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Group Title: Circular - University of Florida Institute of Food and Agricultural Sciences ; 436
Title: A guide for estimating foliage plant costs
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Permanent Link: http://ufdc.ufl.edu/UF00067096/00001
 Material Information
Title: A guide for estimating foliage plant costs
Series Title: Circular
Physical Description: 15, 1 p. : form ; 23 cm.
Language: English
Creator: Gunter, Dan L
Otte, John A
Florida Cooperative Extension Service
Publisher: Florida Cooperative Extension Service
Place of Publication: Gainesville Fla
Publication Date: 197-
 Subjects
Subject: Foliage plants -- Costs   ( lcsh )
Foliage plant industry   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: Dan L. Gunter and John A. Otte.
General Note: Cover title.
General Note: "4-2.5M-78"--p. 16
Funding: Circular (Florida Cooperative Extension Service) ;
 Record Information
Bibliographic ID: UF00067096
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 20536070

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    Main
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Full Text





HISTORIC NOTE


The publications in this collection do
not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
research may be found on the
Electronic Data Information Source
(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida








Circular 436


A
Guide for Estimating
Foliage Plant Costs


Dan L. Gunter and John A. Otte


Florida Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville
John T. Woeste, Dean for Extension










A GUIDE FOR ESTIMATING FOLIAGE PLANT COSTS
Dan L. Gunter and John A. Otte*



Most foliage nurserymen seek maximum profits. This requires
production of the most profitable foliage plant varieties, sizes
and quantities. Both technical and management ability are re-
quired. To determine which plants can be most profitably pro-
duced, a nurseryman must:
1. determine technical ability to grow the individual plants,
2. compare expected market prices of individual plants with
production costs, and
3. compare expected net returns among plant varieties and
sizes on a common basis.
Successful foliage plant production requires horticultural ex-
pertise which is developed through experience, consultation with
other growers, and reading current literature. However, growers
cannot base production decisions solely on plant growing ability.
Market price and production costs need consideration. Knowl-
edge of individual plant costs allows managers to base produc-
tion decisions on profits.
An approach for approximating plant costs from existing
records is presented in this report. Additionally, we show how to
relate these costs to market prices and nursery profits.


Procedure For Plant Costs Estimation
Most nurserymen can allocate some of their annual pro-
duction costs to individual plants. Usually, cutting and container
costs can be determined for each plant size and variety. Few
nurserymen allocate the other production costs to the individual
plants. The remaining costs can be allocated on a "rent" basis.
Plant cost is the sum of the allocated costs (cutting and con-
tainer) plus the "rent." The "rent" each plant should be charged
is based on the amount of growing space required and the amount


*DAN L. GUNTER is an Extension Production Economist, University of
Florida, Food and Resource Economics Department, Gainesville, Florida.
JOHN A. OTTE is -an Area Extension Farm Management Economist, Food
and Resource Economics Department, University of Florida, AREC, Braden-
ton, Florida.







of time required to grow the plant. Typically, the annual rental
rate is in terms of cost per square foot and is calculated as:
Rental rate/sq. ft.=a+b+c
d
where:
a=unallocated annual nursery cost,
b=desired return on investment,
c=supply inventory changes (+decrease) (-increase), and
d=square feet in propagating and finishing space.



(a) Unallocated Annual Nursery Costs
The total annual nursery costs can be obtained from the in-
come tax report or other accounting records. Subtracting allo-
cated costs such as container and cutting expenses gives total un-
allocated costs. The unallocated costs should include all cost
categories which cannot be directed to individual plants.

(b) Desired Return on Investment
The desired annual return on the investment can be included
as an unallocated cost and distributed to each plant along with
the other unallocated costs. One way to arrive at the annual
return is to multiply the depreciated book value of all capital
assets by the desired rate of return. The value of buildings and
equipment can be taken from the depreciation schedule or net
worth statement. Values of the plant inventory and land should
be added to the investment in buildings and equipment. The de-
sired rate of return depends upon the individual nurseryman's
investment opportunities. A common rate is the interest rate
which could be earned if the capital in the nursery were in-
vested elsewhere.

