Title: method of allocating citrus packinghouse costs
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Full Text


uly 1957
July, 1957


Agricultural Economics Mimeo Report No. 58-1


A METHOD OF ALLOCATING CITRUS

PACKINGHOUSE COSTS




By

Eric Thor
James W. Davault
A. H. Spurlock


Department of Agricultural Economics
Florida Agricultural Experiment Station
Gainesville, Florida

in Cooperation With
Department of Accounting
University of Florida
Gainesville, Florida








TABLE OF CONTENTS

Page

INTRODUCTION . .. . . . 1

PROPORTIONING OF MATERIAL EXPENSE . . 18

Direct Materials . . . . 18

Indirect Materials . ........... . 20

Fruit Wraps ... ... . . 20

Nails, Strips and Straps . .. . .. 23

Labels and Paste .. . .... . 23

Linersand No-kuts .... ,.. ....... 24

Bulkheads and Cr Strips ........... 26

Padding ... .... ... ...* .. .. 26

PROPORTIONING OF LABOR EXPENSE . . 27

Receive, Truck and Dump .. .... 28

Receiving ... ... . .... 29

Dumping . ... ... . 32

Box Supply . .... ... 34

Box-making and Assembling . . . 34

Labelingand Stamping . .. .35

Placing Boxes in Chutes . . . 36

Unloading Crate Material .. . . 37

Grading .. .......... . . 38

Packing .... .... ... .. ....... 40

Box Closing and Fruit Distributing . . . 43



43 Z64






TABLE OF CONTENTS--Continued
Page
Shipping and Loading . . 43

Other Labor ............... .. . 46

Payroll Taxes and Workman's Compensation Insurance . 48

PROPORTIONING OF OTHER DIRECT EXPENSE . 49


Power, Light and Water.


S... .. . . . 49


Repairs--Bujilding and Equipment . .. ... 51

Miscellaneous Supplies and Expense . . .. 51

Rentals and Service Charges ... . .53

PROPORTION!NG OF FIXED OR INDIRECT COSTS .. 55

Methods of Allocating Costs . . . .. .55

Direct Labor Time as a Base . . 55

Direct Labor Cost asa Base . . . 56

Machine or Plant Hours as a Base . . 56

Units of Product as a Base . ... .... 56

Material Cost as a Base . . ... 57

Indirect Packinghouse Costs . . . 57

PROPORTIONING OF ADMINISTRATIVE EXPENSE . . 58

PROPORTIONING OF SELLING EXPENSE . . .63

PROPORTIONING OF OTHER INDIRECT EXPENSE . .. 64

Color-added ..... ............. 64

Wax. . .. . . 65

Preconling, Gas Coloring, Interest on Operating Capital
Donations, etc... . . . 66

Advertising Tax, Inspection Fees and Assessments . .. 67










TABLE OF CONTENTS--Continued
Page
SIMPLIFIED METHOD .... ............. .68

Material Expense . ........ ... 68


LaborExpense. .. .. ...

Other Direct Expanse .......

Fixed Expense ..... ... ....

Administrative Expense . . .

Selling Expense ..

Other Indirect Expense . . .


S. .72

S. .... 74

. ...... .76

. . 76

. . 77

. . 77


ACKNOWLEDGMENTS


The cost-allocation ratios used in this outline were developed
from the results of a cooperative research project between the Florida
Agricultural Experiment Station and the Marketing Research Division,
Agricultural Marketing Service, United States Department of Agriculture,
on the efficiency in handling and packing fresh citrus fruits by Eric Thor
and George L. Capel. Part of the results of this work have been pub-
lished as follows:

1. Bulk Handling of Fresh Citrus Fruit (T) by D. S. Prosser, Jr.,
W. F. Grierson, Eric Thor, W. F. Newhall and J. K. Samuels;
Florida Agricultural Experiment Station, Bulletin No. 564.

2. The Use of Packing Labor in Florida Citrus Packinghouses by
George L. Capel, Agricultural Economics Mimeo Report 57-8,
June 1957.









A METHOD OF ALLOCATING CITRUS PACKINGHOUSE COSTS
by I
Eric Thor, James W. DaVault and A. H. Spurlock

INTRODUCTION
There are many cost-accounting problems to consider where joint products such as the

numerous packs of grapefruit, oranges, and tangerines, and by-products, such as packinghouse

eliminations for each type of fruit, result from the operation of a packinghouse. Some of the

more baffling of these problems arise in connection-wTth. thdi.cri4buvlon of annual costs to

the various types of packs.

Strictly speaking, there is no single developed joint cost system. Generally, industrial

concerns producing joint products make use of some type of process cost systems. In this type

of accounting procedure, costs are based on processes.2 The processes are usually represented

by departments. In process cost-accounting, the terms "process" and "department" tend to be

used interchangeably. Proper departmentalization makes possible the accumulation of cost

data on a uniform basis. The size of the department is a matter of convenience, but should

possess definite limits. The boundaries of the departments depend upon the particular type

of industry involved.

Direct costs can be accumulated by department and distributed to the different products

on some equitable basis. Where the same facilities are used to turn out several products,

unit costs may be calculated by the use of proration formulas. The reduction of departmental

expense-totals to the unit costs for the particular products may be achieved by using any

suitable base, such as unit of productive output, direct labor cost, direct labor hours, machine

Eric Thor, formerly Associate Agricultural Economist, Florida Agricultural Experiment
Stations is now manager, Facilities Engineering, Corning Glass Works; James W. DaVault is
Professor of Accounting, University of Florida; A.H. Spurlock is Agricultural Economist,
Florida Agricultural Experiment Stations.
2For detailed discussion see: Clarence L. VanSickle, Cost Accounting. (N.Y. Harper
and Brothers, 1938), Chapter XXIV.










hours, or productive hours. The particular base used may vary from department to department

and from one expense item to another.

Overhead costs can be accumulated on a plant basis. Where several products, such as

different types of packs, are produced simultaneously or in successive runs, the costs can be

apportioned on some convenient ratio of actual expense. The ratios may be based on some

physical unit, such as weight, relative labor inputs, or relative market values. Some firms

divide overhead costs into a number of different classifications, such as power, light and

water; depreciation; taxes; insurance; repairs to building and equipment, etc., and distribute

each classification on a different basis.

The problem in any system of cost allocation is in obtaining factual data on input or

output ratios among the various products or packs. Detailed input-output studies were made

in 18 Florida citrus houses during two seasons, 1953-54 and 1954-55. The handling and

packing of approximately 80,000 boxes of citrus fruit were observed from the time the fruit

was received at the packinghouse door until the packages were loaded onto a rail car or

truck. Detailed time analyses were made of each labor operation. From these analyses

standard time requirements were developed for each job by type of fruit and type of pack.

There is some difference of opinion among citrus accountants as to the proportion of the

packinghouse expenses, especially labor, that should be charged to sorting out and handling

bulk fruit through the house. Some auditors hold that the bulk fruit eliminated at the pack-

inghouse and sent to the cannery should not bear a greater burden of cost than fruit sent

direct from the grove to the cannery. The handling costs for fruit not packed is regarded

under this system as an expense of obtaining suitable fruit for fresh packing. Therefore, the

packed fruit is charged with the major portion of the packinghouse expense.











Under another system of cost allocation, bulk fruit eliminated in the packinghouse is

charged with its portion of receiving, trucking, dumping and grading labor, together with

a portion of direct operating expense and overhead. The actual cost of handling bulk fruit

through the packinghouse depends to a certain degree upon work methods used, amount of

mechanical handling, and whether or not a presizer is used. However, no single formula or

ratio pattern can be expected to satisfy all conditions.

The procedure outlined in this publication does not attempt to resolve the differences

in allocation systems used, but rather illustrates the use of factor-ratios in cost proration.

In the sections that follow factor-ratios will be used to illustrate how the various joint

costs in packinghouse operation may be prorated among the kinds of fruit and packs. The

completed statement giving detailed costs by kind of fruit and pack is shown in Schedule H--

Statement of Packinghouse Operations--Per-Box Costs.

The procedures used in developing these ratios are discussed separately for each expense

classification.

In practice, some houses may find these ratios in greater detail than desired. A

SIMPLIFIED METHOD which combines the cost items into groups, has therefore been

developed and is illustrated in the latter part of this publication.

To illustrate the distribution of each type of expense by type of fruit and type of pack,

a hypothetical packinghouse, referred to herein, as the Model Packing Company, has been

assumed. The essential data on the season's operation for this hypothetical firm are presented

in Schedules A through C on pages 4 through 8.

The factor-ratios used in distributing costs are shown in the Schedules D through G on

pages 9 through 13.











SCHEDULE A
THE MODEL PACKING COMPANY
STATEMENT OF PACKINGHOUSE OPERATING EXPENSES
SEASON ENDED 6-30-57


Total Expense


DIRECT EXPENSES
Materials:
(1) Crate material
(2) Bags
(3) Fruit wraps
(4) Nails, strips, straps
(5) Labels and paste
(6) Liners, no-kuts
(7) Bulkheads, car strips
(8) Padding
(9) Total material expense


$184, 326
29,000
8
2
1,820
5,917
4,316
700
$226,089


Labor:
Receiving, trucking and dumping--
(10) Receiving foreman
(11) Coloring room attendant
(12) Truckers (hand or fork)
(13) Dumper
(14) Empty field-box handlers
(15) Receiving clerk


(16)
(17)
(18)
(19)
(20)
(21)
(22)

(23)
(24)
(25)

(26)
(27)
(28)


$ 2, 264
2,991
5,516
1,880
4,929
1,764


Box Supply--
Foreman
Assemblers
Carton makers
Labelers
Stampers
Chuters
Car unloaders
Grading--
Foreman
Graders
Switch operator
Packing--
Foreman
Packers
Tally clerk


2,329
4,937
1,607
1,747
1,035
2,582
1,642

2,478
19,241
1,222

1,800
34,594
850


Item










SCHEDULE A (Continued)


Total Expense


$ 15,107
1,501


1,004
5,765
1,404
1,912
1,393
618


Box closing--
Box closer
Fruit distributor
Shipping and Loading--
Foreman
Truckers
Loaders
Checkers
Set-off
Shipping clerk
Other labor--
General labor
Packinghouse foreman
Mechanic
Clean-up
Watchman
Subtotal labor
Payroll taxes and workmen's comp. insurance
Total labor expense


Other Direct Expense:
(45) Power, lights, water
(46) Repairs--buildings and equipment
(47) Miscellaneous supplies and expense
(48) Rentals and service charges
(49) Total other direct expense
INDIRECT EXPENSES
Fixed:
(50) Fire and casualty insurance
(51) Taxes and licenses
(52) Depreciation
(53) Total fixed expense
(54) TOTAL PACKING EXPENSE
Administrative:
(55) Management and office salaries
(56) Office supplies and expense
(57) Automobile and travel
(58) Telephone and telegraph
(59) Miscellaneous expense
(60) Total administrative expense


Item


(29)
(30)

(31)
(32)
(33)
(34)
(35)
(36)

(37)
(38)
(39)
(40)
(41)
(42)
(43)
(44)


1,400
2,400
1,800
1,000
1,100
$131,812
3, 096


$ 3,133
28, 807
4,750
150



$ 1,815
2,374
7,270


$134,908





$ 36,840





$ 11,459
$409,296


$ 18,807


$ 13,709
1, 115
1,289
679
2,015










SCHEDULE A (Continued)

Item Total Expense

Selling:
(61) Sales and office salaries $ 9,139
(62) Office supplies 743
(63) Auto and travel 859
(64) Telephone and telegraph 452
(65) Miscellaneous expense 1,344
(66) Total selling expense $ 12,537
Other Indirect:
(67) Color-add $ 1,812
(68) Wax 9,190
(69) Pre-cooling 14,897
(70) Gas coloring 4,966
(71) State advertising tax 21,066
(72) Federai-State inspection 11,312
(73) Growers' Administrative Committee 1,055
(74) Organizational assessments 4, 886
(75) Miscellaneous, donations, etc. 9,773
(76) Interest on operating capital 200
(77) Total other indirect expense $ 79, 157


(78) TOTAL ALL EXPENSES


$519,797










SCHEDULE B
THE MODEL PACKING COMPANY
VOLUME OF FRUIT HANDLED
1-3/5 Bushel Equivalent
Season Ended 6-30-57


Type of Fruit
Line Type of Pack Oranges Grapefruit Tangerines Total


1-3/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. wirebound flat
4/5 bu. fiberboard box
Total Boxes


80
217,003
240

32,354
249,677


(2)
60
157,260


7,762
165,082


36,184
3,877

40,061


140
374,263
36,424
3,877
40, 116
454,820


1/2 box mesh bag 400 400
20 Ib. mesh bag 1,227 1,227
8 lb. mesh bag 15,221 2,984 18,205
8 Ib.mesh bag in master containera 200 200a
5 Ib. mesh bag 16,678 4, 156 20,834
5 lb.mesh bag in master containera 78 78a
Total Bags 33,804 7, 140 40,944

U.S. No.1, Bulk-in-truck 6,000 6,000
Bulk in field box 500 500 1,000
Elimination to cannery 147,295 100,267 47,028 294,590
Grove direct to cannery 108,000 72,000 180,000

Total Bulk 261,795 172,767 47,028 481,590


(19) GRAND TOTAL


545,276


344,989


87,089 977,354


aTwo hundred and seventy-eight 1-3/5 bushel wirebound boxes additional were
required for these packs.


(1)
(2)
(3)
(4)
(5)
(6)

(7)
(8)
(9)
(10)
(11)
(12)
(13)

(14)
(15)
(16)
(17)










SCHEDULE C
THE MODEL PACKING COMPANY
PURCHASES AND INVENTORIES OF MATERIALS
Season Ended 6-30-57


Beginning Purchases Ending Amount
Line Type of Pack Inventory Number Cost Inventory Used


DIRECT:
Crate material:
(1) 1-3/5 bu. standard box
(2) 1-3/5 bu. wirebound box
(3) 4/5 wirebound box
(4) 4/5 wirebound flat
(5) 4/5 bu. fiberboard box
,(6) 1-3/5 bu. wirebound master
(7) Total Boxes
Bags:
(8) 1/2 box mesh bag
(9) 20 lb. mesh bag
(10) 8 lb. mesh bag
(11) 5 lb. mesh bag
Total Bags
INDIRECT:
Fruit Wraps:
(13) Oranges
(14) Grapefruit
(15) Nails, strips, straps
(16) Labels and paste
(17) Liners and no-kuts
(18) Bulkheads, car strips
(19) Padding
(20) Total Indirect
(21) TOTAL MATERIAL


$ 49
95,920
-
1,388
9,802
-


221
388,600
90,090
6,006
52,632
435


$ 123
150,000
30,000
2,000
10,000
200


$ 95
103,334
6,057
840
4,756
74


$ 77
142, 586
23,943
2, 548
15,046
126


$107,159 537,984 $192, 323 $115,156 $184,326


$ 98 606 $ 100 $ 68 $ 130
29 5,144 500 58 471
6,536 81,169 5,000 527 11,009
10, 056 138,889 7, 500 166 17,390
$ 16,719 225,808 $ 13,100 $ 819 $ 29,000


$ 5 $ 10 $ 10 $ 5
5 10 12 3
1 1 2
2,000 1,000 1,180 1,820
5,520 1,000 603 5,917
176 4,359 219 4,316
700 700

$ 7,707 $ 7,080 $ 2,024 $ 12,763


$212,503 $117,999 $226,089


$131,585 763,792










SCHEDULE D v

FACTOR-RATIOS FOR DISTRIBUTING MATERIALS EXPENSEa
Per 1-3/5 Bushel Equivalent

Boxes, Nails, Labels, Liners, Bulkheads,
Type of Pack Bags Strips, Straps Paste No-kuts car strips Padding


ORANGES: (1)
1-3/5 bu. standard box
4/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. fiberboard box, regular
4/5 bu. fiberboard, telescope
1/2 box mesh bag
20 Ib. mesh bag (1/4 box bag)
8 lb. mesh bag
8 lb. mesh bag in wirebound master
5 lb. mesh bag
5 Ib. mesh bag in wirebound master
U.S.No.1, bulk-in-truck
Bulk in field box
Elimination to cannery
Grove .direct to cannery
GRAPEFRUIT: 0
1-3/5 bu. standard box
4/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. fiberboard box, regular Lu
4/5 bu, fiberboard, telescope u
1/2 box mesh bag
20 Ib. mesh bag (1/4 box bag)
8 lb. mesh bag
8 lb. mesh bag in wirebound master
5 Ib. mesh bag
5 Ib. mesh bag in wirebound master
U.S. No.1, bulk-in-truck
Bulk in field box
Elimination to cannery
Grove direct to cannery
TANGERINES:
4/5 bu. standard box
4/5 bu. wirebound box
4/5 bu. wirebound flat
4/5 bu. fiberboard box
Bulk in field box
Elimination to cannery
Grove direct to cannery
TEMPLES:
4/5 bu. standard box
4/5bu. wirebound box
4/5 bu. wirebound flat
4/5 bu. fiberboard box
Bulk in field box
Elimination to cannery
Grove direct to cannery


(2)
1.0
2.0
-
-
-
-
-
-
-


-ir
-


1.0
2.0















2.0






2.0
- l



2.0
-
-,
- m

2.0
e-
-
-


(3)
1.0
2.0
1.0
2.0
2.0
2.0



1.0

1.0
-
-





1.0
2.0
1.0
2.0
2,0
2.0
1.0
-
,






1.0

1.0





2.0
2.0
2.0
2.0




2.0
2.0
2.0
2.0
-


(4)
2.0
4.0
1.0
2.0













2.0
4.0
1.0
2.0
-



























4.0
2.0
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2.0





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2.0
2.0
- u
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-
-
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(5)
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1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0




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1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
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1.0
1.0
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1.0
1.0
1.0
1.0


1.0
1.0

1.0


1.0
-
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1.0
1.0
1.0

1.0
1.0







-
-


aNo materials used for (a) bulk in field box,
direct to cannery.


