs. The index for the period prior to 19U7 is presented with some reservations, as price series adequate for developing an index of replacement costs for pack- ing house equipment are not available for this period. The index shown is based on the United States Bureau of Labor Statistics index of prices for farm implements. The farm implement price index probably represents fairly well the range of variations in the replacement costs of packing house equip- ment during this period. For the period since 1<>U7, the index has been computed to represent the variations in the replacement cost of equipment in a typical packing house. The elements considered in the calculation of the index since 19U7 are noted in Figure 6. etfsoo beiis 31. Application of the Price Indices In addition to portraying the variation in replacement costs for buildings and equipment over a time period, the cost indices in Figure 6 can be used to obtain an approximation of replacement costs at current prices— or at least at a more recent period— of facilities purchased in some past period. Suppose, for example, that a hand-truck plant were constructed in 19U5, the building cost being $50,000 and the equipment cost $U5,000. An estimate of its replacement cost in 1951 is desired. From Figure 6, the index of replacement cost for the building at 19U5 prices is approximately 5h per cent and the equipment cost index in 19U5 is 66 per cent. Dividing the 19h5 purchase costs by the respective cost indices gives the replacement costs in the base year, 1950, as building $92,000, and equipment $68,000. Then, multiplying the 1950 replacement costs by the respective indices for 1951, the approximate replacement costs at the 1951 price level are building $99,000 and equipment $75,000. + 41 o 9Vf%Jti til aaoibtti &zoo 9 bne :±bJ' \vA 1 sjnxbJ i i tomd.-toox b io1 atri} sgisrio Isi/nrui sgsj-neo tsd Ss+eop bsxil Isunns paqigf cwrcf 9di nol orafip 1 ■ ,8 j nsItT auqjuw io .Tjny taq a-reoo csxxl 9ni i. • 'lonx ji/g^i/o nossos Knj bn.s tfaelq §n.cjiosa -icaq s -to"?: aisos bsxix lo .ixin'x bsjioaj xo -fxroii teg; abmroq OOC^O o io3 noxJ-siyco. Tfrjxosqfco .s :1cffW .faxi'ii qs bx j'nsiq c rf.'Ufs fix ~3S'i^vs afrjM bns ctoalcj /ioxrxi-basri 9ri.t nf xotf xxx xod biebnCvfi t^q sjneo 9 bns ■ ^ritslq fcl e^eisvs aitt . Vitrei flyD fens vtermso tsq 0S.£# •^IsJ-jBmtxo'ifTCTs 9*ts rrosB«3 i«q 33 cannery fruit with 250 hours of plant operation per season are $1.25 per ton in the hand-truck plant and $1.85 per ton in the fork-truck plant. Indices of replacement costs for buildings and equipment rise rapidly- through the period since 19U0. w ith 1950 as a base year (1950 » 100) the 19li0 building replacement cost for a hand-truck plant was only 1|2 per cent of the 1950 replacement cost. Similarly, the 19U0 building replacement cost of a fork-truck plant was 52 per cent of the 1950 cost. The replace- ment costs for equipment in 19U0 were only 66 per cent of the 1950 replace- ment costs. The data presented can be used to estimate replacement costs at the 1950 price level for different types and sizes of plants. The index of replacement costs for buildings and equipment can be applied to such esti- mates—or to actual investments in a past period— to obtain an estimate of replacement cost at the current price level. 