• TABLE OF CONTENTS
HIDE
 Front Cover
 Abstract
 Table of Contents
 List of Tables
 List of Figures
 Introduction
 Mature green tomato packing...
 Investment and operating costs
 Total packing costs under various...
 Summary and conclusions
 Reference














Group Title: University of Florida. Agricultural Experiment Station. Economics report ; 88
Title: Costs and efficiencies of packing mature-green tomatoes in Florida
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Full Citation
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Permanent Link: http://ufdc.ufl.edu/UF00027404/00001
 Material Information
Title: Costs and efficiencies of packing mature-green tomatoes in Florida
Series Title: Economics report
Physical Description: iv, 33 p. : ill. ;
Language: English
Creator: Wall, G. Bryan ( George Bryan )
Publisher: Food and Resource Economics Dept., Cooperative Extension Service, Institute on Food and Agricultural Sciences
Place of Publication: Gainesville Fla
Publication Date: 1977
 Subjects
Subject: Tomatoes -- Packing -- Economic aspects   ( lcsh )
Tomatoes -- Packing   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Bibliography: p. 33.
Statement of Responsibility: G. Bryan Wall.
General Note: Cover title.
Funding: Florida. Agricultural Experiment Station. Economics report ;
 Record Information
Bibliographic ID: UF00027404
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Source Institution: University of Florida
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Resource Identifier: aleph - 001618681
oclc - 03613902
notis - AHP3189

Table of Contents
    Front Cover
        Front Cover
    Abstract
        Page i
    Table of Contents
        Page ii
    List of Tables
        Page iii
    List of Figures
        Page iv
    Introduction
        Page 1
        Page 2
        Page 3
    Mature green tomato packing operations
        Page 4
        Page 5
        Page 6
    Investment and operating costs
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
    Total packing costs under various operating conditions
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
    Summary and conclusions
        Page 30
        Page 31
        Page 32
    Reference
        Page 33
Full Text







Costs and Efficiencies of Packing


Mature-Green


Tomatoes


in Florida


Food and Resource Economics Department
Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville 32611


G. Bryan Wall











ABSTRACT


Synthesized costs for two model packinghouse sizes showed significant
economies of scale in the packaging of mature green tomatoes. The degree
of scale economies were found to vary depending on season length, level of
technology, capacity design of facility, the percentage of culls, and
capacity utilization. The season length was found to be the most signifi-
cant factor in determining per unit packing costs. There appears to be a
necessary trade off between packinghouse size and length of season. For
a given total output, as the season length increases, the smaller packing-
house becomes more cost efficient. The limitation for the smaller houses
is its inability to handle the total field production.


Key words: Tomatoes, packing costs, scale economies, break-even costs













TABLE OF CONTENTS


ABSTRACT .

LIST OF TABLES .


Page

i


. . . . . . iii


LIST OF FIGURES . . . .

INTRODUCTION . . . .

MATURE GREEN TOMATO PACKING OPERATIONS .

Factors Influencing Average Packing C

INVESTMENT AND OPERATING COSTS . .

Land and Buildings . .

Equipment--Packing and Office ...

Miscellaneous Fixed Costs . .

VARIABLE COSTS . . . .

Labor . . . .

Variable Costs Per Packing Hour .

Variable Costs Per Packed Container .


0C


ists .. .. .

. .

. .

. .

. .

. .

. .

. .

. . .


TOTAL PACKING COSTS UNDER VARIOUS OPERATING CONDITIONS .

Season Length and Its Affect on Packing Costs .

Cull Rate and Its Affect on Packing Costs . .

Expected Seasonal Production and Packinghouse Size

SUMMARY AND CONCLUSIONS . . . .

REFERENCES . . . . ... ..











LIST OF TABLES

Table Page

1 Florida tomato acreage and production by area
for crop year 1975-76 . . . . 2

2 Size distribution of mature green and vine ripe
tomatoes for 1976-77 season . . . 8

3 Quality distribution of mature green and vine
ripe tomatoes for 1976-77 season . . . 9

4 Total capital assets investment for model
packing houses by size . . . .... 12

5 Estimated fixed costs for model packing houses
by size . . . . ... . .13

6 Number of salaried employees and their annual
earnings . . . .. .. . .15

7 Miscellaneous fixed costs per year . ... 16

8 Estimate of number of workers necessary to
operate packing house at stated percentages
of capacity . . . .... .. .. .18

9 Hourly labor costs by operational stages . ... 19

10 Miscellaneous variable costs per operating hour .... .20

11 Miscellaneous variable costs per packed container .. 21

12 Summary of packing house charges by house size at
full capacity . . .... . . 23

13 Packing cost per thirty pound box for small plant .. 24

14 Packing cost per thirty pound box for medium
size plant . .... . . . 25

15 Effects of cull rate changes on unit packing
charges by plant size . . ... .. 28







LIST OF FIGURES

Figure Page

1 Flow diagram for tomato packing shed . . 5

2 Assumed scale of operation for model packinghouses 10

3 Unit packing costs by season length for Florida
mature green tomato production at 75 percent
season capacity . . . .... 27