(c) Supply Inventory Changes
Unallocated costs should also be adjusted for supply inven-
tory changes of those inputs for which a cost is not allocated
directly to the plant. An increase in the supply inventory value
means that more supplies were purchased than were used in
production. Thus, the unallocated costs should be reduced by the
value of the supply inventory increase. Conversely, a decrease
in the supply inventory value should be added to the unallocated
nursery costs for the accounting year.







(d) Square Feet in Propagating and Finishing Space
The total area in the nursery usually includes propagating
and finishing areas, stock plant areas, roads, assembly areas,
potting and packing areas, and aisles. The non-growing artes
and stock areas, although necessary, do not directly contribute
to plants for sale. Additionally, the propagating space may not
contribute directly to plant sales in some nurseries. If cuttings
are not directly stuck but rooted in propagating beds, then the
propagation space should be treated as stock areas and excluded
from the square feet in the growing areas. If cuttings are di-
rectly stuck into individual containers, then include these areas
in the growing space. Since the costs associated with the non-
productive and stock plant areas (and in some cases propagating
areas) are included in the annual nursery costs, the "rent" for
the productive areas will cover the costs associated with non-
productive areas.


Plant Cost Estimation
Nurserymen may use the work sheet provided on the last
page of this publication to calculate the individual plant costs.
Space is provided for the necessary calculations along with in-
structions for completing the work sheet.
Estimating the plant costs for the Green Foliage Nursery
illustrates the application of the work sheet. Mr. Green has
81,250 square feet in production. Of this amount 15,000 square
feet are in stock plant production, anid 16,250 square feet are de-
voted to aisles leaving 50,000 square feet from which plants can
be sold. Exhibit 1 provides production information on the plants

Exhibit 1. Green Foliage Nursery Production and Sales, 1976
Percent
Sq. ft./ plant Weeks to Allocated Selling
Plant container losses grow costs price
3" Corda-
tum* .111 (4" 10 13 $ .15 $ .31
centers)
3" Peper-
omia .111 (4" 10 9 $ .16 $ .21
centers
4" Zebra .444 (8" 10 24 $ .09 $1.40
centers)
Philodendron scandens.







that Mr. Green produces. Mr. Green can allocate the cutting and
container cost directly to each plant. The three inch containers
cost $.03, and the four inch containers cost $.05. Three Cordatum
cuttings costing $,04 each are used in each container, while two
Peperomia tips costing $.065 each are used in each container. One
Zebra tip costing $.04 is used in each container. The sum of the
container cost and cutting or tip cost is shown as the allocated
cost for each plant. Exhibit 2 shows the nursery costs for 1976.
The costs include a supply inventory decrease of $2,781. Total
costs for the nursery were $256,010 during 1976. Exhibit 3
shows an investment in the nursery of $231,639. This includes

Exhibit 2. Green Foliage Nursery Production Costs, 1976
Item Dollars
Cash costs
Operator's salary $ 22,141
Other wages & salaries 69,064
Plants & seeds to grow on 48,711*
Pots, growing containers 17,762*
Fuel oil for prod. heat 6,549
Peat, soil, shavings, etc. 4,118
Fertilizer and lime 1,371
Pesticides & other chemicals 5,022
Packing boxes & supplies 9,304
Repairs & maintenance 8,030
Equipment operating costs 3,606
Travel & entertainment 846
Insurance 4,225
Telephone & electricity 4,401
Taxes, licenses, bonds 3,043
Advertising 331
Rent; land and/or buildings 878
Other cash expenses 29,175
Total cash costs $238,577
Non-cash costs
Depreciation machinery & equipment $ 6,607
Depreciation buildings, etc. 8,045
Inventory decreases, supplies (except containers) 2,781
Total non-cash costs $ 17,433
Total all costs $256,010
A cost Mr. Green can allocate directly.






