Page 42 - FDMAsia SepOct 2025

40 TECHNOLOGY SEP/OCT 2025 FDM ASIA | www.fdmasia.com

Operating costs refer to the maintenance and administration the pwr package was used to determine that a sample size
of a business on a day-to-day basis. Horngren et al. define of 1,000 logs resulted in a statistical power of 0.832 with a
operating costs as “all costs associated with generating significance level of 0.05.
revenues, other than cost of goods sold.” However, this study A statistical power of 0.832 means that 83.2 percent of

takes a broader view of operating cost in that operating cost the time, a statistically significant result will be observed when
denotes all expenses incurred to make and sell the product. present, while 16.8 percent of the time, the analysis would fail
to find a significant difference where one existed.
Cost Information Power values for statistical analyses typically range between
Using the LOg ReCovery Analysis Tool, this study investigated 0.8 and 0.9. Based on the power analysis results, a 1,000 log
the cost structure of an eastern U.S. hardwood sawmill sample consisting of 500 Factory 1 grade and 500 Factory
producing red oak lumber. 2 grade red oak (Quercus rubra) logs was created using the
Lacking access to mills’ accounting information, this study LORCAT log sample creation tool.
used market data from various sources and the assumption All logs included in the sample are 12-feet long. Table 1

that, given the current depressed market for lumber, sawmills, lists the specifications of the log sample. The average small
on average, breakeven but make zero profits. Hence, the end diameter (SED) and large end diameter (LED) values (Table
goal is to solve Eq. 1, Operating Cost = Revenue (Lumber + 1) used to create the sample are based on a compendium of
Residues) – Log Cost (1) sawmill studies where red oak saw log diameters by grade
where revenue from lumber can be obtained using price were collected.
series reports such as the Hardwood Market Report, while Overall, the log sample consists of 8970.7 bdft (Doyle scale)
revenue from residues can be estimated using expert input. of Factory 1 logs and 7937.5 bdft (Doyle scale) of Factory

The cost of logs for the operation can be obtained from price 2 logs. Hence, the total volume of the 1,000-log sample is
reports for logs. The unknown factor is the sawmill’s operating 16,908.2 bdft (Doyle scale).
cost, which was calculated using LORCAT.
Once operating cost are known, profit can be calculated Table 1. Specifications of the 1,000 Red Oak Log Sample
with Eq. 2, Profit = Revenue (Lumber + Residues) – Log
Cost – Operating Cost (2) where profit is the excess returns
over expenditure over a given period.

Log Sample Table 2. Sawing Settings Used

A power analysis using R was performed to determine the
log sample size necessary within the LORCAT analysis for a
valid statistical comparison of the differences in profit due
to a change in one or more of the factors shown in Eq. 1.
Power analysis determines the power of a statistical analysis
given a sample size and a required significance level. The
statistical power indicates the probability of not making a Type

II error, i.e., the failure to reject a null hypothesis that is false.
Using the R statistical package, the pwr.t.test function of