4 Per unit packing cost for various cull rates
at 300 hour season . . . .... 29

5 Optimum mature-green tomato packinghouse size
for output and seasonal length . ... .... 31











COSTS AND EFFICIENCIES OF PACKING
MATURE-GREEN TOMATOES IN FLORIDA


G. Bryan Wall


INTRODUCTION

The most recent publication dealing with packinghouse operations of
Florida grown mature green tomatoes is now six years old. A major impetus
for this report is to update and expand on that work. Since Brooker and
Pearson's 1971 study the U.S. has experienced a period of substantial in-
flation, with significant increases in wages and equipment costs. Pearson
and Brooker's study was an outgrowth of a regional study entitled Planning
Data for Marketing Selected Fruits and Vegetables in the South published
in May of 1970. As such, the data used in the Pearson and Brooker study
represents average prices for the Southern region for 1970. The present
study is dependent on Florida production cost estimates and methods of
operation rather than averaged data from the overall production region of
which Florida is a part. Florida's position as a major supplier of fresh
market tomatoes is due in part to her ability to provide minimum cost packing
operations. This study is designed to document those costs.
In 1974 the total value of U.S. tomato production was 19,879,000 cwt
with Florida providing 25 percent of that or 4,998,000 hundredweight. The
major tomato producing areas of Florida are shown in Table 1 for the 1975-
1976 season. From this table it can be seen that the Palmetto-Ruskin area
provides 41 percent of Florida's total production, Dade County provides 25
percent, and the Southwest areas approximately 20 percent. The season itself
starts in November and runs to mid-June with variances in season length due
to weather.
Because of the length of the marketing season and the total quantity


G. BRYAN WALL is assistant professor, Food and Resource Economics
Department, University of Florida, Gainesville, Florida.







Table 1.--Florida tomato acreage and production by area
1975-76


for crop year


Aras Acres Yield per Production
harvested acre

30 lb. cartons 1000 cartons.

West, north and
north central 520 508 264

Palmetto-Ruskin 13,420 890 11,944

Ft. Pierce-Pompano 5,330 745 3,971

Southwest 7,170 820 5,879

Dade 11,860 610 7,235

State Totals 38,300 765 29,293

Source: Vegetable Summary. 1976. Florida Crop and Livestock
Reporting Service.






of tomatoes produced some Florida packinghouses are quite large. This
study deals with two packinghouses which handle less than 2300 thirty
pound cartons per hour. In terms of output the smaller house is capable
of producing 1000 to 1250 cartons per hour and the larger of the two is
capable of producing from 1500 to 2300 cartons per hour. The smaller of
the two plants is more labor intensive in that it does not make use of
automatic fillers, weighers, and lidders. Thus, differences in per unit
costs between the two plants are due in part to differences inherent in
the labor intensive and the more capital intensive plant. The packing
seasons used in this study range in length from 200 to 600 hours under
three levels of capacity of 50, 75, and 100 percent.
This study focuses on how per unit packing costs are affected by
variances in plant size, season length, and degree of capital investment.
Major objectives of this study are to
(1) Outline the components of packing costs and to measure
costs for alternative handling and packing techniques
used in 1977.
(2) Compare costs in packinghouses of two (2) different sizes
(3) Evaluate the effect on costs of varying selected
operating conditions. [1]
The economic engineering approach is used in this study. Artificial
plants are established by specifying building size and layout, equipment,
labor and packing supplies requirements. It is than possible to calculate
total and unit costs for each plant operation. These costs are in fact
estimates as they do not reflect actual costs of any single plant. These
"derived" costs are contingent upon assumptions and specifications used
in setting up the model plants.
One advantage of this study over similar ones is that the building
and equipment estimates are based in part on actual contract figures taken
from two recently contracted packinghouses of the stated sizes. As a result
these costs are much more accurate than would be possible if the costs were
totally synthesized. In addition, the operators of the smaller capacity
plant plan to incorporate several automated operations in several years
time to increase production of their plant to over 3000 cartons per hour.
It will be possible to expand and update this study at that time to include
the large packinghouse with a capacity of 3000 cartons per hour. Labor and
management practices, the development of such cost items as utilities, insur-
ance, repairs, depreciation methods, material flow design, and costs of






supervisory labor are based on far more than the two requirements of the
two plants. The use of engineering standards enables consistent equipment
and labor performances to be proxied without dependence on observed per-
formance. In addition, actual inspection and evaluation of firm records
are not required as such information can be obtained from published sources.
While the cost estimates contained in this study are accurate they should
be used only as guides. The use of labor and equipment standards in this
paper assumes "normal" or average operating conditions. Actual operating
plants must adjust the "synthetic costs" to the extent their own operations
differ from those of the model plants. [1]

MATURE GREEN TOMATO PACKING OPERATIONS


A mature green tomato packing plant is a fairly straight forward
operation. Figure 1 is a schematic presentation of the various steps
involved in grading and packing mature green tomatoes. The packing
operation consists of first cleaning the fruit and then separating it
by color, grade and size and finally boxing the product for temporary
storage and degreening or for immediate shipping in the case of the ripe
fruit.
Tomatoes are received at the packinghouse in 1000 pound field boxes
which are unloaded and dumped into the water bath tank by fork lift oper-
ators. In the recent past this process was performed manually with smaller
sized boxes. This study uses the more labor saving process of machine
dumping. Chlorine is added to the bath water to prevent the spread or
development of possible diseases.
After the initial washing and removal of pinks and ripes, and some
culls the tomatoes are pregraded, waxed and separated by size and grade,
either U.S. Numbers 1, 2, or 3. The fruit is boxed by grade and size with
the sizes being listed as small, medium, large, and extra large. This new
sizing classification replaces the old method of size designation which
was based on the number of tomatoes by rows and columns necessary to fill
the package. Sizing is done automatically and in those plants equipped
with automatic fillers the boxes are both filled and weighed automatically.
In plants which do not have automated means of packaging, the packing and
weighing of each box is a distinct and separate manual operation. The
packed boxes are then lidded, either manually or automatically, and the
















