- 32 -
capitalized as reservoir and pond related costs. Petitioners'
revised capital costs of the reservoir and pond are based, in
part, on the allocation to the capital costs of the reservoir of
a portion of the direct labor costs and of the indirect or
general expenses incurred each year on the timber farm and on
petitioners' estimate that 40 percent of total direct labor costs
incurred on the timber farm related to the reservoir and should
therefore be capitalized as part of the costs thereof. Also, in
allocating general overhead costs of the timber farm to the
capital costs of the water reservoir and pond, petitioners
applied the above 40-percent direct-labor ratio. Further, on the
proposed revised returns, petitioners allocated to the capital
costs of the reservoir 100 percent of the depreciation on the
reservoir-unique equipment but no portion of the depreciation on
the nonreservoir-unique equipment.
In allocating general overhead costs of the timber farm to
the capital costs of the water reservoir and pond and in applying
the above 40-percent ratio (based on petitioners' computation of
the ratio of direct labor costs of the reservoir to total direct
labor costs incurred on the timber farm), neither petitioner’s
time and labor nor two other individuals’ time or labor, while
working on the reservoir and pond were factored into the direct-
labor percentage. Petitioners did not factor into the direct-
labor percentage petitioner's personal labor on the reservoir
because no hard dollar cost was incurred therefor (i.e.,
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011