(b) elimination to cannery, and (c) grove,






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SCHEDULE F
ALLOCATION RATIOS FOR OTHER DIRECT EXPENSE
Per 1-3/5 Bushel Equivalent

Power, Repairs Misc.Supplies and
Light, Building and Expense, Rentals,
Type of Pack Water Equipment Service Charges

ORANGES: (1) (2) (3)
1-3/5 bu. standard box 1.97 1.97 1.97
4/5 bu. standard box 2.22 2.22 2.22
1-3/5 bu. wirebound box 1.00 1.00 1.00
4/5 bu. wirebound box 1.37 1.37 1.37
4/5 bu. fiberboard box 1.37 1.37 1.37
1/2 box mesh bag 1.51 1.51 1.51
20 lb. mesh bag 1.57 1.57 1.57
8 lb. mesh bag 1.77 1.77 1.77
8 lb. bag, wirebound master 1.83 1.83 1.83
5 Ib. mesh bag 2. 2.02.06 2.06
5 lb. bag, wirebound master 2.12 2.12 2.12
U.S. No.l, Bulk-in-truck 1.00 1.00 1.00
Bulk in field box 1.00 1.00 1.00
Elimination to cannery 0.10 0.20 0
Grove, direct to ccnnery 0 0.10 0
GRAPEFRUIT:
1-3/5 bu. standard box 1.27 1.27 1.27
4/5 bu. standard box 1.50 1.50 1.50
1-3/5 bu. wirebound box 0.69 0.69 0.69
4/5 bu. wirebound box 0.85 0.85 0.85
4/5 bu. fiberboard box 0.85 0.85 0.85
1/2 box mesh bag 1.36 1.36 1.36
20 Ib. mesh bag 1.43 1.43 1.43
8 Ib.mesh bag 1.63 1.63 1.63
8 lb. bag, wirebound master 1.68 1.63 1.68
5 lb. mesh bag 1.94 1.94 1.94
5 lb. bag, wirebound master 1.99 1.99 1.99
U.S.No. 1, Bulk-in-truck 0.69 0.69 0.69
Bulk in field box 0.69 0.69 0.69
Elimination to cannery 0.07 0.14 0
Grove, direct to cannery 0 0.07 0
TANGERINES:
4/5 bu. standard box 2.81 2.81 2.81
4/5 bu. wirebound box 1.73 1.73 1.73
4/5 bu. wirebound flat 1.73 1.73 1.73
4/5 bu. fiberboard box 1.73 1.73 1.73
Elimination to cannery 0.17 0.35 0
Grove, direct to cannery 0 0.17 0
TEMPLES:
4/5 bu. standard box 2.61 2.61 2.61
4/5 bu. wirebound box 1.68 1.68 1.68
4/5 bu. wirebound flat 1.68 1.68 1.68
4/5 bu. fiberboard box 1.68 1.68 1.68
Elimination to cannery 0.17 0.34 0
Grove, direct to cannery 0 0.17 0








SCHEDULE G
ALLOCATION RATIOS FOR INDIRECT EXPENSE
Per 1-3/5 Bushel Equivalent

Admin- Color- Adv. Tax, Insp.
Type of Pack Fixeda istrative Selling add Wax Fees,Assess.
--. -& < ff*I/ f


ORANGES:
1-3/5 bu. standard box
4/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. fiberboard box
1/2 box mesh bag
20 lb. mesh bag
8 lb. mesh bag
8 Ib. mesh bag, w bd. master
5 b. mesh bag
5 lb. mesh bag wbd.master
U.S. No.I,Bulk-in-truck
Bulk in field box
Elimination to cannery
Grove, direct to cannery
GRAPEFRUIT:
1-3/5 bu. standard box
4/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu, fiberboard box
1/2 box mesh bag
20 Ib. mesh bag
8 lb. mesh bag
8 Ib. mesh bag, wbd,master
5 lb. mesh bag
5 lb. mesh bag,wbd.master
U.S.No.1, Bul k-in-truck
Bulk in field box
Elimination to cannery
Grove, direct to cannery
TANGERINES:
4/5 bu. standard box
4/5 bu. wirebound box
4/5 bu. wirebound flat
4/5 bu. fiberboard box
Elimination to cannery
Grove, direct to cannery
TEMPLES:
4/5 bu. standard box
4/5 bu. wirebound box
4/5 bu. wirebound flat
4/5 bu. fiberboard box
Elimination to cannery
Grove, direct to cannery


) 1( (2) (3) (4) (5) (6)


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14


SCHEDULE H.--THE MODEL PACKING COMPANY. STATEMENT OF PACKING OPERATIONS, PER-BOX COSTS. SEASON ENDED JUNE 30, 1957.
(All expenses calculated on a 1-3/5 bushel box equivalent.)

GRAPEFRUIT


Elimination Direct, 1-3/5 Bu. 1-3/5 Bu. 4/5 Bu. 8-lb. 5-lb. Bulk in
to Grove to Standard Wirebound Fiberboard Mesh Mesh Field
Item Cannery Cannery Box Box Box Bag Bag Box

Boxes Handled 100,267 72,000 60 157,260 7,762 2,984 4,156 500
DIRECT EXPENSE
Material:
Crate material . ... $0.5494 $0.3810 $0.3751 . . .
Bags . . .... . . $0.5472 $0.7461 ....
Fruit wraps . . .0500 . .... .... . .
Nails, strips, straps . . .0143 . ... . ....
Labels and paste . . .0034 .0034 .0068 . . .
Liners, No-kuts . .0260 .0130 .. .. .
Bulkheads, car strips . . .0086 .0086 .0086 .0086 .0086 ..
Padding . . . . . .0150 .0150 ....
Total Material . ... $0.6517 $0.4060 $0.3905 $0.5708 $0.7697 ..
Labor:
Receive, Truck, Dump.-
Receiving $0.0101 ... $0.0092 $0.0092 $0.0092 $0.0092 $0.0086 $0.0101
Dumping .0094 . .0174 .0094 .0116 .0223 .0265 .0094
Box Supply--
Box making, assembling . . .0212 .0177 .0257 . . .
Labeling and stamping . . .0052 .0052 .0104 . . .
Box chuters . . .0061 .0051 .0102 . . .
Car unloaders ... . .0034 .0034 .0034 . . .
Graders . . .0549 .0298 .0368 .0705 .0839 .0298
Packing . . .1049 .0524 .0580 .1049 .1279 .0350
Box closing . . .0398 .0216 .0266 .0510 .0607 .0216
Shipping, loading . . .0195 .0186 .0359 .0398 .0677 .0164
Other labor . .0184 .0100 .0123 .0237 .0282 .0100
Subtotal, Labor $0.0195 ... $0.3000 $0.1824 $0.2399 $0.3214 $0.4035 $0.1323
Payroll taxes, Insurance $0.0005 . $0.0070 $0.0043 $0.0056 $0.0075 $0.0095 $0.0031
Total Labor $0.0200 . $0.3070 $0.1867 $0.2455 $0.3289 $0.4130 $0.1354
Other Direct Expense:
Power, lights, water $0.0004 ... $0.0071 $0.0039 $0.0048 $0.0091 $0.0109 $0.0039
Repairs, building and equipment .0067 $0.0033 .0603 .0328 .0404 .0775 .0922 .0328
Misc. supplies and expense . .. .0114 .0062 .0076 .0146 .0174 .0062
Rentals . .0003 .0002 .0002 .0005 .0005 .0002
Total Other Direct $0.0071 $0.0033 $0.0791 $0.0431 $0.0530 $0.1017 $0.1210 $0.0431
Fixed:
Fire and casualty insurance $0.0003 . $0.0041 $0.0025 $0.0033 $0.0044 $0.0056 $0.0018
Taxes and Licenses .0004 . .0054 .0033 .0043 .0058 .0073 .0024
Depreciation .0011 . .0165 .0101 .0132 .0177 .0223 .0073
Total Fixed $0.0018 ... $0.0260 $0.0159 $0.0208 $0.0279 $0.0352 $0.0115
Total Packing Expense $0.0289 $0.0033 $1.0638 $0.6517 $0.7098 $1.0293 $1.3389 $0.1900
Administrative:
Management and office salaries $0.0010 $0.0001 $0.0356 $0.0218 $0.0238 $0.0345 $0.0448 $0.0064
Office supplies and expense .0001 0 .0029 .0018 .0019 .0028 .0036 .0005
Auto and travel .0001 0 .0033 .0021 .0022 .0032 .0042 .0006
Telephone and telegraph 0 0 .0018 .0011 .0012 .0017 .0022 .0003
Miscellaneous .0001 0 .0052 .0032 .0035 .0051 .0066 .0009
Total Administrative $0.0013 $0.0001 $0.0488 $0.0300 $0.0326 $0.0473 $0.0614 $0.0087
Selling:
Office salaries . ... $0.0182 $0.0182 $0.0182 $0.0182 $0.0182 $0.0182
Office supplies . . .0015 .0015 .0015 .0015 .0015 .0015
Auto and travel . . .0017 .0017 .0017 .0017 .0017 .0017
Telephone and telegraph . .0009 .0009 .0009 .0009 .0009 .0009
Miscellaneous . . .0027 .0027 .0027 .0027 .0027 .0027
Total Selling . ... $0.0250 $0.0250 $0.0250 $0.0250 $0.0250 $0.0250
Other Indirect:
Color-ad..J. . .
Wax . ... $0.0150 $0.0150 $0.010 $0.0150 $0.0150 $0.0150
Pre-cooling . . .0296 .0296 .0296 .0296 .0296 .0296
Gas coloring . . .0099 .0099 .0099 .0099 .0099 .0099
Advertising tax ... . .0600 .0600 .0600 .0600 .0600 .0600
Federal-State inspection . . .0225 .0225 .0225 .0225 .0225 .0225
Grower's Administrative Comm. . . .0040 .0040 .0040 .0040 .0040 .0040
Other Assessments $0.0050 $0.0050 .0050 .0050 .0050 .0050 .0050 .0050
Contributions, misc. . . .0194 .0194 .0194 .0194 .0194 .0194
Interest operating capital . . .0004 .0004 .0004 .0004 .0004 .0004
Total Other Indirect $0.0050 $0.0050 $0.1658 $0.1658 $0.1658 $0.1658 $0.1658 $0.1658
TOTAL, ALL EXPENSE $0.0352 $0.0084 $1.3034 $0.8725 $0.9332 $1.2674 $1.5911 $0.3895







JUNE 30, 1957. (All expenses calculated on a 1-3/5 bushel box equivalent. ) Continued--


4/5 Bu. 1/2 20-lb. 8-lb. 8-lb. Bag, 5-lb. 5-lb. Bag, U.S.No.l Bulk in
Fiberboard Bag Mesh Mesh Wirebound Mesh Wirebound Bulk-in- Field
Box Bag Bag Master Bag Master Truck Box


32,354 400 1,227 15,221 200 16,678 78 6,000 500


$0.3751 . . $0.4538 . $0.4538 . .
. $0.3257 $0.3838 $0.6080 .6080 $0.8527 .8527 . .

S.0068 .. . .. ... ..0034 . .
.0068 .... .. .. .....0034 .... .0034 ........
,,* .. ,. ., ,. .... . . .
.0086 .0086 .0086 .0086 .0086 .0086 .0086 .0086 ..
S. .0150 .0150 .0150 . .0150 . .0150 ..
$0.3905 $0.3493 $0.4074 $0.6316 $1.0738 $0.8763 $1.3185 $0.0236 .


$0.0104 $0.0093 $0.0093 $0.0101 $0.0101 $0.0104 $0.0104 $0.0106 $0.0106
.0187 .0207 .0215 .0242 .0250 .0282 .0290 .0137 .0137

.0257 .... .. .. .0177 .... .0177 . .
.0104 .... .... .... .0052 . .0052 .
.0102 ... . .0051 . .0051 . .
.0034 ... .. .0034 .... ..0034 . .
.0593 .0653 .0679 .0766 .0791 .0891 .0917 .0432 .0432
.0818 .0930 .1049 .1279 .1279 .1517 .1517 . .0468
.0429 .0473 .0492 .0554 .0573 .0645 .0664 .0313 .0313
.0359 .0510 .0510 .0398 .0186 .0677 .0186 .0212 .0164
.0199 .0219 .0228 .0257 .0266 .0299 .0308 .0145 .0145
$0.3186 $0.3085 $0.3266 $0.3597 $0.3760 $0.4415 $0.4300 $0.1345 $0.1765
.0075 .0072 .0077 .0084 .0088 .0104 .0101 .0032 .0041
$0.3261 $0.3157 $0.3343 $0.3681 $0.3848 $0.4519 $0.4401 $0.1377 $0.1806

$0.0077 $0.0084 $0.0088 $0.0099 $0.0102 $0.0115 $0.0119 $0.0056 $0.0056
.0651 .0717 .0746 .0841 .0870 .0979 .1007 .0475 .0475
.0123 .0135 .0141 .0159 .0164 .0184 .0190 .0090 .0090
.0004 .0004 .0004 .0005 .0005 .0006 .0006 .0003 .0003
$0.0855 $0.0940 $0.0979 $0.1104 $0.1141 $0.1284 $0.1322 $0.0624 $0.0624

$0.0044 $0.0042 $0.0045 $0.0050 $0.0052 $0.0061 $0.0059 $0.0019 $0.0024
.0057 .0056 .0059 .0065 .0068 .0080 .0077 .0024 .0032
.0176 .0170 .0180 .0198 .0207 .0244 .0237 .0074 .0097
$0.0277 $0.0268 $0.0284 $0.0313 $0.0327 $0.0385 $0.0373 $0.0117 $0.0153
$0.8298 $0.7858 $0.8680 $1.1414 $1.6054 $1.4951 $1.9281 $0.2354 $0.2583

$0.0278 $0.0263 $0.0291 $0.0382 $0.0538 $0.0501 $0.0646 $0.0079 $0.0087
.0023 .0021 .0024 .0031 .0044 .0041 .0053 .0006 .0007
.0026 .0025 .0027 .0036 .0051 .0047 .0061 .0007 .0008
.0014 .0013 .0014 .0019 .0027 .0025 .0032 .0004 .0004
.0041 .0039 .0043 .0056 .0079 .0074 .0095 .0012 .0013
$0.0382 $0.0361 $0.0399 $0.0524 $0.0739 $0.0688 $0.0887 $0.0108 $0.0119

$0.0182 $0.0182 $0.0182 $0.0182 $0.0182 $0.0182 $0.0182 $0.0182 $0.0182
.0015 .0015 .0015 .0015 .0015 .0015 .0015 .0015 .0015
.0017 .0017 .0017 .0017 .0017 .0017 .0017 .0017 .0017
.0009 .0009 .0009 .0009 .0009 .0009 .0009 .0009 .0009
.0027 .0027 .0027 .0027 .0027 .0027 .0027 .0027 .0027
$0.0250 $0.0250 $0.0250 $0.0250 $0.0250 $0.0250 $0.0250 $0.0250 $0.0250

$0.0062 $0.0062 $0.0062 $0.0062 $0.0062 $0.0062 $0.0062 $0.0062 $0.0062
.0200 .0200 .0200 .0200 .0200 .0200 .0200 .0200 .0200
.0296 .0296 .0296 .0296 .0296 .0296 .0296 .0296 .0296
.0099 .0099 .0099 .0099 .0099 .0099 .0099 .0099 .0099
.0300 .0300 .0300 .0300 .0300 .0300 .0300 .0300 .0300
.0225 .0225 .0225 .0225 .0225 .0225 .0225 .0225 .0225
.0040 .0040 .0040 .0040 .0040 .0040 .0040 .0040 .0040
.0050 .0050 .0050 .0050 .0050 .0050 .0050 .0050 .0050
.0194 .0194 .0194 .0194 .0194 .0194 .0194 .0194 .0194
.0004 .0004 .0004 .0004 .0004 .0004 .0004 .0004 .0004
$0.1470 $0.1470 $0.1470 $0.1470 $0.1470 $0.1470 $0.1470 $0.1470 $0.1470
$1.0400 $0.9939 $1.0799 $1.3658 $1.8513 $1.7359 $2.1888 $0.4182 $0.4422










PROPORTIONING OF MATERIAL EXPENSE


For accounting purposes material costs can be divided into two groups: (1) those which

can be computed exactly for each unit of product and (2) those which cannot be computed

and must be distributed by some accounting procedure. The first group, are those costs

which are part of the product and can be directly allocated, such as the container. The

second, which we may refer to as indirect materials, are such items as nails, strips and straps,

bulkhead materials, loading pads, car strips, labels and paste. Strictly speaking, indirect

materials are also part of the final product, but are so small or difficult to measure that it is

impractical to figure their cost separately for each type of container.