Remove Pinks, Pack Pinks __ Load on
Ripes & Culls & Ripes Trucks


Remove Culls &
Sort by Size


Figure 1.--Flow diagram for tomato packing shed






closed containers are manually stacked on pallets for distribution to
temporary storage or loading.
Whether pinks and ripes, and U.S. Grade Number 3 are packed or treated
as culls is a function of the prevailing market price. When the market for
pinks, ripes, and number 3's is strong, plants will make an effort to pack
the fruit. The culls are simply used as cattle feed and are generally
offered free of charge to local owners of livestock. Because of this the
percentage of culls is in part dependent on market price and since the
packing costs are in part a function of cull rate, the packing costs
become in part dependent on the prevailing market price.
The process of container supply can operate in one of two ways.
Perhaps the most common is for the plant to pay a fixed charge per box
to the supplier. For this charge, the material supplier will construct
both boxes and lids. The movement of the finished boxes and lids to the
packing stations remains the responsibility of the packinghouse owners
and this work is oftentimes paid for on a per unit basis. The second
method of container supply is for the packinghouse to purchase only the
boxing material and to furnish the equipment and labor necessary to
construct the boxes and transport them to the packing stations. The cost
of materials is roughly one-half that charged to furnish the finished
container. The method used in this study is purchasing from a box supplier
although this is not meant as an endorsement of one method over another.
The container size used is the 30 lb. cardboard carton and the majority
of Florida produced fruit is shipped by interstate truck carriers.

Factors Influencing Average Packing Costs

The packinghouse capacities used in this study are: (1) small sized
plant packaging 1000 to 1200 thirty pound cartons per hour at capacity
and (2) a medium sized packinghouse with a capacity output of 1500 to 2000
cartons per hour. The 100 percent capacity estimate for each plant is the
upper range figure and is included to account for the typical time versus
rate dimensions of plant output. Since the machinery runs at a set speed
the only way to achieve a variable output is to employ less labor. At
total capacity of 1200 to 2000 cartons per hour respectively, the only
way to increase total product is to increase the number of operating hours.
This does not, however, cause a change in the marginal costs. [5]






Another factor that effects the packout rate is the size and quality
distribution of the fruit. A disproportionate percentage of poor quality
or smaller sizes tend to slow down total output per unit of time and thus
contributes to increases in per unit costs. Size and quality distribution
of the 1976-77 crop is presented in Tables 2 and 3. While the 1976-77
season can be considered as abnormal because of the severe January freeze,
these tables serve to illustrate the degree to which weather can influence
the quality of the fruit. This change in quality will be reflected in
packinghouse costs. The mid-season decline in fruit quality is shown by
the packout which consisted of 100 percent U.S. Grade #3 mature greens for
the 15th week. Grade compliance is checked by the Florida Department of
Agriculture with the cost of inspection being added to the cost per box.
The overall cull rate assumed in this study is 25 percent of total tomatoes
dumped into the washers.
Seasonal patterns will also alter the per unit costs since the plant
does not begin operations at peak capacity nor does it end the season
operating at full capacity. Houses in southern Florida will experience
a longer operating season than those operating in the panhandle of the
state due to more favorable temperatures. Even during seasonal peaks,
fluctuations in deliveries to the houses do exist (Figure 2). During the
first 10 percent of the season and the last 10 percent the plants are
assumed to operate at 35 percent capacity. For 20 percent of the season
covering season buildup and slowdown, the plants are assumed to operate at
70 percent capacity and the remaining 60 percent of the season to operate
at 90 percent capacity. [1] An operating level of 75 percent of capacity
resulting for the entire season is used to calculate per unit costs presented
in the final cost tables presented. Severe economic impacts such as frost
and flooding reduce total operating time as well as percent of time at
total capacity thus raising the per unit costs.

INVESTMENT AND OPERATING COSTS


Several sources were used in determining equipment costs and specifi-
cations. These included actual equipment contracts, manufacturers cata-
logues, interviews with machinery manufacturers and designers, and inter-
views with agricultural engineers. In most situations the general labor
specifications were taken from available literature and plant visits.








Table 2.--Size distribution of mature green and vine ripes tomatoes
for 1976-77 season

Weeks Mature Greens Vine Ripes
Ex. Large Large Medium Small Ex. Large Large Medium Small