the cost of land at the original purchase price. Mr. Green desired
a 10 percent return on the nursery investment.
Work Sheet Instructions and Explanation
Column 1. Names of the plants Mr. Green produces, listed in
Exhibit 1, are entered in Column 1 of the work sheet.
Column 2. The unallocated cost per square foot per week is cal-
culated in the space provided. The unallocated annual cost from
Exhibit 2 is calculated by subtracting the costs which can be al-
located (plants-$48,711 and pots-$17,762) from the total nurs-
ery costs of $256,010. Enter the unallocated cost, $189,537, on
line a. The capital investment from Exhibit 3, $231,639, is en-
tered on line b. The desired rate of return (10 percent) is en-
tered on line c. The annual return on the investment is calculated
by multiplying the amount on line b, $231,639, by the desired rate
of return on the investment, 10 percent, line c. The product is
entered on line d. The annual unallocated cost on line a, $189,537,
is added to the annual investment cost, $23,164; and the sum,
$212,701, is entered on line e.

Exhibit 3. Green Foliage Nursery Investment, 1976
Item Dollars
Growing plants $ 94,512
Buildings & improvements 86,768
Machinery & equipment 25,742
Land 15,949
Supplies 8,668
Total $231,639


The square feet in propagating and finishing space (50,000) is
entered on line f. The annual unallocated cost per square foot
in propagating and finishing space is calculated by dividing the
amount on line e by the square feet on line f. The annual unal-
located cost per square foot in propagating and finishing space,
$4.25, is entered on line g. The number of weeks in production
is then entered on line h; this should be 52 for nurseries oper-
ating a full year. Finally, the unallocated cost per square foot
per week including the desired return on the investment is cal-
culated by dividing the amount on line g by the weeks on line h,
4.25+52. The unallocated cost per square foot per week (or
weekly rental rate), .082, is entered on line i and in Column 2 for
each plant for which a cost estimate is desired.







Column 3. The number of weeks required to grow each plant
to salable size, as provided in Exhibit 1, is entered in Column 3.
For example, the Zebra requires 24 weeks to grow. The growing
time used should include time that the bench is open for cleaning
or repairs before a new crop is placed for growing.
Column 4. The square feet required to grow the plant should
be entered in Column 4. The square feet should be in decimal
terms rather than fractions. For example, if 1/2 square foot is
required, then enter ".5". Spaced on four inch centers, the three
inch material Mr. Green grows requires .111 of a square foot
(4X4+144 square inches per square foot). The Zebra plants re-
quire .444 of a square foot (8X8+144 square inches per square
foot).
Column 5. The unallocated cost per plant is calculated by mul-
tiplying the amounts in Column 2, 3, and 4 for each individual
plant. The product should be entered in Column 5.
Column 6. The allocated cost for each plant from Exhibit 1
should be entered in Column 6. In Mr. Green's case, the allocated
costs per plant are the cuttings, tips, and containers. The allo-
cated costs are $.15 for the Cordatum, $.16 for the Peperomia,
and $.09 for the Zebra plants.
Column 7. The tptal cost per plant is the sum of the allocated
(Column 6) and unallocated (Column 5) costs. The sum of
Column 5 and Column 6 should be entered in Column 7. In Mr.
Green's nursery the Cordatum costs $.27, the Peperomia, $.24,
and the Zebra, $.96.
Column 8. Not all plants reach a salable size because of
damage in handling, among other things. Thus, the cost per
plant needs to be adjusted for these losses. To do this, the per-
centage of the crop expected to reach a salable size should be
entered in Column 8. For the Green Foliage Nursery, 90 percent
of each plant crop is expected to reach a salable size.
Column 9. The plant cost adjusted for plant losses is calculated
by dividing the amounts in Column 7 by the respective percent-
ages of salable plants in Column 8. The adjusted plant costs
are entered in Column 9. After adjusting for losses, Mr. Green's
Cordatum costs $.30, the Peperomia $.27, and the Zebra $1.07.

Management Information
Returns for each type plant can be analyzed in three im-
portant ways. First, the return can be calculated by comparing
the individual plant cost to the market price; secondly, the re-
turns can be compared on a common space basis-a square foot;







finally, the returns can be analyzed on a common space (a square
foot) and a common time basis (a year). Exhibit 4 summarizes
the costs and returns for the Green Foliage Nursery and illus-
trates the alternative ways of comparing returns from different
plants.