Direct Materials
Direct material cost is a function of the purchase price of the materials and the amount

of materials used. One method of estimating the price is to take the total dollar value of

direct material used for a particular container and divide by the total volume of citrus fruit

packed in the particular container. However, one of the difficulties of this method is that

there may be a gain or loss in inventory due to change in price of containers from one season

to another. In addition, there may be breakage or loss of a particular container. In many

cases these gains or losses involve only one or two types of containers. If costs are distributed

as discussed above, the charges for a particular container may be out of proportion with the

other types of containers. Therefore, the difference in the number of containers purchased

and those into which fruit is actually packed, probably should be spread over all containers,

rather than charged to any one particular container. One way of doing this is to allocate

container costs by a price-ratio. The price-ratio can be calculated by dividing the average

price paid for 1-3/5 bushel wirebound box into the average price per 1-3/5 bushel equivalent









for each of the other types of containers used. Expressed as a formula, it is:

average price per container (1-3/5 bushel equiv.)
average price per 1-3/5 bushel wirebound box = price ratio

This type of price ratio was used to prorate the crate and bag expense for the model house.

The steps involved in calculating the overage cost per 1-3/5 bushel equivalent for the

model house are as follows:

1. Obtain the number of each type of container purchased from Schedule C, column 2,

and enter in Table 1, column 1.

2. Obtain total dollars expended for purchase of each type of container from Schedule

C, column 3, and enter in Table 1, column 2.

3. Divide dollars expended for each type of pack, (column 2) by volume (column 1) in

order to obtain average purchase price and enter in column 3.

4. Convert the average price per container to average price per 1-3/5 bushel equiva-

lent by multiplying average price per container (column 3) by number required per 1-3/5

bushel equivalent (column 4) and enter in column 5.

5. Calculate price ratios by dividing the average price of 1-3/5 bushel wirebound box

(column 5) into the average price per 1-3/5 bushel equivalent of the other containers, and

enter in column 6. For example, the price-ratio for 1-3/5 bushel standard box is calculated

as follows: $0.5566
$0.3860 = 1.4420 price ratio for 1-3/5 bushel standard box
6. Obtain the volume of fruit packed in each type of container from Schedule B, and

enter in Table 2, column 1. Also enter price ratios from Table 1, column 6.

7. Multiply the volume (column 1) of each type of container by its price ratio (column

2) and enter in column 3, Table 2.










S8. Calculate the base price by dividing the total of the price-ratios multiplied by the

volumes (column 3, Table 2) into the total dollars expended for crate materials and bags

(Schedule A, Lines 1 and 2): $213,326 + 559,944 = $0.380977 base price.

9. Multiply the base price by the price-ratios (column 2, Table 2) to obtain cost per

1-3/5 bushel equivalent for each type of container (column 5, Table 2).

10. Enter average costs in the appropriate line and columns in the per-box cost

statement, Schedule H.

Indirect Materials

The expense distribution problem of indirect material cost is more difficult than the

allocation of the direct material costs. There are several methods that can be used. The

description of a convenient and relatively accurate method follows:

Fruit Wraps

The difference in cost of wraps for oranges and for grapefruit necessitates separate entries

in Schedule C. For example, line 13, column 5, Schedule C shows the total dollars expended

by the model packinghouse for fruit wraps for oranges, while line 14, column 5, shows the

expenditure for fruit wraps for grapefruit. Generally, only fruit packed in the standard

nailed box is wrapped. Therefore, the average cost of fruit wraps can be calculated by

dividing the total dollars expended for fruit wraps for the particular type of fruit by the

number of boxes (1-3/5 equivalent) of that fruit packed in the standard nailed box. For

example, in the hypothetical packinghouse, the fruit wrap expense was allocated by

dividing the dollars spent for fruit wraps for oranges by the total volume of oranges packed

in standard boxes and the total dollars spent for fruit wraps for grapefruit by the volume of

grapefruit packed in standard nailed boxes.









TABLE 1
AVERAGE PURCHASE PRICE OF BOXES AND SAGS .


Average Number Average
Purchase Required Price
Volume Dollars Price per 1-3/5 bu. 1-3/5 bu. Price
Type of Container Purchaseda Expendeda Container Equivalent Equiv. Ratioc

boxes dollars dollars number dollars
(1) (2) (3) (4) (5) (6)
Boxes
1-3/5 bu. standard box 221 123 0.5566 1 0.5566 1.4420
1-3/5 bu.wbd. box 388,600 150,000 0.3860 1 0.3860 1.0000
4/5 bu. wbd. box 90,090 30,000 0.3330 2 0.6660 1.7254
4/5 bu. wirebound flat 6,006 2,000 0.3330 2 0.6660 1.7254
4/5 bu.fiberboard box 52,632 10,000 0.1900 2 0.3800 0.9845
Wirebound masters 435 200 0.4598 1 0.4598 1.1912

Bags
1/2 box mesh bag 606 100 0.1650 2 0.3300 0.8549
20 Ib. mesh bag 5, 144 500 0.0972 4 0.3888 1.0073
8 Ib. mesh bag oranges 81,169 5,000 0.0616 10 0.6160 1.5959
5 Ib. mesh bag oranges -138,889 7,500 0.0540 16 0.8640 2.2383
8 ib.mesh bag grapefruit 0.0616 9 0.5544 1.4363
5 lb. mesh bag grapefruit 0.0540 14 0.7560 1.9585


aObtained from Schedule C

bColumn 2 divided by column 1


CCalculated by dividing the price per 1-3/5 bushel
price of a 1-3/5 bushel wirebound box. For example,
standard box is calculated as follows:


of each container (column 5) by the
the price ratio for a 1-3/5 bushel


$0.5566 = 1.4420 price ratio
$0.3860








TABLE 2
ALLOCATION OF BOX AND BAG EXPENSE
Per 1-3/5 Bushel Equivalent


Volume Priceb Volume x Average Cost
Type of Pack Packeda Ratio Price-ratio Per Boxc

Boxes (1) (2) (3) (4)
1-3/5 bu. standard box 140 1.4420 202 $0.5494
1-3/5 bu. wirebound box 374,263 1.0000 374,263 .3810
4/5 bu. wirebound box 36,424 1.7254 62,846 .6573
4/5 bu. wirebound flat 3,877 1.7254 6,689 .6573
4/5 bu. fiberboard box 40,116 0.9845 39,494 .3751
Wirebound masters 278 1.1912 331 .4538
Bags
1/2 box mesh bag 400 0.8549 342 .3257
20 lb. mesh bag 1,227 1.0073 1,236 .3838
8 Ib. mesh bag oranges 15,221 1.5959 24,291 .6080
5 lb. mesh bag oranges 16,678 2.2383 37,330 .8527
8 lb. mesh bag,wb. me. oranges 200 1.5959 319 .6080
5 Ib. mesh bag, wb. mc. oranges 78 2.2383 175 .8527
8 lb. mesh bag grapefruit 2,934 1.4363 4,286 .5472
5 Ib. mesh bag grapefruit 4, 156 1.9585 8, 140 .7461
Total 559,944

aFrom Schedule B
bin terms of 1-3/5 bushel wirebound box as 1.0000 (from Table 1)
CThe total cost of boxes and bags used, as shown in Schedule A, is $213,326. The base price
($213,326+559,944) = $0.380977: Average cost per box is calculated by multiplying base
price ($0.380977) by price ratios in column 2.


The steps involved in the allocation procedure are as follows:
1. Obtain total dollars expended for fruit wraps by type of fruit from Schedule C.
Obtain the volume packed in standard nailed boxes by type of fruit from Schedule 8.

Type of Fruit Amount Expended Volume Packed in Std. Boxes Cost per 1-3/5bu.Box

Oranges $5.00 80 $0.0625
Grapefruit 3.00 60 .0500
Total $8.00 140










2. Divide the total volume packed in standard boxes for each type of fruit into the

dollars expended in order to obtain average cost per 1-3/5 bushel box equivalent.

Oranges -- $5.00 + 80 = $0.0625 average cost per box

Grapefruit -- $3.00 + 60 = $0.0500 average cost per box

Enter these average cost per box in the appropriate line and columns of Schedule H.

Nails, Strips and Straps

Nails, strips and straps are used primarily for standard nailed boxes. The 4/5 bushel

standard box requires approximately twice the amount of nails, strips and straps per 1-3/5

bushel equivalent as does the 1-3/5 bushel standard box. Therefore, it is convenient to

distribute this expense at a 2 to 1 ratio when calculating cost for both 1-3/5 bushel and 4/5

bushel boxes.
The steps involved in the allocation procedure are as follows:
1. Obtain dollars expended from Schedule A, line 4.

2. Obtain volume packed in standard boxes from Schedule B, column 4, line 1.

3. Divide total dollars expended for nails, strips and straps by volume to obtain average

cost per box: $2.00 + 140 = $0.0143, average cost per box.
4. Enter average cost in proper line and columns of Schedule H, per box cost statement.

Labels and Paste

Labels and paste are used on standard nailed boxes, wirebound boxes, wirebound master

containers, and on some fiberboard boxes. Each box, regardless of size requires one label.

Therefore, it is necessary to allocate costs in proportion to the amount of labels required per

1-3/5 bushel equivalent.
The steps involved in the allocation of labels and paste expense for the model house are

as follows:
1. Obtain volume of 1-3/5 bushel box equivalent packed in the various types of boxes










from Schedule B, column 4, and enter in column 1, Table 3.

2. Obtain factor-ratios from Schedule D, column 3 and enter in column 2, Table 3.

3. Multiply factor-ratios (column 2) by volumes (column 1) packed into the various
containers, and enter in column 3, Table 3.

4. Add the products of the volumes multiplied by the factor-ratios (column 3) and

divide into the total dollars expended for labels and paste (Schedule A, line 5) to obtain

base charge: $1,820 + 535,515 = $0.003399 (base charge).

5. Calculate average cost per box by multiplying base charge $0.003399) by the

factor-ratio for each type of pack (column 3) and enter in column 4, Table 3.

6. Enter the average per box costs in appropriate line and columns of Schedule H.

Liners and No-kuts

Liners and no-kuts are used to protect fruit packed in standard nailed boxes and in
wirebound boxes.

TABLE 3
ALLOCATION OF LABELS AND PASTE EXPENSE
Per 1-3/5 Bushel Equivalent

Factor- Volume x Average Cost
Type of Pack Volume ratio Factor-ratio Per Box0
(1) (2) (3) (4)
1-3/5 bu. standard box 140 1.0 140 $0.0034
1-3/5 bu. wirebound box 374, 263 1.0 374,263 .0034
4/5 bu. wirebound box 36,424 2.0 72,848 .0068
4/5 bu. wirebound flat 3,877 2.0 7,754 .0068
4/5 bu. fiberboard box 40, 116 2.0 80,232 .0068
8 lb. bags in wirebound masters 200 1.0 200 .0034
5 lb. bags in wirebound masters 73 1.0 78 .0034
Total 535,515

"Average cost per box = base price x factor-ratio. Base price, $0.003399 calculated by
dividing total dollars expended for labels and paste by the sum of volumes x factor-ratios
($1,820 + 535, 515 = $0.003399).









The steps involved in the allocation procedure are as follows:

1. Obtain the volume of 1-3/5 bushel box equivalent packed into the various types of

boxes from Schedule B, column 4, and enter in column 1, Table 4.

2. Obtain factor-ratios from Schedule D, column 4 and enter in column 2, Table 4.

3. Multiply the factor-ratios (column 2) by the volume packed in the various containers,

(column 1) and enter in column 3, Table 4.

4. Add the products of the volumes multiplied by the factor-ratios and divide into the

total dollars expended for liners and no-kuts (Schedule A, line 6) in order to obtain the base

charge: $5,917 + 455, 145 = $0.013000, base charge.

5. Calculate average cost per box (column 4, Table 4) by multiplying base charge

($0.013000) by the factor-ratios for each type of pack.

6. Enter the average cost per box in appropriate line and columns of Schedule H.


TABLE 4
ALLOCATION OF LINERS AND NO-KUTS EXPENSE
Per 1-3/5 Bushel Equivalent

Factor- Volume x Average Cost
Type of Pack Volume ratio Factor-ratio Per Boxa

(1) (2) (3) (4)
1-3/5 bu. standard box 140 2.0 280 $0.0260
1-3/5 bu. wirebound box 374,263 1.0 374,263 .0130
4/5 bu. wirebound box 36,424 2.0 72,848 .0260
4/5 bu. wirebound flat 3,877 2.0 7,754 .0260
Total 455, 145

aAverage cost per box= base price x factor-ratio. Base price, $0.013000, calculated
by dividing sum of volume multiplied by factor-ratio into total dollars expended for liners
and no-kuts. ($5,917 + 455,145 = $0.013000)









Bulkheads and Car Strips

Bulkheads and car strips may or may not be used in rail cars when shipping boxes or a

combination of boxes and bags. These items are rarely used in truck shipments. However,

it would hardly be worth determining, for the purpose of allocating costs, which shipments

do or do not use these items. Therefore, it is suggested that this expense be distributed

equally to all types of packs.

Average costs can be determined by dividing the total expense by the total volume

packed, including fruit sold loaded bulk-in-truck.

The steps involved in the allocation procedure for the model house are as follows:

1. Obtain total dollars expended for bulkheads and car strips from Schedule A, line 7,

$4,316.

2. Obtain total volume packed into containers, including volume sold loaded bulk-in-

truck from Schedule B.
Type of Pack Volume (1-3/5 bu. equivalent)
Boxes 455,098
Bags 40, 666
Bulk-in-truck 6,000
Total 501,764

3. Divide total volume into total dollars expended in order to calculate average cost

per 1-3/5 bushel box equivalent: $4,316 + 501,764 = $0.0086 average cost per box.

4. Enter average costs in appropriate line and columns of Schedule H.

Padding

Pads are generally placed in truck or rail cars in which fruit packed in bags is loaded,

or in trucks in which "graded" bulk fruit is loaded.

The steps involved in the allocation procedure are as follows:









1. Obtain total dollars expended for padding from Schedule A, line 8, $700.

2. Obtain total volume packed in bags plus volume sold loaded bulk-in-truck from

Schedule B (column 4).
Type of Pack Volume (1-3/5 bu. equivalent)

Bags 40,666
Bulk-in-truck 6,000
Total 46,666

3. Divide total dollars expended for padding by total volume in order to calculate

average cost per 1-3/5 bushel box equivalent: $700 + 46,666= $0.0150, average per-box
cost.
4. Enter average cost under proper headings of Schedule H.


PROPORTIONING OF LABOR EXPENSE

The purpose of this section is to discuss in detail a method of allocating expenditures

for labor by type of fruit and type of pack.

Direct labor is usually one of the largest elements of cost in operating a packinghouse

and consequently receives careful attention from management. The records should enable

the accountant to report to management promptly any deviations from past or anticipated

performance in order that proper steps may be taken to reduce the cost.

If accounting records are kept by departments then costs can be distributed quite easily

department by department. Typical cost departments in a citrus packinghouse and the workers

included in each are:
1. Receive, truck and dump 2. Box Supply
Receiving foreman Foreman
Color-room attendant Assemblers
Truckers (hand or fork) Carton makers
Dumper Labelers
Empty field-box handlers Stampers
Receiving clerk Chuters
Car unloaders










3. Grade 6. Ship and load
Foreman Foreman
Graders Truckers
Switch operator Loaders
Checkers
4. Pack Set-off
Foreman Shipping clerk
Packers
Tally clerk 7. Other
General labor
5. Box closing Packinghouse foreman
Box closer Mechanic
Fruit distributor Clean-up
Watchman

The advantage of this division is two-fold. First, it gives management an opportunity

to analyze costs, function by function. Second, it facilitates the allocation of expenses by

type of pack in relation to the labor expended.

In the packinghouses observed in determining labor-cost ratios, crews were generally

organized in a manner so that when fruit was being packed in 1-3/5 bushel wirebound boxes,

the workers were operating at a rate which might be considered a normal capacity rate.

When fruit was being placed in standard boxes, smaller containers, or in bags, the rate of

flow of fruit through the house generally decreased. In some packinghouses the dumping

rate was slowed down; in others, when the packing bins became full, all operations prior to

packing were halted temporarily. The relationship of labor required for different types of

packs has therefore been calculated on a basis of oranges packed in 1-3/5 bushel wirebound

boxes equal to one. The calculated ratios for various operations and containers are shown

in Schedule E.

Receive, Truck and Dump

The receive, truck and dump section may include receiving foreman, coloring room

attendant, hand truckers or lift operators, mechanical dump operator or hand dumper, empty










field-box handlers, and a receiving clerk.

The operations performed by this group of workers include (a) unloading the full field

boxes from the truck and transporting them to the de-greening room or temporary storage

area, (b) transporting from the de-greening room or temporary storage area to the dump table,

(c) emptying the fruit out of the full field boxes, and (d) handling empty field boxes.

The rate of unloading the fruit from the truck and transporting it to the de-greening

room or temporary storage area and the rate at which fruit is de-greened is not affected by

the operations within the packinghouse. Trucking to dump, dumping, and handling of empty

field boxes are affected by the rate that fruit is moved through the packinghouse. Therefore,

if proper allocations are to be made, the expense associated with receiving and de-greening

should be separated from those associated with dumping. This can be done in two ways.

First, if the accounting records are kept in rather detailed form by type of job as shown in

Schedule A, then the expense for the receiving foreman, receiving clerk, color room attend-

ant, and one-half of the hand-truckers or fork-truckers expense can be allocated to receiving.

The other half of the hand-truckers' or for k-truckers' expense, plus all the expense of the

dumper and empty field box handlers can be allocated to dumping. In cases where expenses

are not kept in sufficient detail to make this type of break-down, a general practice is to

allocate one-half of the total department expense to receiving and the other half to dumping.