---------Percentages----------


4.5
11.2
11.5
14.6
20.1
22.8
21.2
17.4
19.3
19.0
28.2
25.8

9.8
33.1
37.3
39.5
37.5
29.7
29.9
25.0
34.7
34.9
35.8
37.3
29.7
18.0
19.3

24.7


32.7
27.1
33.0
35.3
38.8
36.3
32.9
24.6
23.4
26.4
8.6


14.2
14.6
12.9
23.2
21.9
19.1
17.9
23.2
21.5
22.7
23.9
17.0
26.4
27.2
26.0


62.8
44.8
44.8
42.4
35.5
32.2
33.8
38.5
37.0
35.8
37.9
54.8

61.6
38.1
36.0
30.0
29.9
35.4
31.7
31.3
29.3
31.6
30.4
37.8
34.6
40.3
40.2


16.9
10.7
7.7
5.6
8.7
12.1
19.5
20.3
18.8
25.3
19.4

14.4
14.2
13.8
7.3
10.7
15.8
14.6
16.8
14.5
10.8
9.9
7.9
9.3
14.5
14.5


---------Percentages---------


12.7
48.8
35.2
41.5
52.2
58.5
34.1
24.1
20.3
15.4
13.2

23.6
17.7
16.1
22.2
26.1
24.3
22.5
21.8
46.1
36.9
35.5
29.7
35.4
33.2
32.7
40.1


23.4 38.4 13.1 30.4


65.3
21.3
35.7
33.7
30.6
23.6
18.8
26.7
27.6
23.7
21.9

54.4
47.2
37.1
35.6
31.8
36.8
32.0
36.8
24.9
34.2
34.4
39.5
32.9
29.1
30.7
28.6


22.0
24.1
26.6
23.2
16.1
14.9
30.7
35.9
32.8
35.7
35.1

17.0
28.4
35.7
31.8
33.9
29.4
29.1
30.3
24.0
24.7
25.9
27.8
28.1
32.8
31.1
26.8


33.1 27.9


Source: Florida Tomato Committee


5.8
2.5
1.6
1.1
3.0
16.4
13.3
19.3
25.2
29.8

5.0
6.7
11.1
10.4
8.2
9.5
16.4
11.0
3.9
4.2
4.2
3.0
3.6
4.9
5.5
4.5

8.5


Avg.







Table 3.--Quality distribution of mature green and vine ripe tomatoes
for 1976-77 season

Mature Greens Vine Ripes
Week 85% U.S. U.S. U.S. U.S. 85% U.S. U.S. U.S. U.S.
#1 Comb. #2 #3 #1 Comb. #2 #3


------- Percentages-------


0.0
41.0
53.4
70.0
74.5
68.4
62.2
54.4
49.0
53.3
0.0
0.0

0.0
0.0
0.0
0.0
0.0
6.5

6.5
15.8
50.7
42.0
42.7
64.8
52.7
50.6


0.0
31.9
19.1
6.1
2.5
5.9
10.8
12.5
13.5
15.7
16.3
0.0

0.0
14.0
16.9
23.5
26.2
39.2
45.6
34.8
32.8
10.6
12.9
10.0
5.8
10.6
11.3


35.6
19.8
17.2
16.1
15.4
14.5
14.4
18.9
18.1
13.7
18.3
0.0

0.0
28.1
34.7
30.5
17.9
20.4
18.1
28.2
23.4
17.7
26.1
28.3
17.4
23.4
21.7


64.4
7.3
10.3
7.8
7.6
11.2
12.6
14.2
19.4
17.3
65.4
100.0

100.0
57.9
48.4
46.0
55.9
33.9
36.3
30.5
28.0
21.0
19.0
19.0
12.0
13.3
16.4


--------Percentages--------


0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0
0.0
0.6
2.3


27.2
26.8
51.7
58.5
45.0
48.1
48.2
57.7
71.5
71.9
58.9

68.9
59.3
59.3
52.6
42.1
53.4
41.8
62.3
40.8
60.7
69.9
79.2
65.4
64.8
59.6
40.5


55.2
73.2
10.4
14.4
15.4
16.9
16.5
13.1
7.4
5.3
1.5

0.0
0.5
7.1
1.7
1.8
4.7
18.7
5.6
10.1
13.6
8.5
5.2
9.7
6.7
13.8
11.7


17.6

37.9
27.1
39.1
35.0
35.3
29.2
20.8
22.8
39.6

31.1
40.2
33.6
45.7
56.1
41.9
39.5
32.1
49.1
25.7
21.3
15.6
24.9
28.5
26.0
45.5


Source: Florida Tomato Committee














Operating
Level-- 100
% of
Capacity

80



60



40



20


10 20 30 40 50 60

Figure 2.--Assumed scale of operation for model packinghouses

Source: USDA


70 80


90 100
Season Length
()






Land and Buildings

A presentation of the capital investment for the two plants is
presented in Table 4. Total square footage is included also because of
the lack of a plant layout. The layout was omitted because although it
is preferable for the packing operation to be in a single line (the smaller
the number of bends the more optimum the design) in practice this optimum
is seldom achieved. Actual equipment arrangement is generally dependent
on the existing building structure.
The building itself is a standard steel building sheeted with 26
gauge 80,000 P.S.I. yield galvanized steel panels with five year color
warranty. Wind loading is designed to meet the Southern Standard Building
Code for Coastal Regions. The square footage includes areas for office and
restrooms with the office being constructed of standard framing material.
Land cost is omitted and it is acknowledged that this omission will
bias the final results downward. The reason for the omission is that land
values vary greatly in Florida as do local property taxes, and land costs
are not depreciated but rather carried at the purchase value. To add an
average land value to each plant would change the scale but not the relative
position of the individual plant cost curves.