3U. APPENDIX A Establishing Standard Requirements for Buildings and Equipment for Use in Estimating Replacement Costs The replacement cost data presented in this report are intended to represent costs for well-organized plants of current design, rather than to indicate costs for "ideal" plants. The procedure used to establish the standards for equipment and building requirements on which the cost esti- mates are based is briefly as follows: Three plants were selected which appeared to be well planned and which were "efficient" in the sense that labor costs were relatively low. The allocation of floor space to various functions observed during actual opera- tion of these plants was tabulated. Variations between plants in the space allocations for equipment of a given type and size were relatively small. Considerably greater variation appeared in the space allocation for the storage of incoming fruit and packing materials. By comparison within the group of selected plants— and by comparison with observed space alloca- tions in other plants not selected for special analysis— the space alloca- tions in the selected plants were adjusted to levels that appeared repre- sentative and adequate. Space allocations were standardized for hand-truck and fork-truck plants on the following basis. In regard to storage space for incoming fruit and for shook and empty packing boxes, it was estimated that 1 square foot of floor space in a fork-truck plant is equivalent to 2$ square feet of floor space in a hand-truck plant. This is based on the observed ratio in the height to which these materials are commonly stacked. For example, in hand-truck plants incoming fruit is usually stored in stacks 6-lugs high, while in fork-truck plants, the stacks commonly are 3-pallets high, with boxes stacked £-lugs high per pallet. Floor space for all other cate- gories was standardized on a 1 to 1 ratio for both types of plant, except that aisle space was provided in greater proportion to total floor area in fork-truck plants than in hand-truck plants. Through the above process, floor space requirements in relation to volume of fruit handled were standardized as in Table A. These standard space requirements were then "fitted in" to what appear to be efficiently arranged floor plans. Some small shifting between the various areas was necessary in the "fitting in" process, but the standardized total area was maintained. The estimates of space requirement, grouped according to ■ am 2^«i ai-aoO -7 10'i 2.tl Xs J" e 3 w tj-jM j.oqa-r hxoj nx badxtegeiq .si fib Jr?o ^nsmeofiXq^i srfT i"3nj^-i. ^flsJrusb Jfl9-^r;o to . adxtaXq b»si0B§io-XX9w nol aJaoo JnsBsaqKrc - -xo-39 oaoo SilJ noiriw no atfmjfltetiijpyi. ^Jtbliifd bns ^namqtwp^ icl ebiBbnfidr; :awoXXol as ^cXl^X-id .aX baascf sis aacJ-Bir: doMm bRA barenaltr Xi^ .,cf ftnoiiaf-tay h«4*RfrHc+ =>.>•„.• D +««r^ .XXstre *^Jsvj3*sXf«T siy-wasxe bqs ©cpfr josvig & to d-fismxrpa tol ano 'J'eooX 1 " 0 srfcf icl naMesoXXij eoeqa art* at bsrsfloqqc nojcteXw t9tewt$ -^(fctsbianoO " n<52 *' rs< I W03 -aXsxiPd-sm ar.Jjtesq bns ■JX-.tftl artimooni 1o B|BTo.tR -booh a -sosqa bavnsacfo rfij* xtoai-xaqmoo vtf brcE-~-ejftBXcr bstsaCea lo qnoiy ? jqqa -rnrfi aX rcreo: >oru tol aosqa d^ioJa ocf br^s'i rij .eXaBd" ~nxwoi r •+ bsiaiattfas .86* tfi f paxod gnxjiofiq y.tqm-3 bns jJocrfs ir>i fj»fi P f Jn»ii*vxffp9 sx JxuiXq stoiix.t-tfno? b nx feocqa mooXI lo »'visscto 8£f$ no b&e&d ax aXriT .J-nsXq jtoL^d-bnftrf nfc aoaqe ioo, .-d 37iu.B.re nx beaoJe -y.IXbx/bj.' ex £±xrr1 srtfmninr j«,„ + Kr ., aexod riv+X '/ nx B3^r> TooXl Ixj^oJ" od aoXc^tOqoiq 1^^x91^ ut b3bjvo'ia sx-w sosap oXeXb tfirii : , : .airrfiXq jfomJ-^bnBri nx xwricf ad-fiaXq Howii-Xio"! • oj '' '1 tl f v ~- „ 35. TABLE A Space Allocations, Hand-Truck and Fork-Truck Plants, Pear and Apple Packing Curve desig- nation / Fig. h— *" j Floor area i" Hand- truck plant) Fork-truck plant |^-b/L >-c/! Operation I line-' ' lines- | line- 7 lmes- H H H H • Incoming fruit Packed fruit 1 Cannery and cull fruit j Sorting and dumoing equipment Subtotal Rnnfed areas U.2 2.U 0.5 11.0 6.0 1.0 2.U o.5 