Receiving.-- Regardless of the procedure used to allocate the total dollars expended to the

receiving and dumping operations consideration needs to be given to the percent of pack-out

for the various types of fruit and the volume (weight) of fruit packed into the different

containers.
The steps involved in the allocation procedure for the receiving expense are as follows:









1. Obtain from Schedule A, the labor expense of the receiving section.

Worker Total Cost
Receiving foreman $2,264
Color-room attendant 2,991
Truckers (hand or fork) 2,758
Total $8,013

2. Obtain from Schedule B (column 4) the total volume of fruit handled through the

house and enter in column 1, Table 5.
3. The percent of pack-out for the various types of fruit vary from season to season and

from packinghouse to packinghouse. The assumed percent of pack-out and the calculated

pack-out ratios for the model packinghouse are as follows:

Percent of Pack-out Ratio
Type of Fruit Pack-outa (oranges= 1.00)
Oranges 104 1.00
Grapefruit 100 0.96
Tangerines 105 1.01
aAs related to field boxes received

Enter pack-out ratios in column 2, Table 5.

4. Net weight ratios for the different types of pack were obtained by weighing a large

number of packs of each kind of fruit and subtracting the weight of the container per 1-3/5

bushel equivalent. New weight ratios are calculated by dividing the net of each type of

pack by 90 pounds for oranges, 80 pounds for grapefruit and 95 pounds for tangerines. The

net weight ratios used for the model house are shown in column 3, Table 5.

5. The calculation procedure shown in Table 5 includes: (a) multiplying pack-outratio

(column 2) by weight-ratio (column 3) to obtain factor-ratio (column 4). (b) Multiplying

factor-ratios (column 4) by volumes packed (column 1), adding these products in column 5









TABLE 5
ALLOCATION OF RECEIVING LABOR EXPENSE
Per 1-3/5 Bushel Equivalent


Pack- Net Factor- Average
out Weight Factor- ratio x Cost Per
Type of Pack Volume Ratio Ratio ratioa Volume Box
(1) (2) (3) (4) (5) (6)
ORANGES:
1-3/5 bu. standard box 80 1.00 0.97 0.97 78 $0.0102
1-3/5 bu. wirebound box 217,003 0.97 0.97 210,493 .0102
4/5 bu. wirebound box 240 0.94 0.94 226 .0099
4/5 bu. fiberboard box 32,354 0.98 0.98 31,707 .0104
1/2 box mesh bag 400 0.88 0.88 352 .0093
20 lb. mesh bag 1,227 0.88 0.88 1,080 .0093
8 Ib. mesh bag 15,221 0.96 0.96 14,612 .0101
8 Ib. mesh bag,wbd.master 200 0.96 0.96 192 .0101
5 Ib. mesh bag 16,678 0.98 0.98 16,344 .0104
5 Ib.mesh bag, wbd.master 78 0.98 0.98 76 .0104
U.S.No.1, Bulk-in-truck 6,000 1.00 1.00 6,000 .0106
Bulk in field box 500 1.00 1.00 500 .0106
Elimination to cannery 147,295 1.00 1.00 147,295 .0106
GRAPEFRUIT:
1-3/5 bu. standard box 60 0.96 0.91 0.87 52 .0092
1-3/5 bu. wirebound box 157,260 0.91 0.87 136,816 .0092
4/5 bu. fiberboard box 7,762 0.89 0.85 6,598 .0090
8 Ib. mesh bag 2,984 0.91 0.87 2,596 .0092
5 Ib. mesh bag 4,156 0.84 0.81 3,366 .0086
Bulk in field box 500 1.00 0.96 480 .0101
Elimination to cannery 100,267 1.00 0.96 96,256 .0101
TANGERINES:
4/5 bu. wirebound box 36,184 1.01 0.88 0.89 32,204 .0094
4/5 bu. wirebound flat 3,877 0.88 0.89 3,451 .0094
Elimination to cannery 47,028 1.00 1.01 47,498 .0107
Total 758,272
a
Factor-ratios calculated by multiplying pack-out ratio by weight ratio (column 2 x
column 3).
Average cost per box calculated by multiplying base cost ($8,013 + 758, 272 = $0.010567)
by factor-ratios (column 4).








and dividing the total into dollars expended to obtain base charge: $8, 013 + 758, 272=

$0.010567, base charge. (c) Multiplying base charge by the factor-ratios (column 4) to

obtain average cost per box by type of fruit and type of pack (column 6).

6. These average per-box costs were entered in the appropriate line and columns of the

per-box cost statement, Schedule H.

Dumping.-- The steps involved in the allocation procedure fordumping expenseareasfollows.

1. Obtain from Schedule A the number of dollars expended in the dumping section.

Worker Total Cost
Truckers (hand or fork), 1/2 $ 2,758
Dumper 1,880
Empty field-box handlers 4,929
Receiving clerk 1,764
Total $11,331

2. Obtain from Schedule B the volume of fruit handled by type of pack and enter in

column 1, Table 6.

3. Obtain from Schedule E, column 2, the factor-ratios for dumping and enter in

column 2, Table 6.
4. Multiply volume packed by the factor-ratios and enter in column 3, add these

products and divide the total into dollars expended for dumping to obtain base charge:

$11,331 + 828,271 = $0.013680, base charge.

5. Multiply the base charge by the factor-ratios to obtain average cost per box by

type of fruit and type of pack (column 4, Table 6).

6. Enter average cost per box in appropriate line and columns in the per-box cost

statement, Schedule H.










STABLE 6
ALLOCATION OF DUMPING LABOR EXPENSE
Per 1-3/5 Bushel Equivalent


Factor- Factor-ratio Average Per-
Type of Pack Volume Ratio x Volume Box Costa

(1) (2) (3) (4)
ORANGES:
1-3/5 bu. standard box 80 1.97 158 $0.0269
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0137
4/5 bu. wirebound box 240 1.37 329 .0187
4/5 bu. fiberboard box 32, 354 1.37 44,325 .0187
1/2 box mesh bag 400 1.51 604 .0207
20 Ib. mesh bag 1,227 1.57 1,926 .0215
8 Ib. mesh bag 15,221 1.77 26,941 .0242
8 Ib. mesh bag, wirebound master 200 1.83 366 .0250
5 Ib. mesh bag 16,678 2.06 34,357 .0282
5 Ib. mesh bag,wirebound master 78 2.12 165 .0290
U.S. No., Bulk-in-truck 6,000 1.00 6,000 .0137
Bulk in field box 500 1.00 500 .0137
Elimination to cannery 147,295 1.00 147,295 .0137
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0174
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0094
4/5 bu. fiberboard box 7,762 0.85 6,598 .0116
8 lb. mesh bag 2,984 1.63 4,864 .0223
5 lb. mesh bag 4, 156 1.94 8,063 .0265
Bulk in field box 500 0.69 345 .0094
Elimination to cannery 100,267 0.69 69, 184 .0094
TANGERINES:
4/5 bu. wirebound box 36, 184 1.73 62,598 .0237
4/5 bu. wirebound flat 3,877 1.73 6,707 .0237
Elimination to cannery 47,028 1.73 81,358 .0237
Total 828,271

aAverage cost per box calculated by multiplying base charge ($11,331 + 828,271 =
$0.013680) by factor-ratios.







Box Supply

Supplying boxes to packers includes: unloading crate material from rail car and placing

in temporary storage; making and assembling boxes; labeling; stamping; transporting boxes to

chutes; and placing boxes in chutes. These work functions may or may not be independent

of one another depending upon work methods used within a particular packinghouse. However,

the rate of performing any particular operation within this group does not, as a rule, dictate

the rate at which some of the other operations need to be performed. Therefore, separate

ratios were developed for the following operations:
1. Box-making and assembling 3. Placing boxes in chutes

2. Labeling and stamping 4. Unloading crate material
Box-making and Asserbl ing.--The factor-ratios shown in Schedule E, column 3 were calcu-

lated from the time-study data.

The steps involved in the allocation of this expenditure to the various types of packs are

as follows:
1. Obtain the total dollars expended for box-making and assembling from Schedule A.

Worker Total Cost
Foreman $2,329
Assemblers 4,937
Carton Makers 1,607
Total $8,873

2. Obtain the volume packed from Schedule B and enter the volumes.incolumn 1,Table 7.

3. Obtain the factor-ratios from Schedule E, column 3 and enter the ratios in column 2, .

Table 7.
4. Multiply the volume packed by the factor-ratios, column 3. Add column 3 and
divide the total into dollars expended for box-making and assembling to obtain base charge:
$8,873 + 501, 389 = $0.017697, base charge.









5. Multiply the base charge by the factor-ratios to obtain average cost per box
(column 4, Table 7).
6. Enter average per-box costs in appropriate line and columns of Schedule H.

TABLE 7
ALLOCATION OF BOX-MAKING AND ASSEMBLING EXPENSE
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume x Average Cost
Type of Pack Packed Ratio Ratio Per Boxa
(1) (2) (3) (4)
1-3/5 bu. standard box 140 1.20 168 $0.0212
1-3/5 bu. wirebound box 374,263 1.00 374,263 .0177
4/5 bu. wirebound box 36,424 1.70 61,921 .0301
4/5 bu. wirebound flat 3,877 1.70 6,591 .0301
4/5 bu. fiberboard box 40,116 1.45 58,168 .0256
1-3/5 bu. wirebound masters 278 1.00 278 .0177
Total 501,389
aAverage cost per box calculated by multiplying base charge ($8,873 + 501,389=
$0.017697) by factor-ratios.

Labeling and Stamping.--Labeling and stamping are similar to box-making and assembling

and can be distributed on the relative time required to label and stamp thevarious.boxes..The.

factor-ratios developed from time-studies for this operation are given in column 4, Schedule E.

The steps involved in the allocation procedure are as follows:

1. Obtain the total dollars expended from Schedule A.

Worker Total Cost
Labelers $1,747
Stampers 1,035
Total $2,782

2. Obtain the volume packed by type of container from Schedule B and enter in
column 1, Table 8.
3. Obtain factor-ratios from Schedule E, column 4 and enter in column 2, Table 8.
4. Multiply the volume of each type of pack by the respective factor-ratios, (column 1









x colurm.n 2). Add the products and enter in column 3, Table 8. Divide this total into the

total dollars expended for labeling and stamping to obtain base charge: $2,782 + 535,515=

$0.005195, base charge.

5. Multiply the base charge by the factor-ratios to obtain average cost per box and

enter in column 4, Table 8.

6. Enter the average per-box costs in the appropriate line and columns of Schedule H.

TABLE 8
ALLOCATION OF LABELING AND STAMPING EXPENSES
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume Average Cost
Type of Pack Packed Ratio x Ratio Per Boxa
(1) (2) (3) (4)
1-3/5 bu. standard box 140 1.00 140 $0.0052
4/5 bu. standard box 2.00
1-3/5 bu. wirebound box 374,263 1.00 374,263 .0052
4/5 bu. wirebound box 36,424 2.00 72,848 .0104
4/5 bu. wirebound flat 3 877 2.00 7,754 .0104
4/5 bu. fiberboard box, regular 40 116 2.00 80,232 .0104
4/5 bu. fiberboard box, telescope 2.00 .
1-3/5 bu. wirebound masters 278 1.00 278 .0052
Total 535,515
aAverage cost per box calculated by multiplying base charge ($2,782 + 535,515 =
$0.005195) by factor-ratios.

Placing Boxes in Chutes.--Factor-ratios based on the time required for workers to place the

various types of boxes into chutes are shown in Schedule E, column 5.

The steps involved in the allocation procedure are as follows:
1. Obtain total dollars expended for box-chuting from Schedule A.

Worker Total Cost
Box Chuter $2,582
2. Obtain volume by type of pack from Schedule B, column 4, and enter in column 1, Table 9.

3. Obtain factor-ratios from Schedule E, column 5,and enter in column 2, Table 9.









4. Multiply the volume of each type of pack by the respective factor-ratios and enter in

column 3,Table 9. Add the products, column 3, and divide the total into the total dollars

expended for chuting to obtain base charge: $2, 582*505, 317= $0.005110, base charge.

5. Multiply base charge by factor-ratios to obtain average cost per box, and enter in
column 4, Table 9.

6. Enter average per-box cost in the appropriate line and columns in Schedule H.

TABLE 9
ALLOCATION OF BOX-CHUTING EXPENSE
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume Average Cost
Type of Pack Packed Ratio x Ratio Per Boxa

(1) (2) (3) (4)
1-3/5 bu. standard box 140 1.20 168 $0.0061
1-3/5 bu. wirebound box 374,263 1.00 374,263 .0051
4/5 bu. wirebound box 36,424 1.25 45,530 .0064
4/5 bu. wirebound flat 3, 877 1.25 4,846 .0064
4/5 bu. fiberboard box 40, 116 2.00 80,232 .0102
1-3/5 bu. wirebound masters 278 1.00 278 .0051
Total 505,317

aAverage cost per box calculated by multiplying base charge ($2,582 + 505,317=
$0.005110) by factor-ratios.

Unloading Crate Material .--Factor-ratios based on the time required to unload and place in

storage the various types of container material are shown iri Schedule E, column 6.
The steps involved in the allocation procedure are as follows:

1. Obtain total dollars expended from Schedule A.

Worker Total Cost
Car Unloaders $1,642

2. Obtain volume packed by type of container from Schedule B, column 4 and enter in
column 1, Table 10.
3. Obtain factor-ratios from Schedule E, column 6,and enter in column 2, Table 10.







4. Multiply volume packed (column 1) by the factor-ratios (column 2). Add these pro-

ducts (column 3) and divide the total into dollars expended for unloading container material
in order to obtain base charge: $1,642 + 480,890 = $0.003415.

5. Multiply base charge by factor-ratios to obtain average cost per box (column 4).
6. Enter average per-box cost in appropriate line and columns in Schedule H.

TABLE 10
ALLOCATION OF CAR-UNLOADING EXPENSES
Per 1-3/5 Bushel Equivalent


Volume
Type of Pack Packed
(1)
1-3/5 bu. standard box 140
1-3/5 bu. wirebound box 374,263
4/5 bu. wirebound box 36,424
4/5 bu. wirebound flot 3,877
4/5 bu. fiberboard box 40, 116
1-3/5 bu, wirebound masters 278
Total

aAverage cost per box calculated by multiplying
$0.003415) by factor-ratios.


Factor- Volume Average C
Ratio x Ratio Per Boxa
(2) (3) (4)
1.00 140 $0.0034
1.00 374,263 .0034
1.64 59, 735 .0056
1.64 6,358 .0056
1.00 40,116 .0034
1.00 278 .0034
480, 890

base charge ($1, 642 + 480,890=


:ost


Grading

Grading of citrus fruit in Florida packinghouses consists of inspecting and separating the

fresh citrus fruit into grades for packing, or for diversion to canneries or cull bhis, The method

of allocating the expense for grading labor is similar to allocating dumping expenses. The costs

are proportioned on the basis of the time studies with no charge to fruit going to the cannery plant.

The steps involved in the allocation procedure are as follows:

1. Obtain from Schedule A the total dollars expended for the grading section.

Worker Total Cost
Grading foreman $ 2,478
Graders 19,241
Switch operator 1,222
Total $22,941


ost








2. Obtain from Schedule B the total volume of fruit handled and enter in column 1, Table 1.

3. Obtain from Schedule E, column 7 the factor-ratios and enter in column 2, Table 11.

4. Multiply the factor-ratios (column 2) by volume pocked, (column 1) and enter in

column 3. Add column 3 and divide the total into the dollars expended to obtain base charge:

$22,941 + 530,434= $0.043249, base charge.

TABLE 11
ALLOCATION OF GRADING EXPENSE
Per 1-3/5 Bushel Equivalent

Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
(1) (2) (3) (4)
ORANGES:
1-3/5 bu. standard box 80 1.97 158 $0.0852
1-3/5 bu. wirebound box 217,003 1,00 217,003 .0432
4/5 bu. wirebound box 240 1.37 329 .0593
4/5 bu. fiberboard box 32,354 1.37 44,325 .0593
1/2 box mesh bag 400 1.51 604 ` .0653
20 Ib. mesh bag 1,227 1.57 1,926 .0679
8 Ib. mesh bag 15,221 1.77 26,941 .0766
8 lb. bag in wirebound master 200 1.83 366 .0791
5 lb. mesh bag 16,678 2.06 34,357 .0891
5 lb. bag in wirebound master 78 2.12 165 .0917
U.S. No.1, Bulk-in-truck 6,000 1.00 6,000 .0432
Bulk in field-box 500 1.00 500 .0432
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0549
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0298
4/5 bu. fiberboard box 7,762 0.85 6,598 .0368
8 lb. mesh bag 2,984 1.63 4,864 .0705
5 Ib. mesh bag 4, 156 1.94 8,063 .0839
Bulk in field-box 500 0.69 345 .0298
TANGERINES:
4/5 bu. wirebound box 3., 134 1.73 62,598 .0748
4/5 bu. wirebound flat 3,877 1.73 6,707 .0748
Total 530,434


aAverage cost per box calculated by multiplying base
$0.043249 by factor-ratios.


charge ($22,941 + 530,434=








5. Multiply the base charge by factor-ratios to obtain average cost per box (column 4)
by type of fruit and type of pack.

6. Enter average costs in appropriate line and columns in Schedule H.

Packing
The expense of packing includes the piece rates paid the packers for placing the fruit

into containers, the packing foreman's wage and the clerk that tallies the number of boxes

packed by the various packers. The total packing labor expense can be distributed to the

different packs by using a factor-ratio based on the piece rate wage paid the packers. It is

convenient to distribute the packing labor expense as a factor-ratio because it eliminates

the problem of the difference in the number of boxes sold and the number for which packers

were paid. Also it makes possible the distribution of the packer foreman and tally clerk's

wages in proportion to the rate paid the packers.