Exhibit 4. Comparison of Costs and Returns for
Green Foliage Nursery, 1976
Plant
3" 3" 4"
Item Unit Cordatum Peperomia Zebra
Selling price $ 0.31 0.21 1.40
Adjusted plant cost $ -0.30 -0.27 -1.07
Return over cost & return
on investment per plant $ 0.01 <0.06> 0.33
Sq. ft. per plant Sq. ft. +0.111 0.111. +0.444
Return over cost & return
on investment per sq. ft.
per crop $ 0.09 <0.54> 0.74
Crops per year crops X4.0 X5.78 X2.17
Return over cost & return
on investment per sq. ft.
per year $ 0.36 <3.12> 1.61


Returns Over Cost and Return on Investment Per Plant
For the Green Foliage Nursery, the Cordatum costs $.30 per
plant, the Peperomia costs $.27 per plant, and the Zebra costs
$1.07 per plant. Comparing the plant costs to the selling price,
Mr. Green earns a return of $.01 on the Cordatum, $.33 on the
Zebra, and loses $.06 on the Peperomia.

Returns Over Cost and Return on Investment Per Square Foot
On the basis of a square foot, Zebra has a return of $.74
($.33+.444) a square foot per crop; the Cordatum returns $.09
per square foot per crop, and Mr. Green loses $.54 per square foot
per crop on the Peperomia.

Returns Over Cost and Return on Investment Per Square Foot Per Year
On an annual basis, the Zebra can be expected to return $1.61
per square foot (2.17 cropsX$.74), and the Cordatum is expected
to return $.36. Mr. Green will be losing $3.12 per square foot in
production of the Peperomia. Clearly, there are production and
marketing adjustments that Mr. Green should consider.






Cautions
1. The individual plant costs calculated by this method are
only approximations of actual cost.
2. The cost per square foot is an average. Using an average
implies that all square feet in the nursery -are equal in
value.
3. The nursery plant costs calculated from last year's records
are history. When input prices are increasing, the plant
costs may be underestimated and vice versa. Thus, plant
cost estimates should be updated as soon as the appropri-
ate information is available. When large increases in input
prices are expected nurserymen may even project their
annual costs.
4. The annual production costs should be adjusted for changes
in supply inventories during the accounting period.
5. Production practices and costs will differ from those used
in the example. Care must be used in drawing conclusions
about plant costs in other nurseries based on the example.
6. Consider factors in addition to the plant cost estimates
when establishing price lists. It may be necessary to grow
plants providing lower returns in order to complete a prod-
uct mix. Competitors' price lists might also be helpful in
developing price lists.

















WORK SHEET FOR CALCULATING FOLIAGE NURSERY PLANT COST

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9
Unallocated Weeks to Space per Unallocated Allocated Total cost Percent Adjusted
Plant cost/sq.ft./ grow plants plant cost per cost per per plant salable plant
week plant plant plants cost


1 5"Cord&tum .02- /3 11 .12. ./ .27 .90 .30
2 3" Pperoia .082 11 .Os .16 .24 .10 .27
3. ZebrA .0o2 __ .44f .27 .01 .16 0 1.07
4.
5.
6.
7.
8.
9.
10.
7. ___________---------------------------------------------___ ___------
8. ___________ _______------------------------------------------
9.0. --------- -----------------------------------------------------____ _____ _____ ____





Instructions:
Column 1. Enter the individual plant names for which a cost will be estimated.

Column 2 Calculate unallocated cost per square foot per week as follows:

a. Unallocated annual costs (from nursery records) .
b. Investment in nursery operation . .31
c. Desired rate of return .......... /O0
d. Investment cost (b X c) . . . . 236.
e. Annual costs plus investment cost (a + d) ....... 2 270I
f. Square feet of propagation and finishing ........... .'0000
g. Annual unallocated cost/sq.ft. in propagation & finishing ( e+f) 2
h. Weeks in operation (52 if a full year) ........... .. 5'2
i. Unallocated cost/sq.ft./wk., including a return on investment (g h) 82.
Enter this figure in column 2 for each plant for which a cost will be estimated.
Column 3. Enter weeks to grow each plant to salable size in Column 3. Include normal "down time" for cleaning and placing a new crop.