Equipment--Packing and Office

Equipment costs were mentioned previously and the only remaining
item to be mentioned here is that the total equipment cost estimates
include cost of setup, office equipment and field bins. The bins are
of wooden construction and carry.a capacity of 1000 pounds. Plumbing
and electrical installation are included with the building cost estimate.
The total annual estimated fixed costs is to be found in Table 5.
The building is estimated to have a useful life of 25 years with a 20
percent salvage value while the equipment life is assumed to be 10 years
with a 10 percent salvage value. Depreciation is calculated separately
for building and equipment by using a sinking fund depreciation method
with an 8 percent interest charge on first cost. Interest charges are
calculated at eight percent on a capital recovery basis for the stated
time spans [4] while the estimates for repairs and taxes are taken from









Table 4.--Total capital assets investment for model packing houses
by size


Item


Estimated Building Invest.

Sq. footage

Cost per foot

Estimated Equipment Costs

Office equipment

Packing equipment

Bins

Equipment installation

Total Equipment

Total


Packing House Size
Small Medium
(1000-1200) (1500-2000)
Cartons Cartons
$190,800 $205,000

19,080 20,500

10 10


1,300

199,720

31,000

39,944

271,946

$462,746


1,500

265,072

31,500

53,014

351,086

$556,086








Table 5.--Estimated fixed costs for model packing houses by size


Item


Depreciationa

Building

Equipment

Interest

Repairsc

Insurance

Taxese

Total


Small Medium
(1000-1250) (1500-2300)
------------Cartons-----------


17,352

38,651

54,580

10,549

7,300

8,227

136,659


18,643

49,899

70,145

13,533

9,365

10,556

172,741


aDepreciation: Building-25 year life-20 percent S.V.
Equipment-10 year life-10 percent S.V.
Sinking fund depreciation with interest on first cost.
Interest: 8 percent calculated on capital recovery basis for set
time spans.
CRepairs: 2.5 percent investment.

dInsurance: 1.73 per $100 valuation.

eTaxes: 19.5 mils or .0195 percent total assessed value.


--






USDA literature. The insurance estimates are taken from Florida Farm
Bureau estimates.
One final word is in order concerning the capital investments and
the corresponding annual fixed costs. It is the standard practice in
Florida for mature green tomatoes to be degreened before the final ship-
ment. The capital investment for this process is quite large and if added
to those costs mentioned would raise the per unit costs substantially.
They are omitted because such operations do not contribute to the packing
cost per se. The selling broker charges the receiver the cost of degreening
and thus the degreening cost can be classified as a selling cost. Building
design, however, must reflect the necessary space requirements for the gas
rooms. To this extent, the increased capital outlays carried through this
analysis in the form of depreciation, maintenance, and other fixed costs
will bias the final results downward.


Miscellaneous Fixed Costs

Miscellaneous fixed costs, which are in addition to those already
mentioned in Table 5, are shown in Table 7. Included in miscellaneous
fixed cost is salaried labor. Salaried labor is tabulated in Table 6 and
includes the plant managers, foremen, mechanics, and office personnel.
The assumption underlying Table 6 is that the normal operating season is
15 weeks in length. This means that the small plant will hire two fore-
men while the medium sized plant will hire three. The manager, mechanic,
and the secretary-bookkeeper are year-round employees.
The weekly salary is listed for each position but the total salary
expense includes 15 percent for fringe benefits. This expense is carried
over to Table 7 where it is added to office supplies and non-itemized
expenses. The non-itemized expenses include annual charges for auditing,
advertising, donations, legal expenses, and total miscellaneous expenses.

VARIABLE COSTS


Labor


One of the largest costs encountered in a tomato packing house is
labor. Although the majority of this cost can be considered as a variable








Table 6.--Number of salaried employees and their annual earnings

Weeks Requireda d
Pack Out Weekly Salary Expense
1000 1500 3000 Salary Pack Out
1200 2300 +


Manager

Foreman

Mechanic

Secretary-Bookkeeper

Full-time

Seasonal

Total


52

30b




52

15


52

45c

52


52

15


52

45c

52


52

30


11960 11960

4485 6728

10465


7774

2070

26289


7774

2070

38997


aAssuming a normal season of 15 weeks.

bTwo foreman--1 grading and 1 shipping.

CShipping foreman and 2 grading foremen.

dWage plus 15 percent fringe benefit.


11960

6728

10465


7774

4140

41067










Table 7.--Miscellaneous fixed costs per year


Packinghouse Size
Item (Hourly Capacity 30 Ib. Cartons)
1000-1200 1500-2000 3000 +

----------------Dollars----------------

Salaried Labor 26,289 38,997 41,067


Office Supplies 1,200 2,000 3,500


'Non-Itemized 3,500 6,000 7,200


Total 30,989 46,997 51,767


,V






cost, the cost of supervision of the labor can also be considered a component
of labor costs even though it is salaried labor. Table 8 is a presentation
of the number of hourly workers necessary to operate each packinghouse at
various levels of operation. As a guideline it is assumed that a crew of
50 percent is required to operate a packinghouse at levels up to 35 percent
capacity.* The 75 percent crew is necessary to operate the plant between
35 and 70 percent and at levels over 70 percent the full labor contingent
is required. The number enclosed is parenthesis represent additional labor
required if the packinghouse endeavors to construct its own lids and cartons.
In such a circumstance the additional cost of the lid and carton machine
would have to be included in the equipment cost estimates.
Hourly labor costs, presented in Table 9, are simply an extension
of Table 8 in that the hourly wage rates listed in the tables footnotes
for Table 9 are applied to the employee numbers. The wage rate varies
by operation and degree of skill necessary and is above the minimum wage
level. The larger labor costs at each level of operation for the smaller
plant is due to its greater degree of labor intensity. The larger plant
uses automated packing and weighing equipment thereby reducing total labor
outlays.