The factor-ratios used are calculated by dividing the piece rate paid packers for pack-

ing oranges into 1-3/5 bushel wirebound boxes into the rate paid for other types of packs.

The factor-ratios used to calculate average costs of packing labor for the model house were

determined by using piece rates which were considered representative of the industry for the

1954-55 season. The calculated ratios are shown in Table 12. The factor-ratios shown in

column 2 were calculated by dividing the piece rate paid for packing oranges in 1-3/5 bushel

wirebound boxes ($0.06) into the piece rates paid for the other types of packs. For example

the factor-ratio for oranges packed in 1-3/5 bushel standard nailed box was calculated by

dividing the packing rate ($0.11) paid for oranges packed in 1-3/5 bushel standard nailed

box by the rate ($0.06) paid for oranges packed in 1-3/5 bushel wirebound box, $0.11

1.83 factor-ratio. $0.06

The steps involved in the allocation procedure for packing labor expense are as follows:








1. Obtain total dollars expended for packing labor from Schedule A.

Worker Total Cost
Foreman $ 1,800
Packers 34,594
Tally clerk 850
Total $37,244


2. Obtain the volumes of the various types of packs from Schedule B and enter in

column 1, Table 13.
3. Obtain packing factor-ratios from Table 12, column 2 and enter in column 2, Table 13.

TABLE 12
DEVELOPMENT OF PACKING LABOR RATIOS
Per 1-3/5 Bushel Equivalent

Type of Pack Piece Rate Factor-ratio0
(1) (2)
ORANGES:
1-3/5 bu. standard box $0.110 1.83
1-3/5 bu. wirebound box .060 1.00
4/5 bu. wirebound box .070 1.17
4/5 bu. fiberboard box .070 1.17
1/2 box mesh bag .080 1.33
20 Ib. mesh bag .090 1.50
8 lb. mesh bag .110 1.83
8 lb. bag in wirebound master .110 1.83
5 lb. mesh bag .130 2.17
5 Ib. bag in wirebound master .130 2.17
Bulk in field box .040 0.67
GRAPEFRUIT:
1-3/5 bu. standard box .090 1.50
1-3/5 bu. wirebound box .045 0.75
4/5 bu. fiberboard box .050 0.83
8 lb. mesh bag .090 1.50
5 lb. mesh bag .110 1.83
Bulk in field box .030 0.50
TANGERINES:
4/5 bu. wirebound box .110 1.83
4/5 bu. wirebound flat 110 1.83
aFactor-ratios calculated by using the piece-rate paid for oranges packed in the 1-3/5
bushel wirebound box ($0.06) as a base (equal to one).








4. Multiply the volumes packed (column 1, Table 13) by the factor-ratios (column 2,

Table 13) and enter in column 3, Table 13. Add the products and divide the total into dollars

expended, to obtain the base charge: $37, 244 + 532,691 = $0.069917, base charge.

5. Multiply the base charge by the factor-ratios to obtain average cost per box by

type of fruit and type of pack (column 4).

6. Enter average costs in appropriate line and columns of Schedule H.

TABLE 13
ALLOCATION OF PACKING LABOR EXPENSES
Per 1-3/5 Bushel Equivalent

Volume Factor- Factor-ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
(1) (2) (3) (4)
ORANGES:
1-3/5 bu. standard box 80 1.83 146 $0.1279
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0699
4/5 bu. wirebound box 240 1.17 281 .0818
4/5 bu. fiberboard box 32,354 1.17 37,854 .0818
1/2 box mesh bag 400 1.33 532 .0930
20 lb. mesh bag 1,227 1.50 1,840 .1049
8 Ib. mesh bag 15,221 1.83 27,854 .1279
8 lb. wirebound master 200 1.83 366 .1279
5 Ib. mesh bag 16,678 2.17 36, 191 .1517
5 lb. wirebound master 78 2.17 169 .1517
Bulk in field box 500 0.67 335 .0468
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.50 90 .1049
1-3/5 bu. wirebound box 157,260 0.75 117,945 .0524
4/5 bu. fiberboard box 7,762 0.83 6,442 .0580
8 Ib. mesh bag 2,984 1.50 4,476 .1049
5 Ib. mesh bag 4,156 1.83 7,605 .1279
Bulk in field box 500 0.50 250 .0350
TANGERINES:
4/5 bu. wirebound box 36,184 1.83 66,217 .1279
4/5 bu. wirebound flat 3,877 1.83 7,095 .1279
Total 532, 691

aAverage cost per box calculated by multiplying base charge ($37,244 + 532,691
$0.069917) by factor-ratios.








Box Closing and Fruit Distribution

Box-closing includes the workers who close the wirebound boxes, nail the standard boxes,

staple or seal the fiberboard cartons, and distribute the fruit to the packing bins. The labor

for this group is directly associated with the rate of the flow of fruit through the packing bins.

Therefore, it seems logical to distribute this expense in the same ratio used to distribute the

graders' expense.

The steps involved in the allocation procedure are as follows:

1. Obtain total dollars expended from Schedule A.

Worker Total Cost
Box closer $15,107
Fruit distributors 1,501
Total $16,608

2. Obtain volume for fruit by type of pack from Schedule B and enter in column 1

Table 14.

3. Obtain factor-ratios from Schedule E (column 7) and enter in column 2, Table 14.

4. Multiply factor-ratios (column 2) by volume (column 1), and enter in column 3,

Table 14. Add column 3 and divide total of products into total dollars expended to obtain

base charge: $16,608 + 530,434 = $0.031310, base charge.

5. Multiply base charge by factor-ratios (column 2) to obtain average cost per box by

type of fruit and type of pack (column 4).

6. Enter average costs in appropriate line and columns of Schedule H.

Shipping and Loading

Shipping and loading, similar to crate-making, is not entirely regulated by rate of pack.
This is possible because as a general rule only part of the packed fruit is trucked or conveyed
directly from the packing line to the loading station and loaded into a rail car or truck.








TABLE 14

ALLOCATION OF BOX-CLOSING AND FRUIT-DISTRIBUTING EXPENSE
Per 1-3/5 Bushel Equivalent


Factor- Factor-Ratio Average Cost
Type of Pack Volume Ratio x Volume Per Boxa

ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.97 158 $0.0617
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0313
4/5 bu. wirebound box 240 1.37 329 .0429
4/5 bu. fiberboard box 32,354 1.37 44,325 .0429
1/2 box mesh bag 400 1.51 604 .0473
20 lb. mesh bag 1,227 1.57 1,926 .0492
8 Ib. mesh bag 15,221 1.77 26.941 .0554
8 Ib. bag in wirebound master 200 1.83 366 .0573
5 lb. mesh bag 16,678 2.06 34,357 .0645
5 Ib. bag in wirebound master 78 2.12 165 .0664
U.S.No.1, Bulk-in-truck 6,000 1.00 6,000 .0313
Bulk in field-box 500 1.00 500 .0313
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0398
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0216
4/5 bu. fiberboard box 7,762 0.85 6,598 .0266
8 Ib. mesh bag 2,984 1.63 4,864 .0510
5 Ib. mesh bag 4,156 1.94 8,063 .0607
Bulk in field box 500 0.69 345 .0216
TANGERINES:
4/5 bu. wirebound box 36, 184 1.73 62,598 .0542
4/5 bu. wirebound flat 3,877 1.73 6,707 .0542
Total 530,434


aAverage cost per box calculated by multiplying base
$0.031310)by factor-ratios.


charge ($16,608 + 530,434 =


Generally, part of the fruit is transported to a temporary storage area where it is assembled
by variety and by size. Also the packed fruit may be trucked from temporary storage to the

loading station during the hours when fruit is being packed or during non-packing hours.
Therefore, it seems appropriate to distribute the shipping and loading expense by factor-

ratios based on the amount of labor required to handle the various types of packs.


The steps involved in the allocation procedure are as follows:










1. Obtain total dollars expended for ship and load from Schedule A.


Worker Total Cost
Shipping foreman $ 1,004
Truckers 5,765
Loaders 1,404
Checkers 1,912
Set-off 1,393
Shipping clerk 618
Total $12,096


2. Obtain total volumes of fruit from Schedule B and enter in column 1, Table 15.

TABLE 15


ALLOCATION


OF SHIPPING AND LOADING
Per 1-3/5 Bushel Equivalent


LABOR EXPENSE


Volume Factor- Fcctor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa

ORANGES: (1) (2) (3) (4)
1-3/5 bu.standard box 80 1.05 84 $0.0195
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0186
4/5 bu. wirebound box 240 1.83 439 .0341
4/5 bu. fiberboard box 32,354 1.93 62,443 .0359
1/2 box mesh bag 400 2.74 1,096 .0510
20 lb. mesh bag 1,227 2.74 3,362 .0510
8 Ib. mesh bag 15,221 2.14 32,573 .0398
8 lb. bag in wirebound master 200 1.00 200 .0186
5 lb. mesh bag 16,678 3.64 60,708 .0677
5 Ib. bag in wirebound master 78 1.00 78 .0186
U.S.No.1, Bulk-in-truck 6,000 0.65 3,900 .0121
Bulk in field box 500 0.88 440 .0164
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.05 63 .0195
1-3/5 bu. wirebound box 157, 260 1.00 157,260 .0186
4/5 bu. fiberboard box 7,762 1.93 14,981 .0359
8 lb. mesh beg 2,984 2.14 6,386 .0398
5 lb. mesh bag 4, 156 3.64 15, 128 ,0677
Bulk in field box 500 0.88 440 .0164
TANGERINES:
4/5 bu. wirebound box 36, 184 1.83 66, 217 .0341
4/5 bu. wirebound flat 30877 1.83 7,095 .0341
Total 649,896


aAverage cost per box calculated by multiplying base
$0.018612) by factor-ratios.


charge ($12,096 + 649,896 =









3. Obtain factor-ratios from Schedule E, column 9 and enter in column 2, Table 15.

4. Multiply factor-ratios by the volumes packed into the various types of containers

and enter in column 3, Table 15. Column 3 is added and the sum is divided into total dollars

expended for shipping and loading, to obtain base charge: $12,096+649,896= $0.018612,

base charge.

5. Multiply base charge by factor-ratios (column 2) to obtain average cost per box by

type of pack (column 4).

6. Enter average cost per box in appropriate line and columns of Schedule H.

Other Labor

Other labor includes such workers as packinghouse foremen, mechanics, clean-up labor .

and night watchman. The labor for this group cannot be associated directly with anyspecified

packing operation. There are several methods that can be used to allocate this cost. Some

of the more common are: (1) distribution on the percentage total other labor expense is of

total labor cost; (2) distribution on the percentage total other labor expense is of total

revenue; and (3) distribution on a time-ratio basis. However, it seems logical that the cost

should be distributed proportional to the time required for the various types of fruit to move

through the house. The ratio that most nearly fits this description and the one used to distrib-

ute other expense in the model house is the ratio used for distributing the grading costs.

The steps involved in the allocation procedure are as follows:

1. Obtain total dollars expended for other labor from Schedule A:

Worker Total Expense
Packinghouse foreman $2,400
Mechanic 1, 800
Clean-up man 1,000
Watchman 1,100
General labor 1,400
Total $7,700








2. Obtain volumes of fruit by type of pack from Schedule B and enter in column 1, Table 16.

3. Obtain factor-ratios from Schedule E (column 7) and enter in column 2, Table 16.

4. Multiply factor-ratios (column 2) by volume (column 1) and enter in column 3. Add

column 3 and divide the total into total dollars expended to obtain base charge: $7,700 +

530,434 = $0.014516, base charge.
5. Multiply base charge by factor-ratios (column 2) to obtain average cost per box by

type of fruit and type of pack (column 4).

6. Enter average per-box costs in appropriate line and columns of Schedule H.

TABLE 16
ALLOCATION OF OTHER LABOR EXPENSE
Per 1-'3/5 BusheJ .quipvaent '

Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.97 158 $0.0286
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0145
4/5 bu. wirebound box 240 1.37 329 .0199
4/5 bu. fiberboard box 32,354 1.37 44,325 .0199
1/2 box mesh bag 400 1.51 604 .0219
20 lb. mesh bag 1,227 1.57 1,926 .0228
8 Ib. mesh bag 15,221 1.77 26,941 .0257
8 Ib.bag in wirebound master 200 1.83 366 .0266
5 Ib. mesh bag 16,678 2.06 34,357 .0299
5 lb. bag in wirebound master 78 2.12 165 .0308
U.S.No.1, Bulk-in-truck 6,000 1.00 6,000 .0145
Bulk in field box 500 1.00 500 .0145
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0184
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0100
4/5 bu. fiberboard box 7,762 0.85 6,598 .0123
8 Ib. mesh bag 2,984 1.63 4,864 .0237
5 Ib. mesh bag 4,156 1.94 8,063 .0282
Bulk in field Box 500 0.69 345 .0100
TANGERi NES:
4/5 bu. wirfebound box 36, 184 1.73 62,598 .0251
4/5 bu. wirebound flat 3,877 1.73 6,707 .0251
Total 530,434
aAverage cost per box calculated by multiplying base charge ($7,700+530,434=
$0.014516) by factor-ratios.







Payroll Taxes and Workmen's Compensation Insurance

These expense items are usually considered to be a part of labor expense. A common

method of proportioning this expense to the different types of packs is on a percentage of

total labor cost. The percentage of total labor cost is derived by dividing the total payroll

taxes and workmen's compensation insurance by the total labor expense excluding payroll

taxes and workmen's compensation insurance.

The steps involved in the allocation procedure are as follows:
1. Obtain dollars expended for payroll taxes and workmen's compensation insurance

and total labor expense, excluding payroll taxes and workmen's compensation insurance

from Schedule A:
Item Amount
Payroll taxes and workmen's
compensation insurance $ 3,096
Total laborr 131,812

2. Obtain total labor cost per-box, excluding payroll taxes and workmen's compensa-

tion insurance from Schedule H and enter in column 1, Table 17.

3. Calculate the percent payroll taxes and workmen's compensation insurance is of

total labor expense, excluding payroll taxes and workmen's compensation insurance, by

dividing the labor expense into the payroll taxes and workmen's compensation insurance
$ 3, 096
expense:$131,812 x 100= 2.3488 percent.

4. Multiply the percent (2.3488) by the average total labor cost per box, excluding

payroll taxes and workmen's compensation insurance, for each type of pack including

elimination to cannery and grove direct to cannery in order to calculate average cost per

box for payroll taxes and workmen's compensation insurance (column 3, Table 17).

5. Enter the average costs in proper line and columns of Schedule H.






TABLE 17


ALLOCATION OF PAYROLL TAXES AND WORKMEN'S COMPENSATION
Per 1-3/5 Bushel Equivalent


INSURANCE


Total Labor Average Cost
Type of Pack Cost Per Box Percent Per Box
ORANGES: (1) (2) (3)
1-3/5 bu. standard box $0.3959 2.3488 $0.0093
1-3/5 bu. wirebound box .2328 .0055
4/5 bu. wirebound box .3191 .0075
4/5 bu. fiberboard box .3186 .0075
1/2 box mesh bag .3085 .0072
20 Ib. mesh bag .3266 .0077
8 Ib. mesh bag .3597 I .0084
8 lb. bag in wirebound master .3760 .0088
5 lb. mesh bag .4415 .0104
5 lb. bag in wirebound master .4300 .0101
U. S. No.1, Bulk-in-truck .1345 .0032
Bulk in field box .1765 .0041
Elimination to cannery .0243 .0006
GRAPEFRUIT:
1-3/5 bu. standard box .3000 .0070
1-3/5 bu. wirebound box .1824 .0043
4/5 bu. fiberboard box 2399 .0056
8 lb. mesh bag .3214 .0075
5 lb. mesh bag .4035 .0095
Bulk in field box .1323 ".0031
Elimination to cannery .0195 .0005
TANGERINES:
4/5 bu. wirebound box .4016 .0094
4/5 bu. wirebound flat .4016 .0094
Elimination to cannery .0344 .0008

PROPORTIONING OF OTHER DIRECT EXPENSE
Other direct expense includes power, light, water; repairs--building and equipment;

miscellaneous supplies and expense; rentals and service charges. The factor-ratios applying

to other direct expense are found in Schedule F.

Power, Light, and Water

The steps involved in the allocation procedure are as follows:
1. Obtain vol umes of fruit by type of pack from Schedule B and enterircodumn 1, Table 18.

2. Obtain factor-ratiosfrom Schedule F (column 1) and enter in column 2 of Table 18.

3. Multiply the volumes of the different types of packs by the factor-ratios(column 1 x


column 2) and enter in column 3.








4. Add the products in column 3 and divide this sum into the total dollars expended

(obtained from Schedule A, line 45) in order to calculate the base charge: $3,133+560,178=
$0.005593, base charge.

5. Multiply factor-ratios (column 2) by base charge in order to obtain average cost

per box and enter in column 4.
6. Enter the average costs per box in the appropriate line and column of Schedule H.