Column 4. Enter the square feet required for individual containers. Enter the number in decimals. For example, if one-half (Y2) a square
foot is required, enter .5; if one and one-half square feet are required, enter 1.5.

Column 5. The unallocated cost per plant is calculated as: Column 2 X Column 3 X Column 4 Enter the unallocated cost per plant in
Column 5.

Column 6. Enter the costs that can be allocated to the individual plants. Any cost category allocated should have been excluded from the
total annual costs. Common costs that can be allocated are pots and cuttings.

Column 7. Enter the sum of the unallocated cost per plant (column 5) and the allocated cost per plant (Column 6) in Column 7.

Column 8. Enter the percentage of the plants that reach a salable size and quality. Enter the number in decimals. For example, if 3/4 of the
plants are salable, enter .75.


Column 9. The adjusted cost per plant is calculated as Column 7 +Column 8. Enter the quotient in Column 9.
















WORK SHEET FOR CALCULATING FOLIAGE NURSERY PLANT COST

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9
Unallocated Weeks to Space per Unallocated Allocated Total cost Percent Adjusted
Plant cost/sq.ft./ grow plants plant cost per cost per per plant salable plant
week plant plant plants cost



1.
2.
3.
4.
5.
6.
7.
8.
9.
10.






Instructions:
Column 1. Enter the individual plant names for which a cost will be estimated.

Column 2 Calculate unallocated cost per square foot per week as follows:

a. Unallocated annual costs (from nursery records) ......... ___
b. Investment in nursery operation ...... .
c. Desired rate of return . ..... ....
d. Investment cost (b X c) . . . ...
e. Annual costs plus investment cost (a + d) ............
f. Square feet of propagation and finishing .. . ......
g. Annual unallocated cost/sq.ft. in propagation & finishing ( e f) .
h. Weeks in operation (52 if a full year) . . ....
i. Unallocated cost/sq.ft./wk., including a return on investment (g+h)
Enter this figure in column 2 for each plant for which a cost will be estimated.
Column 3. Enter weeks to grow each plant to salable size in Column 3. Include normal "down time" for cleaning and placing a new crop.

Column 4. Enter the square feet required for individual containers. Enter the number in decimals. For example, if one-half (%) a square
foot is required, enter .5; if one and one-half square feet are required, enter 1.5.

Column 5. The unallocated cost per plant is calculated as: Column 2 X Column 3 X Column 4 Enter the unallocated cost per plant in
Column 5.

Column 6. Enter the costs that can be allocated to the individual plants. Any cost category allocated should have been excluded from the
total annual costs. Common costs that can be allocated are pots and cuttings.

Column 7. Enter the sum of the unallocated cost per plant (column 5) and the allocated cost per plant (Column 6) in Column 7.

Column 8. Enter the percentage of the plants that reach a salable size and quality. Enter the number in decimals. For example, if 3/4 of the
plants are salable, enter .75.


Column 9. The adjusted cost per plant is calculated as Column 7 Column 8. Enter the quotient in Column 9.





















fl IFAS

EIL7iI
I NIERIT O FORD


This publication was printed at a cost of $266.20, or 10.6 cents
per copy, to aid nurserymen in estimating individual plant costs.

Single copies are free to residents of Florida and may be obtained
from the County Extension Office. Bulk rates are available upon
request. Please submit details of the request to C.M. Hinton, Publi-
cation Distribution Center, IFAS Building 664, University of
Florida, Gainesville, Florida 32611.

4-2.5M-78
COOPERATIVE EXTENSION WORK IN AGRICULTURE AND HOME ECONOMICS
(Acts of May 8 and June 30, 1914)
Cooperative Extension Service, IFAS, University of Florida
and United States Department of Agriculture, Cooperating
K. R. Tefertiller, Director


33292A




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