Variable Costs Per Packing Hour


In addition to wages there are other categories of variable costs.
Some of these costs vary according to the number of operating hours and
others with the number of boxes packed. Those costs which are considered
to be hourly variable costs include utilities, telephone and telegraph
services for the brokers, and miscellaneous costs such as fuel for fork-
lifts and other mechanical motor operations. The rate schedules for
electricity, water, and sewage charges are footnoted in Table 10.
Telephone and telegraph charges are primarily selling expenses and
are dependent on market conditions. The cost estimate provided assumes
a "normal" season.


Variable Costs Per Packed Container


Variable costs, or those costs which vary with the number of packed
cartons, are highest for small packinghouses (Table 11). Labor costs








Table 8.--Estimate of number of workers necessary to operate packing
house at stated percentages of capacity

Small House Medium House
Operation with crew of with crew of
100% 75% 50% 100% 75% 50%



Unload
Dump operators 1 1 1 2 2 1
Lift operators 4 3 2 1 1 1

Pregrade 12 8 6 8 6 4

Grade 41 31 21 42 33 20

Packing 26 24 13 20 17 14

Packed Box Removal 10 6 5 0 0 0

Weighed Packed Box 5 5 5 0 0 0

Lidders of Packed Box 3 2 2 0 0 0

Stacking 9 7 5 5 5 5

Lid Manufacturea (3) (2) (2) 0 0 0

Box Manufactureb (7) (6) (6) 0 0 0

Transport to Load 3 3 2 4 3 2

Material Supply 1 1 1 1 1 1

Cull Disposal 1 1 1 1 1 1

Miscellaneous 1 1 1 0 0 0
117 93 65
Total (127) (101) (73) 84 71 49

aThese employees are necessary if the plant chooses to construct its
own lids.
bThese employees are necessary if the plant chooses to construct its
own cartons.
cMiscellaneous labor is used as a temporary fill to reduce production
bottlenecks. The use of automated packing equipment in the larger plant
eliminates the necessity for such auxiliary labor.


L U








Table 9.--Hourly labor costs by operational stages


Small House Medium House
Stage with crew of with crew of
100% 75% 50% 100% 75% 50%

---------------------Dollars-------------------


Unload
Dumpa
Liftb

Pregradec

Gradec

Packing

Packed Box Removala

Weigh Packed Boxa

Lid Packed Boxc

Stackinga

Lid Manufacturea

Box Manufacturea

Transport to Loadb

Material Supplyb

Cull disposal

Miscellaneousb,d


Total


2.75
12.00

30.00

102.50

71.50

27.50

13.75

7.50

24.75

(8.25)

(19.25)

9.00

3.00

3.00

3.00


310.25
(337.75)


2.75
9.00

20.00

77.50

66.00

16.50

13.75

5.00

19.25

(5.50)

(16.50)

9.00

3.00

3.00

3.00


2.75
6.00

15.00

52.50

35.75

13.75

13.75

5.00

13.75

(5.50)

(16.50)

6.00

3.00

3.00

3.00


247.25 173.25
(269.25) (195.25)


5.50
3.00

20.00

105.00

55.00

0

0

0

13.75

0

0

12.00

3.00

3.00


220.25


5.50
3.00

15.00

82.50

46.75

0

0

0

13.75

0

0

9.00

3.00

3.00


5.50
3.00

10.00

50.00

38.50

0

0

0

13.75

0

0

6.00

3.00

3.00


181.50 132.75


aHourly wages of $2.75 plus 15 percent fringe.

bHourly wages of $3.00 plus 15 percent fringe.

CHourly wages of $2.50 plus 15 percent fringe.

dStacking foreman.




L-U


Table 10.--Miscellaneous variable costs per operating hour


Item


Cost per Hour by House Size
Small Medium


Utilities

Electricitya

Water and Sewageb

Telephone and Telegraph

Miscellaneous


Total


$16.04

4.81

4.00

5.75


$30.60


$16.75

5.30

6.00

3.75


$31.80


aEstimate of 1 kw/hr per 100 sq. ft. building space
Billing rate of
minimum charge 6.50
0 1000 kw .05 kw/hr
1000 kw or greater .028 kw/hr
water and sewage estimate is 30 percent of the electricity
estimate.
CIncludes fuel for mechanical motor operations, etc.

dTaken from U.S.D.A. literature.








Table 11.--Miscellaneous variable costs per packed container

Cost Item Dollars Per Unit

Labor

Box Supply .02

Truck Loaders .025

Boxing Material .51

Broker .10

Pallets .10

Miscellaneous .0374


Total .7924


aMiscellaneous charges include was and chlorine costs
of .01 dollars per box, inspection charges of .0199 dollars
per 30 lb. box and a market order assessment of .0075
dollars per box.






include transportation of the completed boxes and lids to the packers
while the material costs cover construction of the lids and boxes. Also
included is the brokerage charge of 10 cents per box and a charge of 10
cents per box is allocated for the pallets. The 2 cents assigned to
the truck loaders will include the labor cost of binding the loads to the
pallets as well as the cost of loading those trucks which contain non-
palletized loads.
The miscellaneous charges per box includes the cost for chlorine,
wax, inspection charges, and market order assessment.

TOTAL PACKING COSTS UNDER
VARIOUS OPERATING CONDITIONS


The summation of costs, both fixed and variable, is presented in
Table 12. It also includes a reference to the tables from which the
various costs are taken. The season average costs can be reconstructed
by the reader by following the formula listed below.