TABLE 18
ALLOCATION OF OTHER DIRECT EXPENSE--POWER, LIGHT AND WATER
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume Average Cost
Type of Pack Packed Ratio x Ratio Per Box0
ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.97 158 $0.0110
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0056
4/5 bu. wirebound box 240 1.37 329 .0077
4/5 bu. fiberboard box 32,354 1.37 44,325 .0077
1/2 box mesh bag 400 1.51 604 .0084
20 Ib. mesh bag 1,227 1.57 1,926 .0088
8 Ib. mesh bag 15,221 1.77 26,941 .0099
8 lb. bag in wirebound master 200 1.83 366 .0102
5 Ib. mesh bag 16,678 2.06 34,357 .0115
5 lb. bag in wirebound master 78 2.12 165 .0119
U.S.No.1, Bulk-in-truck 6,000 1.00 6,000 .0056
Bulk in field box 500 1.00 500 .0056
Elimination to cannery 147,295 0.10 14,730 .0006
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0071
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0039
4/5 bu. fiberboard box 7,762 0.85 6,598 .0048
8 Ib. mesh bag 2,984 1.63 4,864 .0091
5 Ib. mesh bag 4,156 1.94 8,063 .0109
Bulk in field box 500 0.69 345 .0039
Elimination to cannery 100, 267 0.07 7,019 .0004
TANGERINES:
4/5 bu. wirebound box 36,184 1.73 62,598 .0097
4/5 bu. wirebound flat 3,877 1.73 6,707 .0097
Elimination to cannery 47,028 0.17 7,995 .0010
Total 560,178
aAverage cost per box calculated by multiplying base charge ($3,133+560, 178 =
$0.005593) by factor-ratios.








Repairs--Building and Equipment

The steps involved in the allocation procedure are as follows:

1. Obtain the volumes of fruit by type of pack from Schedule B and enter in column 1,
Table 19.

2. Obtain the factor-ratios from Schedule F, column 2, and enter in column 2, Table 19.

3. Multiply the volumes of the different types of packs by the factor-ratios (column 1

x column 2) and enter in column 3.

4. Add the products in column 3 and divide into the total dollars expended (obtained

from Schedule A, line 46) in order to calculate the base charge: $28,807+606, 230=

$0.047518, base charge.

5. Multiply the factor-ratios (column 2) by the base charge in order to obtain average

cost per box and enter in column 4.

6. Enter the average costs per box in the appropriate line and columns of Schedule H.

Miscellaneous Supplies and Expense

The steps involved in the allocation procedure are as follows:

1. Obtain the volumes of fruit by types of pack from Schedule B and enter in column 1,
Table 20.

2. Obtain the factor-ratios from Schedule F (column 3) and enter in column 2, Table 20.

3. Multiply the volumes by the factor-ratios (column 1 x column 2) and enter in column 3.

4. Add column 3 and divide the sum into the total dollars expended (Schedule A, line

47) in order to calculate the base charge: $4,750+530,434 = $0.008955, base charge.

5. Multiply the factor-ratios (column 2) by the base charge in order to obtain the

average cost per box and enter in column 4.

6. Enter the average costs per box in the appropriate line and columns of Schedule H.








TABLE 19
ALLOCATION OF OTHER DIRECT EXPENSE--REPAIRS--BUILDING AND EQUIPMENT
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume x Average Cost
Type of Pack Packed Ratio Factor-Ratio Per Boxa

ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.97 158 $0.0936
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0475
4/5 bu. wirebound box 240 1.37 329 .0651
4/5 bu. fiberboard box 32,354 1.37 44,325 .0651
1/2 box mesh bag 400 1.51 604 .0717
20 lb. mesh bag 1,227 1.57 1,926 .0746
8 lb. mesh bag 15,221 1.77 26,941 .0841
8 lb. bag in wirebound master 200 1.83 366 .0870
5 lb. mesh bag 16,678 2.06 34,357 .0979
5 lb. bag in wirebound master 78 2.12 165 .1007
U.S. No.l, Bulk-in-truck 6,000 1.00 6,000 .0475
Bulk in field box 500 1.00 500 .0475
Elimination to cannery 147, 295 0.20 29,459 .0095
Grove, direct to cannery 108,000 0.10 10,800 .0048
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0603
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0328
4/5 bu. fiberboard box 7,762 0.85 6,598 .0404
8 Ib. mesh bag 2,984 1.63 4,864 .0775
5 lb. mesh bag 4,156 1.94 8,063 .0922
Bulk in field box 500 0.69 345 .0328
Elimination to cannery 100,267 0.14 14,037 .0067
Grove, direct to cannery 72,000 0.07 5,040 .0033
TANGERINES:
4/5 bu. wirebound box 36,184 1.73 62,598 .0822
4/5 bu. wirebound flat 3,877 1.73 6,707 .0822
Elimination to cannery 47,028 0.35 16,460 .0166
Total 606,230

aAverage cost per box calculated by multiplying base charge ($28,807 + 606,230=
$0.047518) by factor ratios.







TABLE 20
ALLOCATION OF OTHER DIRECT EXPENSE--MISCELLANEOUS SUPPLIES
Per 1-3/5 Bushel Equivalent


AND EXPENSE


Type of Pack


ORANGES:
1-3/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. fiberboard box
1/2 box mesh bag
20 lb. mesh bag
8 lb. mesh bag
8 lb. bag in wirebound master
5 Ib. mesh bag
5 Ib. bag in wirebound master
U.S.No.1, Bulk-in-truck
Bulk in field box
GRAPEFRUIT:
1-3/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. fiberboard box
8 lb. mesh bag
5 lb. mesh bag
Bulk in field box
TANGERINES:
4/5 bu. wirebound box
4/5 bu. wirebound flat
Total


Volume
Packed
(1)
80
217,003
240
32,354
400
1,227
15,221
200
16,678
78
6,000
500

60
157,260
7,762
2,984
4,156
500

36,184
3,877


Factor-
Ratio
(2)
1 .97
1.00
1.37
1.37
1.51
1.57
1.77
1.83
2.06
2.12
1.00
1.00

1.27
0.69
0.85
1.63
1.94
0.69

1.73
1.73


530,434


aAverage cost per box calculated by multiplying base charge ($4,750+530,434=
$0.008955) by factor-ratios.

Rentals and Service Charges

This expense was allocated by the same factor-ratios and in the same manner that the

item Miscellaneous Supplies and Expense was allocated.

The steps involved in the allocation procedure are as follows:

1. Obtain the volumesof fruit by type of pack from Schedule B,enter in column 1, Table 21.

2. Obtain factor-ratios from Schedule F (column 3) and enter in column 2, Table 21.

3. Multiply the volumes by the factor-ratios (column 1 x column 2) and enter in


Volume x
Factor-Ratio
(3)
158
217,003
329
44,325
604
1,926
26,941
366
34,357
165
6,000
500

76
108,509
6,598
4,864
8,063
345

62,598
6.707


Average Cost
Per Boxa
(4)
$0.0176
.0090
.0123
.0123
.0135
.0141
.0159
.0164
.0184
.0190
.0090
.0090

.0114
.0062
.0076
.0146
.0174
.0062

.0155
.0155








column 3, Table 21.
4. Add the product in column 3 and divide the sum into the total dollars expended

(Schedule A line 48) in order to calculate the base charge: $150 + 530,434= $0.000283,

base charge.

5. Multiply factor-ratios (column 2) by base charge ($0.000283) in order to obtain

average cost per box and enter in column 4.

6. Enter the average costs per box in the appropriate line and columns of Schedule H.

TABLE 21
ALLOCATION OF OTHER DIRECT EXPENSE--RENTALS AND SERVICE CHARGES
Per 1-3/5 Bushel Equivalent

Volume Factor- Volume x Average Cost
Type of Pack Packed Ratio Ratio Per Box0
ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.97 158 $0.0006
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0003
4/5 bu. wirebound box 240 1.37 329 .0004
4/5 bu. fiberboard box 32, 354 1.37 44,325 .0004
1/2 box mesh bag 400 1.51 604 .0004
20 lb. mesh bag 1,227 1.57 1,926 .0004
8 lb. mesh bag 15, 221 1.77 26,941 .0005
8 lb. wirebound master 200 1.83 366 .0005
5 lb. mesh bag 16,678 2.06 34,357 .0006
5 Ib. wirebound master 78 2.12 165 .0006
U.S. No.1, Bulk-in-truck 6,000 1.00 6,000 .0003
Bulk in field box 500 1.00 500 .0003
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0003
1-3/5 bu. wirebound box 157,260 0.69 108,509 .0002
4/5 bu. fiberboard box 7,762 0.85 6,598 .0002
8 b. mesh bag 2,984 1.63 4,864 .0005
5 lb. mesh bag 4,156 1.94 8,063 .0005
Bulk in field box 500 0.69 345 .0002
TANGERINES:
4/5 bu. wirebound box 36,184 1.73 62,598 .0005
4/5 bu. wirebound flat 3,877 1.73 6,707 .0005
Total 530,434


oAverage cost per box calculated by multiplying base
$0.000283) by factor-ratios.


charge ($150+530,434=









PROPORTIONING OF FIXED OR INDIRECT COSTS

Methods of Allocating Costs

All costs other than those classified as direct labor are commonly referred to as indirect

or overhead costs. These costs are by nature and by definition those costs and expenses

which cannot conveniently be charged to the product, department, or cost center directly,

either because the amount of the charge is too small to justify the procedure or because the

amount applicable cannot be known at the time the charge must be made.

Direct labor and direct materials are usually large items compared with the total amount

or overhead costs for the plant. For example, the cost of electric power used in a unit of

production might be less than the total of the clerical costs necessary to charge it to pro-

duction directly; and the same may be said of many other costs of this nature. In order to

overcome this problem accountants have developed a number of simplified methods which

can be used to give a relatively accurate method of distributing indirect costs. A short

discussion of some of the more important methods follows.

Direct Labor Time as a Base

Since the major portion of overhead costs in any plant is likely to be closely related to

the time used in the production of the goods and services, the bases which result in the

application of these costs according to the amount of time used in the operation usually

result in the most accurate unit costs. At the present time most firms have available

reasonably accurate records of labor time used in production. These records, supplemented

by time studies, enable the accountant to set standards for the allocation of indirect costs

on the basis of labor hours. The simple formula for the computation of the rate is total

estimated overhead cost applicable to the cost center divided by the total estimated labor

hours for the accounting period.









Direct Labor Cost as a Base

In those enterprises where conditions do not justify the extra clerical cost required to

keep records of labor time and make time studies, and where other conditions are suitable,

labor cost may be used as a base with reasonably satisfactory results. However, it should

be observed that variations in wage rates of different workers may distort the amount of

overhead cost applied by this method. The formula for the computation of the rate is total

estimated overhead cost applicable to the cost center divided by the total labor cost for

the accounting period.

Machine or Plant Hours as a Base

In some departments or cost centers, labor time may be relatively insignificant as

compared with the amount of machinery used and, considering the amount of overhead cost

resulting directly from the use of the machinery machine hours may give the best results as

a base for the application of those costs. The rate is computed by dividing the total esti-

mated overhead cost for the department by the total estimated machine hours for the

accounting period.

Units of Product as a Base

In many cases, overhead costs can be applied to production on the basis of units of

product. If all conditions are favorable and there is a suitable relationship between the

different products as to time used in the production process, as in the case of cans, bags,

boxes, or other units, it makes a satisfactory, and often very convenient base. This relation-

ship can be established by means of time studies to determine the relative amounts of time

used. The rate is computed by dividing the total estimated overhead for the department

cost center or plant, as the case may be, by the total estimated standard units.

1The costs of taxes, repairs, depreciation, obsolescense, space occupied, power, etc.









Material Cost as a Base

Occasionally, but principally in the past, in the absence of complete records of labor

cost and time used in the process, the cost of material used in production is or has been used

as a base for the allocation of overhead costs. Material cost is not generally satisfactory as

a base because there is iikely to be little relationship between the cost of materials used in

the product and the amount of overhead cost applicable to it. The most expensive materials,

or the better quality materials with the greatest cost, often require less time to process than

the cheaper ones, yet when used as a base would result in the application of more overhead

cost to the product when the amount should have been less.

Indirect Packinghouse Costs

The items included in this category are: fire and casualty insurance, taxes and licenses,

and depreciation.

The more common methods used by the citrus accountants in distributing indirect pack-

inghouse costs to the various types of packs are percentages based on (1) total revenue,

(2) total direct costs, or (3) total labor costs. Of these three, the method of prorating this

group on the basis of total labor for each pack was found to be most common. This method

has been used in distributing the fixed cost items to the various types of packs for the model

packinghouse.

The steps involved in the allocation of fixed expense are as follows:
1. Obtain itemized fixed cost expenses from Schedule A lines 50 through 52:

Item Dollars
Fire and casualty insurance 1,815
Taxes and licenses 2,374
Depreciation 7,270










2. Obtain total labor expense from Schedule A, line 44, $134,908.

3. Calculate the percentage that the various items of fixed cost are of total labor

cost by dividing the total dollars expended for labor into the dollars expended for each of

the individual items and multiplying by 100:
Fire and casualty insurance $ 1,815
134908 x 100= 1.3454 percent;
134,908
Taxes and licenses $ 2,374 x 00 7 per
13490x 100= 1.7597 percent;
134,908
Depreciation $ 7, 270
134,908 x 100 = 5.3889 percent.
134,1908
4. Obtain average total labor costs by type of pack from line 26, Schedule H and

enter in column 1, Table 22.

5. Calculate the average expense for fire and casualty insurance by multiplying the

average total labor costs for each type of pack, column 1, Table 22, by the percentage

that fire and casualty insurance is of the total labor cost (1.3454) and enter in column 2,

Table 22.

6. Calculate the average expense for taxes and licenses by multiplying the average

total labor costs for each type of pack, column 1, Table 22, by the percentage that Taxes

and Licenses is of the total labor cost (1.7597) and enter in column 3, Table 22.

7. Calculate the average expense for Depreciation by multiplying the average total

labor costs for each type of pack, column 1, Table 22, by the percentage that Depreciation

is of the total labor cost (5.3889) and enter in column 4, Table 22.

8. Enter the average costs per box in the appropriate lines and columns of Schedule H.

PROPORTIONING OF ADMINISTRATIVE EXPENSE

Packinghouse administrative expense is generally divided into five categories-
management and office salaries; office supplies and expense; automobile and travel;









TABLE 22
ALLOCATION OF FIXED OR INDIRECT EXPENSE
Per 1-3/5 Bushel Equivalent


Average Cost Per Box0
Average Fire and
Total Labor Casualty Taxes and
Type of Pack Cost Insurance Licenses Depreciation
(1) (2) (3) (4)
ORANGES:
1-3/5 bu. standard box $0.4052 $0.0055 $0.0071 $0.0218
1-3/5 bu. wirebound box .2383 .0032 .0042 .0128
4/5 bu. wirebound box .3266 .0044 .0057 .0176
4/5 bu. fiberboard box .3261 .0044 .0057 .0176
1/2 box mesh bag .3157 .0042 .0056 .0170
20 lb. mesh bag .3343 .0045 .0059 .0180
8 lb. mesh bag .3681 .0050 .0065 .0198
8 Ib. wirebound master .3848 .0052 .0068 .0207
5 lb. mesh bag .4519 .0061 .0080 .0244
5 lb. wirebound master .4401 .0059 .0077 .0237
U.S. No.1, Bulk-in-truck .1377 .0019 .0024 .0074
Bulk in field box .1806 .0024 .0032 .0097
Elimination to cannery .0249 .0003 .0004 .0013
GRAPEFRUIT:
1-3/5 bu. standard box .3070 .0041 .0054 .0165
1-3/5 bu. wirebound box .1867 .0025 .0033 .0101
4/5 bu. fiberboard box .2455 .0033 .0043 .0132
8 lb. mesh bag .3289 .0044 .0058 .0177
5 Ib. mesh bag .4130 .0056 .0073 .0223
Bulk in field box .1354 .0018 .0024 .0073
Elimination to cannery .0200 .0003 .0004 .0011
TANGERINES:
4/5 bu. wirebound box .4110 .0055 .0072 .0221
4/5 bu. wirebound flat .4110 .0055 .0072 .0221
Elimination to cannery .0352 .0005 .0006 .0019

aAverage fixed cost per box calculated by multiplying average perbox labor cost by
percent each item of fixed cost is of total labor cost. Percentages used are: fire and
casualty insurance, 1.3454 percent; taxes and licenses, 1.7597 percent; depreciation,
5.3889 percent.









telephone and telegraph; and miscellaneous expense.

Administrative expense, similar to fixed expense, is an overhead expense incurred in

operations of the packinghouse. The administrative expense is commonly proportioned on

the basis of (1) a percentage of total revenue, (2) a percentage of total packing costs, or

(3) equal per-box distribution to all packs and classes of fruit.

The individual items of administrative expense for the model packinghouse were

distributed on the percentage basis of total packinghouse expense.

The steps involved in the allocation procedure are as follows:

1. Obtain the total expense for each item from Schedule A, lines 55 through 59.

Item Total Expense
Management and office salaries $13,709
Office supplies and expense 1, 115
Automobile and travel 1,289
Telephone and telegraph 679
Miscellaneous expense 2,015

2. Obtain the total packing expense from Schedule A, line 54, $409,296.

3. Calculate the percentage that each expense is of total packing expense by dividing

the total packing expense into the individual expense and multiplying by 100:

Management and office salaries, $ 13,709 x 100= 3.3494 percent;
$409, 296

Office supplies and expense, $ 1115 x 100= 0.2724 percent;
$409,296

Automobile and travel, $ 1,289 x 100 = 0.3149 percent;
$409, 296

Telephone and telegraph, $ 679 x 100 =0.1659 percent;
$409, 296

Miscellaneous expense, $ 2,015 x 100=0.4923 percent.
$409,296









4. Obtain average total packing cost by type of pack from line 36, Schedule H, and

enter in column 1, Table 23.

5. Calculate the average cost for management and office salaries by multiplying the

average total packing costs for each type of pack, column 1, Table 23 by the percentage

that management and office salaries are of the total packing expense (3.3494) and enter in

column 2, Table 23.