u.u 6.0 1.0 7.1 — i 1 18.0 1 U.6 li. U I I Aisles Miscellaneous (toolroom, office, restrooms, etc.) Subtotal 3-0 2.0 8.6 3.0 3.5 2.0 3.0 5.0 11.6 i 5.5 1 13.5 G G Packing boxes, shook, and lids, storage Boxmaking, labeling, and liddmg- Subtotal U.2 o.U 1U.2 1 1.7 2.3 o.U 5.7 2.3 U.6 16.5 1 2.1 r- ; 8.0 Sum of H, G, and I Total roofed area, excluding sizing equipment & / Sizing equipment (Table l)- Total roofed area 16.7 2.1 U6.1 | 12.2 6.3 i 2.1 32.9 6.3 18.8 52. U J 39.2 J I 1 K Empty lug storage Receiving area Shipping area TTnroofed areas 2.8 j 10.5 3.8 , 9.6 e/ } e/ 0.8 U.o 3.0 3.5 12.0 5.2 a/ Curves H, I, J, and K related to capacity rate, total fruit run? curve G re- ~ la ted to capacity rate, fruit packed. b/ Capacity rate: total fruit run, 20,000 pounds per hour; packed fruit, 12,000 pounds per hour. c/ Capacity rate: total fruit run, 75,000 pounds per hour; packed fruit, U8,000 pounds per hour. d/ Storage of empty boxes assumed to be on main floor of packing house. If - boxes are stored in a box loft, the total roofed area may ^ leas than in- dicated. In this event, building costs in relation to roofed area given m Figure 5 would be greater for a given roofed area than indicated, e/ Assuming track adjacent to packing house, with direct access to storage for packed fruit. L zj£ • ,jGi?-'lo tltiOOTlocC'') 3£JC9rtB rx ^oslM ' -■ — ~ _- 1 3b£X bri^ .Loop's aajt-'v? ■Qff j^p^ . . ¥ .. . t . ...... J Snx&r/iox.'s t fia«fi balo/ri Icier?] I Jbns ,f> j ■4 36. relevant capacity rate, were plotted as in Figure b. A straight-line varia- tion in space requirements for plants of different size was assumed. Specifications for details of building construction were drawn up, from which the quantities of labor and materials required for construction were estimated. These quantities were priced at the 19?0 level to obtain estimates of construction cost, and the cost estimates were plotted in relation to the roofed area of the building (Figure $). Detailed lists of equipment were prepared for plants of four different capacities. The types and quantities of equipment included in these "stand- ard" lists are indicated in the summary for a 2-line pear packing plant given in Table B. Each item of equipment was priced at manufacturer's 1950 list price, plus an estimated amount for delivery and for the cost of labor and materials required for installation. The level of quoted prices was verified in many cases by comparison with the actual cost of recent pur- chases in particular plants. These estimated costs were then grouped ac- cording to the relevant variable— e. g. , total fruit run for sorting equip- ment; fruit packed for boxmaking equipment. The results were plotted and a straight line "smoothed" between the cost points for different plant capacities (Figure 3)« Total floor space requirements estimated from the "standards" derived in the above manner compare favorably with the total floor space in actual plants, and the estimated costs for buildings and equipment appear consist- ent with actual costs in recently constructed plants. This suggests that the data indicate fairly well the level of building and equipment costs that may be expected. It should be emphasized, however, that the data are intended only to provide a basis for estimating the general level of aggregate costs for buildings and equipment. Considerable variation will result if the data are applied to a particular plant that differs in im- portant respects from the model used in this analysis. Also, the data re- garding space allocations and equipment requirements are quite generalized and are not intended as a guide for planning plant layout. to 11 .iGJIIcXU 'Jcterwsv drip- iii>. f 5:fr