Total ( Hours (Variable Cost
Unit = Variable Costs Per Unit + Fixed Costs + Operated/\ Per Hour /
Costs Total Boxes Per Season

These calculations are presented in final form in Tables 13 and 14
for various season lengths and capacity operations. By way of an example
the small plant which operates for 300 hours in a given season at 100
percent capacity (1200 boxes per hour output) can expect a total unit
cost of $1.45 per box. It must be remembered, however, that it was assumed
that because of startup, slowdown and mid-season fluctuations that a given
plant would operate at a season average of 75 percent capacity. This is
900 cartons per hour for a total season packout of 270,000 boxes. This
level of operation carries a per unit total cost of $1.89 per box which
translates into a 17 percent increase in costs.
If one assumes that an average yield per acre is 600 cartons a season,
a packout of 270,000 thirty pound cartons can be achieved with 450 acres of
tomatoes. This 450 acres of tomatoes would include both the fall and spring
crop for the south Florida growing areas while in the panhandle it could
represent a single spring crop. This is an indication of the relative
sizes of packinghouse in the two regions. The implication of this is that
for the short season length in North Florida a larger packinghouse is needed








Table 12.--Summary of packing house charges by house size at full capacity

Cost Table Dollar Outlay
Component Used Small Medium

Fixed Costs

Depreciation 4, 5
Building 17352 18643
Equipment 38651 49899

Interest 5 54580 70145

Repairs 5 10549 13533

Insurance 5 7300 9365

Taxes 5 8227 10556

Miscellaneous 5

Subtotal 136659 172141


Variable Cost Per Hour

Labor 9 310.25 220.25

Miscellaneous 10 30.60 31.80

Subtotal 340.85 252.05


Variable Costs Per Packed
Container

Itemized 11 .7550 .7550

Miscellaneous 11 .0374 .0374

Subtotal .7924 .7924








Table 13.--Packing cost per thirty pound box for small plant


Hourly
Operating Hourly
Season ut
(hours) (30# unit)
(hours)


Total
Packout
(1000)


Fixed
Cost
Box


Iota I
Hourly
Var. Cost


Cost Components
Total Hourly
Var. Cost
per Unit


Var.
Cost
Unit


Total
Unit Costs


----------------------------Dollars--------------------------
1.14 40770 .34 .79 2.27

.76 55570 .31 .79 1.86

.57 68170 .28 .79 1.64


200






300





400






500


600

900

1200


600

900

1200


600

900

1200


600

900

1200


120

180

240


180

270

360


240

360

480


300

450

600


.79

.79

.79


.79

.79

.79


.79

.79

.79


1.89

1.61

1.45


1.70

1.48

1.35


1.59

1.40

1.30


.76

.51

.38


.57

.38

.28


.46

.30

.23


61155

83355

102255


81540

111140

136340


101925

138925

170425


.34

.31

.28


.34

.31

.28


.34

.31

.28


- I--~ -----------------






Table 14.--Packing cost per thirty pound box for medium size plant


Hourly T l Cost Components _
Operating Packout Fixed Total Total Hourly Var.
Season i0x. tUn Total
Season (30# unit) Packout Cost Hourly Var. Cost Cost Total
(hours) (1000) Box Var. Cost per Unit Unit Unit Cost

----------------------------Dollars--------------------------

200 1000 200 .86 32910 .16 .79 1.81

1500 300 .57 42660 .14 .79 1.50

2000 400 .43 50410 .13 .79 1.35

300 1000 300 .57 49365 .16 .79 1.52

1500 450 .38 63990 .14 .79 1.31

2000 600 .29 75615 .13 .79 1.21

400 1000 400 .43 65820 .16 .79 1.38

1500 600 .29 85370 .14 .79 1.22

2000 800 .22 100820 .13 .79 1.14

500 1000 500 .34 82275 .16 .79 1.29

1500 750 .23 106650 .14 .79 1.16

2000 1000 .17 126025 .13 .79 1.09

600 1000 600 .29 98730 .16 .79 1.24

1500 900 .19 127980 .14 .79 1.12

2000 1200 .14 151230 .13 .79 1.06




L. U


than in south Florida where the total season output is split between two
seasons.


Season Length and Its Affect on Packing Costs


As illustrated by Figure 3, per unit packing costs rise sharply when
the season length falls below 300 hours. There is also a leveling off of
economies of scale past the 300 hour point. The price difference between
the two plants is some 54 cents at 100 hours, 36 cents at 200 hours, 30
cents at 300 hours, 26 cents at 400 hours, and 24 cents at 500 hours.


Cull Rate and Its Effect on Packing Costs


Table 15 and Figure 4 represent the manner in which total costs per
packed container increases as the percentage of culls increase for a 300
hour operating season. It can be readily seen that the percentage of
culls has an important bearing on the cost per container. The cost of
moving a set number of pounds is roughly the same regardless of the cull
rate. The variable costs per box would be expected to remain the same
although the total cost per box will vary as the fixed and hourly variable
costs are distributed among a smaller number of packed containers. The
cost increases for the small plant are roughly 40 percent while those of
the larger plant are approximately 20 percent between cull rates of 20 and
60 percent. Both Table 15 and Figure 4 provide a clear indication of the
advantages to be gained by running the best quality fruit available through
the packinghouse.