6. Calculate the average cost for office supplies and expense by multiplying the ,

average total packing costs for each type of pack, column 1, Table 23 by the percentage

that office supplies and expense are of the total packing expense (0.2724) and enter in

column 3, Table 23.

7. Calculate the average cost for automobile and travel by multiplying the average

total packing costs for each type of pack, column 1, Table 23 by the percentage that auto-

mobile and travel expense are of the total packing expense (0.3149) and enter in column 4,

Table 23.
8. Calculate the average cost for telephone and telegraph by multiplying the average

total packing costs for each type of pack, column 1, Table 23 by the percentage that tele-

phone and telegraph is of the total packing expense (0.1659)and enter in column 5, Table 23.

9. Calculate the average cost for miscellaneous expense by multiplying the average

total packing costs for each type of pack, column 1, Table 23 by the percentage that miscel-

laneous expense is of the total packing expense (0.4923) and enter in column 6, Table 23.

10. Enter the average costs per box on the appropriate lines and columns of Schedule









TABLE 23
ALLOCATION OF ADMINISTRATIVE EXPENSE
Per 1-3/5 Bushel Equivalent

Average Cost Per Boxa
Total Manage- Office
Packing mentand Supplies Auto Telephone
Cost Office and and and Misc.
Type of Pack Per Box Salaries Expense Travel Telegraph Expense
: .. 1i 1,) ( 2 ) ... ( 3 ) (4 ) -( 5 ) .. ( 6 )
ORANGES:;
1-3/5 bu. standard box $1.2266 $0.0411 $0.0033 $0.0039 $0.0020 $0.0060
1-3/5 bu. wirebound box .7269 .0243 .0020 .0023 .0012 .0036
4/5 bu. wirebound box 1.1385 .0381 .0031 .0036 .0019 .0056
4/5 bu. fiberboard box .8298 .0278 .0023 .0026 .0014 .0041
1/2 box mesh bag .7858 .0263 .0021 .0025 .0013 .0039
20 Ib. mesh bag .8680 .0291 .0024 .0027 .0014 .0043
8 lb. mesh bag 1.1414 .0382 .0031 .0036 .0019 .0056
8 lb. bag in wirebound master 1.6054 .0538 .0044 .0051 .0027 .0079
5 Ib. mesh bag 1.4951 .0501 .0041 .0047 .0025 .0074
5 lb. bag in wirebound master 1.9281 .0646 .0053 .0061 .0032 .0095
U.S. No.1, Bulk-in-truck .2354 .0079 .0006 .0007 .0004 .0012
Bulk in field box .2583 .0087 .0007 .0008 .0004 .0013
Elimination to cannery .0370 .0012 .0001 .0001 .0001 .0002
Grove direct to cannery .0048 .0002 .0000 .0000 .0000 .0000
GRAPEFRUIT:
1-3/5 bu. standard box 1.0638 .0356 .0029 .0033 .0018 .0052
1-3/5 bu. wirebound box .6517 .0218 .0018 .0021 .0011 .0032
4/5 bu. fiberboard box .7098 .0238 .0019 .0022 .0012 .0035
8 Ib. mesh bag 1.0293 .0345 .0028 .0032 .0017 .0051
5 lb. mesh bag 1.3389 .0448 .0036 .0042 .0022 .0066
Bulk in field box .1900 .0064 .0005 .0006 .0003 .0009
Elimination to cannery .0289 .0010 .0001 .0001 .0000 .0001
Grove direct to cannery .0033 .0001 .0000 .0000 .0000 .0000
TANGERINES:
4/5 bu. wirebound box 1.2524 .0419 .0034 .0039 .0021 .0062
4/5 bu. wirebound flat 1.2524 .0419 .0034 .0039 .0021 .0062
Elimination to cannery .0558 .0019 .0002 .0002 .0001 .0003

aAverage cost per-box calculated by multiplying average total packing cost by percent
each expense item is of total packing cost. Percentages used are: management and office,
salaries, 3.34940/; office supplies and expense, 0.2724%; auto and travel, 0.3149%; telephone
and telegraph, 0.1659%; miscellaneous expense, 0.4923%.









PROPORTIONING OF SELLING EXPENSE

Selling expense includes the salaries of the sales department personnel, office supplies,,

travel expense, telephone and telegraph, and miscellaneous expense. It does not include

brokerage or commission charges in the model house. These latter expenses may logically

be selling costs but they are not readily obtainable from some packinghouse records, as they

are sometimes deducted from fruit sales before the net proceeds are entered on the books.

Selling expense is usually mixed with administrative expense in packinghouse records

and some items such as office salaries, office supplies, telephone, auto and travel must

first be separated or prorated before allocation to kinds of pack.

There are a number of ways that selling expense is prorated within the industry. The

more common are (1) a proportional distribution based on total revenue obtained for each

type of pack, or (2) equal distribution to all types of packs. The second method, that of

equal distribution to all types of packs including bulk loaded in truck and bulk in field box,

was used to distribute the expense for the model house.

The steps involved in the allocation procedure are as follows:

1. Obtain total dollars expended for each item of expense from Schedule A.

Item Amount
Office salaries $9,159
Office supplies 743
Auto and travel 859
Telephone and telegraph 452
Miscellaneous 1,344

2. Obtain total volume sold for fresh consumption from Schedule B, line 19, column 4,

less elimination to cannery and grove direct to cannery, (502,764 boxes).

3. Calculate average cost per 1-3/5 bushel box equivalent by dividing the volume sold
for fresh consumption into total dollars expended for each item:









Office salaries, $9,139 + 502,764 = $0.0182, per-box cost;

Office supplies, $743 + 502,764 = $0.0015, per-box cost;

Auto and travel, $859 + 502,764 = $0.0017, per-box cost;
Telephone and telegraph, $452 + 502,764 = $0.0009, per-box cost;
Miscellaneous expense, $1,344 + 502,764 = $0.0027, per-box cost.

4. Enter these average per-box costs in the appropriate line and columns of Schedule H.


PROPORTIONING OF OTHER INDIRECT EXPENSE

Other Indirect Expense includes the following items: color-add; wax; pre-cooling;

gas coloring; advertising tax; federal-state inspection; Growers Administrative Committee

Assessments; Organizational Assessments; interest on operating capital and miscellaneous

donations, etc. In some cases these expenses are distributed by piece rate. In other cases

they are most conveniently distributed by the use of a factor-ratio.

The methods used to proportion the various expenses for the model packinghouse are

discussed item by item.
Color-Added

This expense applies to oranges only. The cost per-box is found by dividing the dollars

expended by the total volume of oranges sold for fresh consumption, including bulk loaded

in truck and bulk sold in field boxes. As a rule no charge is made to oranges sold to the

canning plant, even though they may have passed through the color-add process.

The steps involved in the allocation procedure are as follows:

1. Obtain total dollars expended for color-add from Schedule A, line 67 ($1,812).

2. Obtain total volume (1-3/5 bushel equivalent) of oranges from Schedule B, line 18,

column 1, less elimination to cannery and grove direct to cannery, 289,981 boxes.

3. Calculate the average cost per-box by dividing the total dollars expended for









color-odd by total volume sold for fresh consumption. $1,812 + 289,981 = $0.0062,

average cost per-box.

4. Enter the average cost per-box in the appropriate line and columns of Schedule H.

Wax

The steps involved in the allocation of wax expense are as follows:
1. Obtain the volume of fruit packed from Schedule B and enter in column 1, Table 24.

2. Obtain the factor-ratios from Schedule G, column 5 and enter in column 2, Table 24,

TABLE 24
ALLOCATION OF WAX EXPENSE
Per 1-3/5 Bushel Equivalenrt .

Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 1.00 80 $0.0200
1-3/5 bu. wirebound box 217,003 217,003
4/5 bu. wirebound box 240 240
4/5 bu. fiberboard box 32,354 32,354
1/2 box mesh bag 400 400
20 lb. mesh bag 1,227 1,227
8 lb. mesh bag 15,221 15,221
8 Ib. bag in wirebound master 200 200
5 lb. mesh bag 16,678 16,678
5 lb. bag in wirebound master 78 78
U.S. No.1, Bulk-in-truck 6,000 6,000
Bulk in field box 500 500
GRAPEFRUIT:
1-3/5 bu. standard box 60 0.75 45 0.0150
1-3/5 bu. wirebound box 157,260 117,945
4/5 bu. fiberboard box 7,762 5,822
8 Ib. mesh bag 2,984 2,238
5 Ib. mesh bag 4,156 3,117
Bulk in field box 500 375
TANGERINES:
4/5 bu. wirebound box 36,184 1.00 36,184 0.0200
4/5 bu. wirebound flat 3, 877 3,877
Total 459, 584
aThe average cost per-box was calculated by multiplying the base charge ($9, 190 +
459,584 = $0.019996) by factor-ratios.









3. Multiply the volumes by the factor-ratios (column 1 x column 2) and enter in

column 3, Table 24.

4. Add column 3 and divide the sum into the total dollars expended (obtained from

Schedule A, line 68) to obtain the base charge: $9, 190 + 459,584= $0.019996, base
charge.
5. Multiply the factor-ratios by the base charge in order to calculate the average

cost per box (column 4).

6. Enter the average costs per-box in the appropriate line and columns of Schedule H.

Pre-cooling, Gas Coloring, Interest on Operating Capital, Donations, etc.

It is difficult to allocate these expense items directly to any particular type of pack.

Therefore, these expenses were distributed equally for the model packinghouse, to all fruit

sold for fresh consumption.
The steps involved in the allocation procedure are as follows:
1. Obtain the total expense for each item from Schedule A:

Item Amount
Pre-cooling $14, 897
Gas coloring 4,966
Interest on Operating Capital 200
Misc. donations, etc. 9,773

2. Obtain the total volume of fruit (1-3/5 bushel equivalent) sold for fresh consump-

tion from Schedule B, 502,764 boxes.

3. Calculate the average cost per-box by dividing dollars expended for each item by

total volume:

Pre-cooling, $14,897 + 502,764 = $0.0296, average cost per-box;

Gas coloring, $4,966 + 502,764 = $0.0099, average cost per-box;

Miscellaneous donations, etc., $9,773 + 502,764 = $0.0194, average cost per-box;









Interest on Operating Capital, $200 + 502,764 = $0.0004, average cost per-box.

4. Enter these average costs in the appropriate line and columns of Schedule H.


Advertising Tax, Inspection Fees, and Assessments

These expense items are usually fixed either by regulatory laws or organizational

contracts. The expense items are paid on a piece-rate basis and therefore can be entered

directly into the appropriate lines and columns of Schedule H, if the volume pocked agrees

with the assessment paid.

The per-box rates used for the model house are as follows:

1. Advertising tax per 1-3/5 bushel box equivalent (applies to all fruit for fresh

consumption): Oranges $0.03
Grapefruit .06
Tangerines .05

2. Federal State inspection fees per 1-3/5 bushel box equivalent, applying to all

packed fruit: Oranges $0.0225
Grapefruit .0225
Tangerines .0225
There may be additional color-add inspection fees for oranges if that process was used.

3. Growers Administrative Committee assessment per 1-3/5 bushel box equivalent on

all fresh fruit in interstate shipments:
Oranges $0.0040
Grapefruit .0040
Tangerines .0040

4. Organizational assessments per 1-3/5 bushel box equivalent:
Oranges $0.006
Grapefruit .006
Tangerines .006

5. Enter these average costs per-box in the appropriate lines andtolumr iof ScheduleH.

If there are differences in the total assessment or tax paid and the packout multiplied









by the piece rate, then the total dollars expended should be distributed by factor-ratios

developed from the piece rates paid.


SIMPLIFIED METHOD

The approach used to distribute packinghouse costs ir the preceding section of tis pub-

lication was probably developed in more detail than is required for most practical purposes.

The simplified approach which follows is less detailed. The factor-ratios for this

approach have been developed from the detailed allocations, end are shown in Schedule 1--

Simplified Factor-ratios. the development of each set of factor-atios and the procedure

used to distribute costs by these simplified ratios will be discussed Wsparately for each major

expense item. The completed per-box costs are given in Schedule $--Statement of Packing

Operations, Per-Box Costs. The total expense for each pack in this condensed statement

should agree with the same item and pack in the detailed statement (Schedule H) but

because of rounding of figures some differences appear.

Material Expense

The material expense item similar to the detailed approach was divided into direct and

indirect materials. Direct materials which Includes boxes and bags were proportioned on

the same price ratio basis as used in the detailed approach. The average costs for direct

materials were previously shown in Table 2 and are entered in Schedule J.

Indirect material expense, which includes such items as fruit wraps; nails, strips and

straps; labels and paste; liners and no-kuts; bulk-heads and car strips; and padding, was

combined into one expense item in the simplified approach.

The factor-ratio used to distribute the indirect material expense by the simplified

approach was developed from the average indirect material expense previously given in








SCHEDULE I
SIMPLIFIED FACTOR-RATIOS FOR ALLOCATING PACKINGHOUSE COSTS,
Per 1-3/5 Bushel Equivalent

Boxes Admin- Sell- Other
and Indirect Other Fixed istra- ing Indi-
Type of Pack Bogs Material Labor Direct Cost tive Exp. rect
(1) (2) (3) (4) (5) (6) (7) (8)


ORANGES:
1-3/5 bu. standard box 4.59 1.70 1.97 1 1.00
4/5 bu. standard box 8.26 1.93 2.22 "
1-3/5 bu. wirebound box 1.00 1.00 1.00
4/5 bu. wirebound box 1.66 1.37 1.37 I
4/5 bu. fiberboard box 0.62 1.37 1.37
4/5 bu. fiberboard, telescope 0.62 1.37 1.37 "
1/2 box mesh bag 0.94 1.32 1.51 "
20 Ib. mesh bag 0.94 1.40 1.57 "
8 Ib. mesh bag 0.94 1.54 1.77 "
8 lb. bag in wbd. master 0.48 1.61 1.83 .. .
5 lb. mesh bag 0.94 1.90 2.06 "
5 Ib. bag in wbd. master 0.48 1.85 2.12 '
U.S.No.1,Bulk-in-truck 0.94 0.58 1.00 o u
Bulk in field box 0.76 1.00 -
Elimination to cannery 0.10 0.16 o
Grove, direct to cannery -o 0.08
GRAPEFRUIT: o
1-3/5 bu. standard box 4.09 1.29 1.27 1.00
4/5 bu. standard box 8.26 1.72 1.50 0 "
1-3/5 bu. wirebound box 8 1.00 0.78 0.69 "
4/5 bu. fiberboard box 0.62 1.03 0.85 "
4/5 bu. fiberboard, telescope g 0.62 1.03 0,85 "
1/2 box mesh bag 0.94 1.29 1.36
20 Ib. mesh bag 0.94 1.37 1.43 0
8 1b. mesh bag a 0.94 1.38 1.63 a
8 1b. bag in wbd. master a 0.48 1.40 1.68 "
5 1b. mesh bag 0.94 1.73 1.94
5 Ib. bag in wbd.master 0.48 1.70 1.99 "
Bulk in field box 0.57 0.69
Elimination to cannery 0.08 0.11
Grove, direct to cannery 0.05
TANGERINES:
4/5 bu. standard box a 8.26 2.10 1.73 aI 1.00
4/5 bu. wirebound box a 1.66 1.72 1.73 "
4/5 bu. wirebound flat 1.66 1.72 1.73 "
4/5 bu. fiberboard box 0.62 1.72 1.73
Elimination to cannery 0.15 0.28
TEMPLES:
4/5 bu. standard box a 8.26 2.04 1.68 1.00
4/5 bu. wirebound box 1.66 1.68 1.68
4/5 bu. wirebound flat 1.66 1.68 1.68
4/5 bu. fiberboard box 0.62 1.68 1.68
Elimination to cannery B 0.18 -


I
I
I


-D
0
a





I
a



a
a

a,
a,
I
I
I


I
I
I
a
I









Schedule H. The factor-ratios were calculated by adding the average costs for indirect

materials for each type of pack and dividing the sum of the average cost on each type of

pack by the sum of the average cost of indirect materials for oranges packed in 1-3/5 bushel

wirebound box. For example, the average indirect material cost for oranges packed in

1-3/5 bushel wirebound box (obtained from Schedule H) is $0.0250. The average cost for

indirect material for oranges packed in 1-3/5 bushel standard nailed boxes (obtained from

Schedule H) is $0.1148. The factor-ratio for indirect material for oranges packed in 1-3/5

bushel standard nailed boxes was calculated by dividing $0.1148 by $010250:

$0.1148
$0.0250 = 4.59 factor-ratio.
$o.0250
The factor-ratios used for the simplified approach of proportioning indirect material

expense are presented in Schedule 1, column 2.

The procedure used to proportion indirect materials expense for the model packing-

house is as follows:

1. The volumes of fruit by type of pack obtained from Schedule B and entered in

column 1, Table 25.

2. The factor-ratios were obtained from Schedule land entered in column 2, Table 25.

3. The volumes were multiplied by the factor-ratios (column 1 x column 2) and

entered in column 3, Table 25.

4. The products of the factor-ratios multiplied by the volumes were added and the

sum divided into the total dollars expended for the indirect materials to obtain the base
$ 12,763
charge: $510,644 = $0.024994, base charge.

5. The factor-ratios (column 2) were multiplied by the base charge to obtain average

cost per-box (column 4).









