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SYSTEM OF COSTING MILK AND MILK PRODUCTS [Vol. XXIV, Part II,
Items brought forward are those products on hand at the beginning of a calendar
month, the accounting period employed. The rate or cost per pound at which these
products were valued is arbitrarily set at approximately this retail price at the begin-
ning of the first month of the study. Thereafter this rate for a particular month was
the calculated cost by the procedure described here as of the end of the preceding
month.
Raw milk is received from the Institute Cattle Yard. No milk is purchased
from outside, hence the single source of this raw material. The cattle yard requires
some skim milk for calf feeding, consequently the required quantity of whole milk is
separated, the cream being supplied to the Institute Dairy.
The rates at which raw milk and cream are transferred to the Dairy are arbitrarily
fixed at the beginning of each financial year, that is the 1st of April. This rate, with
only occasional exceptions, is used throughout the year. As the financial accounts
for a particular accounting year are closed, debit or credit balances in the Dairy
and in the milk stock account in Cattle Yard combined are approximately divided
between the two by an adjustment on raw milk and cream supplied during the year.
This practice does not alter the veracity of other items currently comprising the cost
of a product of the Dairy in any month prior to this annual adjustment. It does
affect the percentage each may represent of the total. That is, it affects the total
by reason of its affect on the items raw milk and cream. It does not affect the cost
of other items. Raw milk is utilized in making available for sale each of the products
handled, except ice and, occasionally, butter, cooking butter and ghee. The cost of
raw milk is distributed in the same proportions as the milk itself. Products in which
cream is used are charged at a common rate per pound of cream not per pound of
butter fat.
Cream purchased from outside the Institute was used only for butter making
and for no other purpose. The rate is a free market rate which varies from
season to season and is based on the butter outturn.
Cream for butter making comes from three, sometimes four, sources. On the
one hand, it is purchased; secondly, portions of that received from the Cattle Yard
are used; thirdly, raw milk may be separated and portions of cream thus obtained
may be used for butter making; fourthly, there are times when excess ice cream is
melted, separated and the cream thus obtained is used for butter making. Because
purchased cream is to be used exclusively for butter making, it is initially entered
and charged in the butter manufacture receipts and distribution account. Other
cream is brought to this account through one or more other accounts. Cream from
raw milk and which, for example, is used for butter making, is entered initially in
the raw milk receipts and distribution account from where it goes to the separation
account, then to the cream receipts and distribution account, from here it goes to the
butter manufacture receipts and distribution account. Reason for this are firstly,
the origin of this cream as raw milk, secondly, the need to separate this milk to
produce cream and skim; thirdly, the fact that this cream is of such quality that it.
may be used for cream sale, ice cream, cream cheese, or perhaps for educational
purposes, generally more economical uses in each case. What is left from other
possible uses is added to the cream purchased, then churned. Butter itself might
be sold as such or converted into cooking butter or ghee.