5 minute read
P. J. McDonald Shows What It Costs to Produce Finished Lumber
It costs procisely $44.M% per thousand to bring rough green cle,ar'Douglas fir lumber'from ship's tackle at San Pedro to I,os Angeles, dry it, finish it, sell it and deliver it on the job in the shape of finished lumber.
This is the exact frgure obtained bfi P. J. McDonald of the Los Angeles Planing Mill Company, after an exhaustive and comprehensive study of the costs of performing' every phase of the operation from the time thet lum[ber is taken from the _ship until it is delive,red into the hands of the customer.
I\tlr. McDonald, who is one of the most successful planing mill operators in Californ'ia, presented his findings at the recent dinner-meeting of the Los Angeles District Lum,bermen's Club.
:His estimates, all the way through, are calculated ,on a base price of $54 per thousand for rough green clears de-
No. 1 and 2 Clear Douglas fir (O. P.) 1 in. random, including widths to 12 in., f. o. b. coast .......$54.00
Wharfage l2lc:, handling $1.20 .
Freight 4c per 100lbs. and 4000lbs. to the M ft.....
Unloading in rough pile back of kiln, one man $.1 per day ; 2 men $4 each, total $13; will handle approximately 24 M per day, or, at cost of per M
Loading on kiln cars 9 M ft. per day, two rnen, one at $5; one at $4. total $9, or, per M
1.32%
1.60
1.00
Taking out of kiln, grading and piling in shed, 6500 ft. per day two men, one at $5, one at $4, total $9 1.38
Depreciation on splits ,and grade through kiln 8 per rcent of cost which at this point'has reached a total of $59.85%
Filling detail orders from shed to mill, two men; one at $6.50, ,one at $4.50, total $11; they will handle 7 Mft. in7 hours at a cost per M ft.of ..
S1S oI 7 M ft., one man $6.50, one m,an $4.50, or $11 per day, they will handle this in 4 hours, or equal to 80c per M ... .80
Rip 7 M ft., average, width 4l in., one rrqian $6.50, one at $4.50; total $11; they will take E hours; ' a cost per M of
1.57 livered at the harbor; on, this basis his estimated cost for this lumber in the finished form is $98.M%.
Adding a, modest 10 per cent for pr'ofit (99.80) he arr,ives at a figure of $107.861. per thousand-the lowest possible pri,ce at which finished lumber can be sold in the Los Angeles territory and enabler the owner of the business to live, he declared.
Obviously, this total willj vary wtith the base price that has to be paid for the green lumber at shipside; and the cost ,of operation will vary slightly fr'om the estimate of $44.06% per thousand, as some of the items that make up this figure are obtained by taking a percentage of the original cost.
,But using $54 as the basis, Mr. McDonald has shown plainly what items have to be included in a proper cost analysis so that th( lum'ber dealer or planing miill operator may kn,ow just what it is costing him to do business.
Itemized Figures Show Costs in Detail
Here are I\{r. McDonald's figures in detail :
P[YtTOOIl.PAl{EtS and VENEERS EKCLUSMLY
Therelore Panel and Veneer HEADQUARTERS
Southern California Agents for BATAAN MAHOGANY
Penelr and Veneer
CALIFORNIA PANEL & VENEER CO.
955-65 S. Alamcde, Lor Angcler
Stick 7 M ft., or 18,380 lin ft.; average 4/a in., 4ffi lin ft. per hour will take 46 hours; one man $7, one boy $2; orl half time,. as he takes care ol 2 stickers, equals $1.I2% per hour for 46 hours equals, per M B. M.
S1S on drum sander 1 M ft., approximately 25 per cent of this is moldings and will not be sanded; 1 man $6.50, one helper $4.00, total $10.50 per day, o'r $l.3li4 per hour,' will put through approximately 4 M B. M. ...
7.39
2.62
'fally and put into shipping room, one mhn $6.50, one helper $4, or $10.50; they willt handle approximately 6 M ft. in 8 hours equals per M B. M. . t.75
Overhead or machine burden on running this through mill 33 1-3 per cent of machine labor. . 5.17
,(This 33 1-3 per cent represents ground space,occupied by machines and lumber sheds, huildings, machinery, blow pipe account, shaft,ing pulley an.d belt a,ccount; pro rata of engine room, and watchman expense; pro rata of office salary and expense account; insurance and taxes ; compensation insurance; supply account, such as saws, knives, cirtters, files, emerywheels, sticker bolts, oil and the many little items that in a year make up a large sum. Depreciation on buildings and machinery; interest'on capital invested, and interest on borrowed money, if any.) i
This brings us up to a point ready to put on the delivery truck at a cost of . .g 91.06%
Selling commission 5 per cent on $100 5.00
Drayage, pe,r M ft. B. M. (which'should be, at least $4.50)
2.A0 Total ..$ 98.06%
How Overhead Burden fs Determined
{Mr. McDonald arrived at the cost of his overhead burden by charging a proper portion of his ,investment burden to his com'mtercial ,overhead and pro rating the overhead costs to all the lumber passing through his kilns in a year. His investment was itemized as follows: high. My reply is, keep yodr costs for s,i:g months, or a year, accur,ately, and you will be convinced that you' are not producing mrill finish as ,cheaply as you thought. Many gf you are placing the burden of manufacture on your lum. ber yard and total output.
"tr have given this subject serious study for many years, and I believe you will agree with me, that when hard times come, that is the crucial test, and wq have seen many of our competitors go broke.
"I could take the ,records of our Mill Association 23 vears ago and today, and you would be su,rprised at the very few firms operating then that are runningi tod,ay.
"Why is this so? Is it that they made sufficient money to retire? No. They did not study their costs,'and didn't understand their bus.iness; and when hard times cbme they , went down and out.
"Gentlemen, we are fortunate here in Southern California, the only white spot sin,ce the war, and from present indi. cations this will continue for some time. But r'emember, pres.ent conditions cann,ot co,ntinue, and just as surely as daylight follows darkness, a let-up in ther building industry must come, anci possibly a financial panic.
"These periods come every so often in a century. When it does, it rnay find too many of us unp,repared. Then the test in our industry will come, as before, and it will be a repetition of other -periods, 'the survival of the fittest.' at Cos! He Says "You will observe," Mr. Mcl)onald declared, we are selling mill finish at ab,out actual cost. rve do so ?
"f have just returned from the held in San Frar.rcisco, which was deed instructive.
"that today Why should Planing Mill Congress r-ery interesting, and in-
"We met planing m$ll and lumber men from all states West and Northwest o{ Colo'rado. In talking to San Francisco millmen, we found that the m:embers of the San Francis,co Millmen's Association figure, and get not less than $125 for finish. Talking to a Fresno r-nillmran he told me lhey get not less than $130, and as hi,gh as $140 lper M. Why shouldn't we get the same, price as San Francisco? It does seem peculiar that millmen and lum,bermen, m,any of w'hom have heavy investments, do not get a fa,ir reiurn on capital invested.
"I am convinced that many of ,our rnillmen cannot p,roduce as cheaply as figures given here, as my overhead is as low as is possible to operate under.
"Some of you may criticize these figures as being too
Fruit Growers Supply Company
Manufacturers of California White and Sugar Pine Lumber Mills at Susanville and Hilt, CaI.
15O,0OO,OOO Feet Annual Cepacity
B. W. ADAMS, Mgr. Sales Dept. First National Bank Bldg. - San Francisco
.
"I ho_pe everyone in this room will so study the industry, learn their costs and sell their pro<iucts at a sufficientiy high price to enable them to roll up a surplus bank acc,ount that when hard times com.e, we all will be sitting €asy."