6. The overage cost per-box was entered in the appropriate line and column of

Schedule J.
TABLE 25
ALLOCATION OF INDIRECT MATERIAL EXPENSE, SIMPLIFIED APPROACH
Per 1-3/5 Bushel Equivalent

Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per-Boxa

ORANGES: (1) (2) (3) (4)
1-3/5 bu. standard box 80 4.59 367 $0.1147
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0250
4/5 bu. wirebound box 240 1.66 398 .0415
4/5 bu. fiberboard box 32,354 0.62 20,059 .0155
1/2 box mesh bag 400 0.94 376 .0235
20 lb. mesh bag 1,227 0.94 1,153 .0235
8 Ib. mesh bag 15,221 0.94 14,308 .0235
8 lb. bag in wirebound master 200 0.48 96 .0120
5 lb. mesh bag 16,678 0.94 15,677 .0235
E lb. bag in wirebound master 78 0.48 37 .0120
U.S. No. Bulk-in-truck 6,000 0.94 5,640 .0235
Bulk in field box 500 -
Elimination to cannery 147,295 -
Grove direct to cannery 108,000 -
GRAPEFRUIT:
1-3/5 bu. standard box 60 4.09 245 .1022
1-3/5 bu. wirebound box 157,260 1.00 157,260 .0250
4/5 bu. fiberboard box 7,762 0.62 4,812 .0155
8 Ib. mesh bag 2,984 0.94 2,805 .0235
5 lb. mesh bag 4,156 0.94 3,907 .0235
Bulk in field box 500 -
Elimination to cannery 100,267 -
Grove, direct to cannery 72,000 -
TANGERINES:
4/5 bu. wirebound box 36,184 1.66 60,065 .0415
4/5 bu. wirebound flat 3,877 1.66 6,436 .0415
Elimination to cannery 47,028 -
Total 510,644

aAverage cost per-box calculated by multiplying base charge ($12,763 + 510,644=
$0.024994) by factor-ratios.








Labor Expense
Total labor expense as used in this study includes all the direct labor and indirect labor

required to perform the various packinghouse operations including payroll taxes and work-

men's compensation insurance. The procedure used for allocating total labor costs by the

simplified approach is to combine all the labor items into one expense and distribute this

expense to the various types of packs by the use of factor-ratios.

The factor-ratios used to proportion total labor expense for the model house were

developed from the average total labor cost shown in line 24, Schedule H. The average

labor cost of oranges packed in 1-3/5 bushel wirebound boxes was divided into the average

total labor costs of the other packs to obtain the factor-ratios.

For example, the labor factor-ratiofor oranges packed in standard nailed boxes was cal-

culated by dividing the average total labor cost fororanges packed in 1-3/5 bushel wirebound

boxes $0.2383 (obtained from Schedule H, line 24) into the average lqbar catppe -3/5 bushel

standard nailed box fororanges $0.4052 (obtained from Schedule H, line 24) $0.4052=1.70,

The factor-ratios developed for the simplified approach for total labor cost are shown

in Schedule 1, column 3.

The procedure used for proportioning the total labor expense for the model packing-

house by the simplified approach is as follows:

1. The volumes of fruit by type of pack were obtained from Schedule B and entered in

column 1, Table 26.
2. The factor-ratios for total labor were obtained from Schedule 1, column 3 and
entered in column 2, Table 26.
3. The volumes (column 1) were multiplied by the factor-ratios (column 2) and
entered in column 3.








4. The products of the factor-ratios multiplied by the volumes were added and the

sum divided into the total dollars expended for labor to obtain base charge: $134,908 +

564, 530 = $0.238974, base charge.

5. The factor-ratios (column 2) were multiplied by the base charge in order to obtain

the average cost per-box (column 4).

6. The average costs were entered in the appropriate line and columns of Schedule J.


ALLOCATION


TABLE 26
OF LABOR EXPENSE, SIMPLIFIED APPROACH
Per 1-3/5 Bushel Equivalent


Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
t111 I91 NIA


ORANGES:
1-3/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. wirebound box
4/5 bu. fiberboard box
1/2 box mesh bag
20 lb. mesh bag
8 Ib. mesh bag
8 lb. bag in wirebound master
5 Ib. mesh bag
5 lb. bag in wirebound master
U.S.No.1, Bulk-in-truck
Bulk in field box
Elimination to cannery
GRAPEFRUIT:
1-3/5 bu. standard box
1-3/5 bu. wirebound box
4/5 bu. fiberboard box
8 Ib. mesh bag
5 Ib. mesh bag
Bulk in field box
Elimination to cannery
TANGERIN ES:
4/5 bu. wirebound box
4/5 bu. wirebound flat
Elimination to cannery
Total


80
217,003
240
32,354
400
1,227
15,221
200
16, 678
78
6,000
500
147,295

60
157,260
7,762
2,984
4,156
500
100,267

36, 184
3,877
47,028


1.70
1.00
1.37
1.37
1.32
1.40
1.54
1.61
1.90
1.85
0,58
0.76
0.10
1.29
0.78
1.03
1.38
1.73
0.57
0.08

1.72
1.72
0.15


a


aAverage cost per-box calculated by multiplying the
564,530 = $0.238974) by factor-ratios.


136
217,003
329
44,325
528
1,718
23,440
322
31,688
144
3,480
380
14,730
77
122,663
7,995
4,118
7, 190
285
8,021

62,236
6,668
7 054
564,530


$0.4063
.2390
.3274
.3274
.3154
.3346
.3680
.3847
.4541
.4421
.1386
.1816
.2390
.3083
.1864
.2461
.3298
.4134
.1362
.0191

.4110
.4110
.0358


base charge by ($134,908 +


\'I \LI \VI \7/








It may be desirable in some instances to separate labor into two or more classes. This

may be done by segregating the detailed labor costs per-box (Schedule H)into the desired

classes and computing a factor-ratio for each classification in the same manner as explained

for total labor. Then each class of labor would be distributed by the factor-ratio computed

for it.
Other Direct Expense

Other direct expense includes power, lights and water; repairs to buildings and equip-

ment; miscellaneous supplies and expense; rentals and service charges. In the simplified

approach these have been grouped together in one classification and distributed on a single

factor-ratio given in Schedule 1, column 4.

The method used to calculate the factor-ratios for other direct expense is the same as

that used for calculating the factor-ratios for indirect materials and labor. The average

total cost of oranges .pckeid in -'-3/5 boshel w.irebound boxes was

used as a base.
The steps used to proportion the other direct expense to the various types of pack in the

model packinghouse are as follows:

1. The volumes of fruit packed in the various types of containers were obtained from

Schedule B and entered in column 1, Table 27.

2. The factor-ratios were obtained from Schedule I and entered in column 2, Table 27.

3. The volumes packed (column 1) were multiplied by the factor-ratios (column 2) and

entered in column 3, Table 27.

4. The products of the factor-ratios multiplied by the volumes were added and the sum

divided into the total dollars expended for other direct expense (obtained from Schedule A)

to obtain the base charge as follows: $36,840+590,437= $0.062394, base charge.









5. The factor-ratios (column 2) were multiplied by the base charge to obtain the
average cost per-box (column 4).

6. The average costs were entered in the appropriate line and column of Schedule J.

TABLE 27
ALLOCATION OF OTHER DIRECT EXPENSE, SIMPLIFIED APPROACH
Per 1-3/5 Bushel Equivalent

Volume Factor- Factor-Ratio Average Cost
Type of Pack Packed Ratio x Volume Per Boxa
ORANGES: (1) (2) (3) (4)
1-3/5 bu, standard box 80 1.97 157 $0.1229
1-3/5 bu. wirebound box 217,003 1.00 217,003 .0624
4/5 bu. wirebound box 240 1.37 329 .0855
4/5 bu. fiberboard box 32,354 1.37 44,325 .0855
1/2 box mesh bag 400 1.51 604 .0942
20 lb. mesh bag 1,227 1.57 1,926 .0980
8 Ib. mesh bag 15,221 1.77 26,941 .1104
8 lb. bag, wbd. master 200 1.83 366 .1142
5 lb. mesh bag 16,678 2.06 34,357 .1285
5 lb. bag, wbd. master 78 2.12 165 .1323
U.S. No.1, Bulk-in-truck 6,000 1.00 6,000 .0624
Bulk in field box 500 1,00 500 .0624
Elimination to cannery 147,295 0.16 23,567 .0100
Grove, direct to cannery 108,000 0.08 8,640 .0050
GRAPEFRUIT:
1-3/5 bu. standard box 60 1.27 76 .0792
1-3/5 bu. wirebound box 157, 260 0.69 108,509 .0431
4/5 bu. fiberboard box 7,762 0.85 6,598 .0530
8 lb. mesh bag 2,984 1.63 4,864 .1017
5 Ib. mesh bag 4,156 1.94 8,063 .1210
Bulk in field box 500 0.69 345 .0431
Elimination to cannery 100,267 0.11 11,029 .0069
Grove direct to cannery 72,000 0.05 3,600 .0031
TANGERINES:
4/5 bu. wirebound box 36,184 1.73 62, 598 .1079
4/5 bu. wirebound flat 3,877 1.73 6,707 .1079
Elimination to cannery 47,028 0.28 13,168 .0175
Total 590,437

aAverage cost per-box calculated by multiplying the base charge ($36,840 + 590,437=
$0.062394) by factor-ratios.









Fixed Expense

Total fixed expense includes fire and casualty insurance; taxes and licenses; and

depreciation. A simplified method of proportioning total fixed cost is to distribute the

expense on the percentage that it is of total labor cost.
The procedure used for distributing this expense for the model packinghouse by the

simplified approach is as follows:
1. Obtain total labor expense and total fixed expense from Schedule A;

Item Amount
Total labor expense $134,908
Total fixed expense 11,459

2. Calculate the percentage that total fixed expense is of total labor expense by

dividing dollars expended for labor into dollars expended for fixed expense and multiply by

100 as follows: $ 1,459 x100= 8.4939 percent.
$134,908
3. Calculate average fixed cost per-box by multiplying the average labor cost for

each type of pack (Schedule J) by the percent that total fixed cost is of labor cost and

enter the average per-box cost for the various types of packs in Schedule J.

Administrative Expense

Administrative expense includes management and office salaries; office supplies and

expense; automobile and travel; telephone and telegraph; and miscellaneous expense.

This expense can be distributed to the various types of pack on a percentage basis of total

revenue or a percentage basis of total packing cost.
The total administrative expense for the model house was proportioned in the simplified
approach on a percentage of total packing expense.
The procedure used is as follows:
1. Total administrative expense and total packing expense were obtained from
Schedule A:









Item Amount
Total packing expense $409, 296
Total administrative expense 18, 807

2. The percentage that total administrative expense is of total packing expense was
calculated by dividing the total administrative expense by the total packing expense and

multiplying by 100 as follows: $ 18,807 x 100 = 4.5950 percent.
$409, 296
3. The average administrative cost per-box was calculated by multiplying the average

total packing cost for each type of pack (Schedule J) by the percentage (4.5950) that the

administrative expense is of total packing expense and the resulting costs for the various

types of packs entered in Schedule J.

Selling Expense
Selling expense includes the salaries of the sales department personnel; office supplies;

travel expense; telephone and telegraph; and miscellaneous expense. This group of costs may

have to first be separated from administrative expense. Total selling expense of the model

packinghouse was distributed equally to all types of packs including bulk loaded-in-truck and

bulk in field boxes. The procedure used has been discussed in the section headed "Selling

Expense" in the fore part of this publication. The average costs have been entered in Schedule J.

Other indirect Expense
There is no simplified method of proportioning other indirect costs which includes such
items as color"add; wax; precooling; gas coloring; advertising tax; inspection fees, assessments;

interest on operating capital; and miscellaneous donations, etc. The expense items differ by
type of fruit and therefore it is necessary to proportion the expense item by item to the
various types of packs.
The method used to distribute these expenses in the model packinghouse has been dis-
cussed earlier in the section headed "Other Indirect Expense" in the fore part of this publi-
cation. The average costs have been entered in Schedule J.








SCHEDULE J


THE MODEL PACKING COMPANY.
OPERATIONS, PER-BOX COSTS,
Per 1-3/5


CONDENSED STATEMENT OF PACKING
SEASON ENDED JUNE 30, 1957.
Bushel Equivalent


ORANGES

Total all Elimina- Direct, 1-3/5 Bu. 1-3/5 Bu. 4/5 Bu. 4/5 Bu.
Depart- tion to Grove to Standard Wbd. Wbd. Fbd.
Item ments Cannery Cannery Box Box Box Box
Boxes Handled 977,354 147,295 108,000 80 217,003 240 32,354
Direct Materials:
Crate Material $184,326 . . $0.5494 $0.3810 $0.6573 $0.3751
Bags 29,000 . . . . .
Indirect Materials 12,763 . .1147 .0250 .0415 .0155
Total Materials $226,089 . . $0.6641 $0.4060 $0.6988 $0.3906
Labor $134,908 $0.2390 . $0.4063 $0.2390 $0.3274 $0.3274
Other direct expense 36,840 .0100 $0.0050 .1229 .0624 .0855 .0855
Fixed Cost 11,459 .0021 . .0344 .0202 .0277 .0277
Total Packing Exp. $409,296 $0.2511 $0.0050 $0.5636 $0.3216 $0.4406 $0,4406
Administrative Exp. $ 18,807 $0.0017 $0.0002 $0.0564 $0.0334 $0.0523 $0.0381
Selling expense 12,537 . . .0250 .0250 .0250 .0250
Other indirect Exp. 79,157 .0050 .0050 .1470 .1470 .1470 .1470
Total All Expense $519,797 $0.2578 $0.0102 $1.4561 $0.9330 $1.3637 $1.0413
1/2 20-lb. 8-lb. 8-lb.bag, 5-lb. 5-lb.bag, U.S.No.1 Bulk in
Box Mesh Mesh Wbd. Mesh Wbd. Bulk in Field
Item Bag Bag Bag Master Bag Master Truck Box
Boxes Handled 400 1,227 15,221 200 16,678 78 6,000 500
Direct Materials:
Crate Material. $0.4538 $0.4538 .
Bags $0.3257 t0.3838 $0.600 :6080 $0.857 .8527 .
Indirect Materials .0235 .0235 .0235 .0120 .0235 .0120 $0.0235 .
Total Materials $0.3492 $0.4073 $0.6315 $1.0738 $0.8762 $1.3185 $0.0235 .
Labor $0.3154 $0.3346 $0.3680 $0.3847 $0.4541 $0.4421 $0.1386 $0.1816
Other direct exp. .0942 .0980 .1104 .1142 .1285 .1323 .0624 .0624
Fixed Cost .0268 .0284 .0313 .0327 .0384 .0374 .0117 .0153
Total Packing Exp.$0.4364 $0.4610 $0.5097 $0.5316 $0.6210 $0.6118 $0.2127 $0.2593
Administrative Exp. $0.0361 $0.0399 $0.0524 $0.0738 $0.0687 $0.0886 $0.0108 $0.0119
Selling expense .0250 .0250 .0250 .0250 .0250 .0250 .0250 .0250
Other Indirect Exp. .1470 .1470 .1470 .1470 .1470 .1470 .1470 .1470
Total All Expense $0.9937 $1.0802 $1.3656 $1.8512 $1.7379 $2.1909 $0.4190 $0.4432








SCHEDULE J.--Continued

GRAPEFRUIT

Elimina- Direct, 1-3/5Bu.1-3/5Bu. 4/5 Bu. 8-lb. 5-lb. Bulk in
tion to Groveto Standard Wbd. Fbd. Mesh Mesh Field
Item Cannery Cannery Box Box Box Bag Bag Box
Boxes Handled 100,267 72,000 60 157,260 7,762 2,984 4, 156 500
Direct Material:
Crate Material . . $0.5494 $0.3810 $0.3751 . . .
Bags . . . . $0.5472 $0.7461 .
Indirect Material . .. .1022 .0250 .0155 .0235 .0235 .
Total Materials . . $0.6516 $0.4060 $0.3906 $0.5707 $0.7696 .
Labor $0.0191 . $0.3083 $0.1864 $0.2461 $0.3298 $0.4134 $0.1362
Other direct exp. .0069 $0.0031 .0792 .0431 .0530 .1017 .1210 .0431
Fixed Cost .0017 . .0261 .0159 .0209 .0279 .0351 .0115
Total Packing Exp.$0.0277 $0.0031 $0.4136 $0.2454 $0.3200 $0.4594 $0.5695 $0.1908
Administrative Exp. $0.0013 $0.0002 $0.0489 $0.0299 $0.0326 $0.0473 $0.0615 $0.0087
Selling expense . . .0250 .0250 .0250 .0250 .0250 .0250
Other Indirect Exp. .0050 .0050 .1658 .1658 .1658 .1658 .1658 .1658
Total All Expense $0.0340 $0.0083 $1.3049 $0.8721 $0.9340 $1.2682 $1.5914 $0.3903

TANGERINES

Elimination 4/5 Bu. Wirebound 4/5 Bu. Wirebound
item to Cannery Box Flat
Boxes Handled 47,028 36, 184 3,877
Direct Material:
Crate Material . $0.6573 $0.6573
Bags . . .
Indirect Materials . .0415 .0415
Total Material Expense . $0.6988 $0.6988
Labor $0.0358 $0.4110 $0.4110
Other direct expense .0175 .1079 .1079
Fixed Cost .0030 .0349 .0349
Total Packing Expense $0.0563 $0,5538 $0.5538
Administrative Expense $0.0026 $0.0575 $0.0575
Selling Expense . .0250 .0250
Other Indirect Expense .0050 .1608 .1608
Total All Expense $0.0639 $1.4959 $1.4959




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