Expected Seasonal Production and Packinghouse Size


A major criterion in planning new or replacement packinghouses is the
question of the optimal size. This entire study has shown how costs vary
as season length, plant size, cull rate, and equipment costs change. The
least cost combination of season length and total seasonal production is
shown in Figure 5. As an example, suppose two packinghouses are being
planned to produce a season output of 300,000 thirty pound cartons of
mature green tomatoes. In the first instance the new house is for an area















Cost per unit


3.00






2.00



Small

Medium
1.00 -






SI I Hours of operation
100 200 300 400 500 600

Figure 3.--Unit packing costs by season length for Florida mature green tomato production
at 75 percent season capacity







Table 15.--Effects of cull rate changes on unit packing charges by plant size

Small Plant Medium Plant
Item -------Cull Rate (%)----------- ----------Cull Rate (%)---------
20 30 40 50 60 20 30 40 50 60

Pounds Dumped ---------------48,000--------------- ----------------80,00------------

Pounds Packed (1000) 38.4 33.6 28.8 24 19.2 64 56 48 40 32

# Cartons Packed 1280 1120 960 800 640 2133 1867 1600 1333 1067

Percent Capacity 100 93 80 67 53 100 93 80 67 53

Crew Percentage -----------------100---------------- -----------------100--------------


Var. Cost/Box .79 .79 .79 .79 .79 .79 .79 .79 .79 .79

Fixed Cost/Box .38 .41 .47 .57 .71 .29 .31 .36 .43 .54

Hourly Cost/Box .28 .30 .36 .43 .53 .13 .13 .15 .19 .23

Total Cost/Box 1.45 1.50 1.62 1.79 2.03 1.21 1.23 1.30 1.41 1.56

a300 hour operating season.





















ost Per I
containerr



2.00.






1.00.


Cost Per
Container


2.00






.1.00


Percent Culls


Figure 4.--Per unit packing cost for various cull rates at 300 hour season


Small I



Medium






which has a relatively short 300 hour season. The second instance is a
split season of 500 total hours. From Figure 5 it can be seen that the
intersection of 300,000 cartons and 300 operating hours is in the medium
size plant category. From Table 14 it can be determined that the break-
even cost of such a plant would be approximately $1.52 per carton. The
intersection for the 300,000 carton and 500 hour season is in the small
plant region with an approximate break-even cost of $1.59 per thirty
pound carton taken from Table 13.

SUMMARY AND CONCLUSIONS


This study has dealt with how per unit packing costs are affected by
variances in plant size; season length; and degree of capital investment
associated with mature green tomato packinghouses in Florida. As might
be expected, significant economies of scale prevail in even this limited
study of two different model sizes. The mechanization of the packing
operation, illustrated by the movement from the more labor intensive
house to the more capital intensive one, was found to be the major source
of increased economies when one moves from the small to the medium sized
packinghouse.
Perhaps the most dominant characteristic which determines least cost
operating size is season length. In a long season, least cost operations
can be obtained with a smaller unit than is possible for a shorter season
and a given total yearly packout.
Changes in the percent of culls also had an effect on break-even
costs and serves to show the importance of handling techniques at harvest
as well as the overall condition of the crop.
From this can readily be seen the importance of a study such as
this one. The need for accurate and timely data is crucial for planners
of packing facilities. This study is intended to serve as a reference
for those parties interested in the cost of packing mature-green tomatoes.
Actual operating costs may vary significantly from those presented in this
study for a number of reasons. Management skills are one factor which
plays an important part in determining profit or loss but that is omitted
from this study. In short, this study is intended to serve as a useful
guide. Those factors which have been shown to affect operational costs





Seasonal
Production
(1000)
of
Cartons


1000


900

800

700

600

500

400

300

200

100


Medium Plant


Small Plant


100


300


400


500


600


Season Length
(Hours)

Figure 5.--Optimum mature-green tomato packinghouse size for output and seasonal length


A




JL



exert real influences and should therefore be accounted for in planning
the actual construction of a packinghouse. This is the usefulness of
this study.









REFERENCES

[1] Bohall, Robert W., Raymond Farrish, and Joseph Podany. 1964. Ripe Mature
Green Tomatoes: Costs, Efficiencies, and Economies of Scale in the
Lower Rio Grande Valley of Texas, USDA Market Research Service, ERS
Marketing Research Report No. 679.

[2] Brooker, John R. and James L. Pearson. 1971. Factors Affecting the
Feasibility of Investment in Tomato Packinghouses, Univ. of Florida
Agricultural Econ. Report 25, Gainesville, Florida.

[3] Brooker, J. R. and J. L. Pearson (eds.). 1970. Planning Data for Marketing
Selected Fruits and Vegetables in the South, Part III Fresh Vegetable
Packing Handbook Bulletin No. 152, Southern Cooperative Series.

[4] Grant, Eugene and Grant Ireson. 1970. Principles of Engineering Economy,
5th Edition, The Ronald Press Company, New York, New York.

[5] Gutierrez-Villarreal, Jose, R. A. King, Gene A. Mathia, and Normal Milker.
1973. An Economic Analysis of Alternative Investment Opportunities
in Apple Processing, N.C.S.U. Economics Research Report 24,
Raleigh, North Carolina.

[6] Jesse, Edward V. 1974. Packing California Vine-Ripe Tomatoes--Costs and
Efficiencies, USDA, ERS Agricultural Report No. 275.




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