In the fall of 1917, the milk producers adopted as their guide in arriving at milk prices what has been called Pearson’s formula. According to this formula, the cost of producing a hundred pounds of milk in the Chicago milk district is equal to the cost of 44 pounds of grain, plus 188 pounds of silage, plus 50 pounds of hay, plus 39 pounds of bedding, plus 2.42 man hours of labor. To the valuation thus secured, certain differentials were to be applied to each month of the year, the widest differential being 120.3 per cent, in December, and the narrowest 70.6 per cent, in June. This formula was devised by Professor F. A. Pearson, of the Dairy Economics Division of the University of Illinois, after several years of actual cost-accounting work in the Chicago milk district. It really represents actual cost of production on a large number of farms in certain specific years. Using Pearson’s formula as a guide, the Chicago milk producers asked the dealers $3.71 per hundredweight for their milk in November, 1917. The dealers refused, and a strike was declared. The Food Administration intervened in an unofficial way and induced the producers to agree to a price of $3.22 per hundredweight, pending an investigation by the federal government as to a price which should cover cost of production and a reasonable profit. The Food Administration appointed as a committee to determine cost of producing milk plus a reasonable profit, six people of essentially city interests and three people of essentially agricultural interests. This committee took testimony during the months of December and January, and in their report took as a guiding principle in determining the cost of producing milk the ratio method. Early in December, the author was asked to present to the commission a profit and loss chart on milk produced in the Chicago district since January, 1907, the profits and losses being based on ratios between milk prices per hundredweight on the one hand, and a composite of corn, oats, bran, cottonseed meal, gluten feed, hay, and labor prices on the other hand. These latter ingredients were weighted roughly as in the Pearson formula, but corn was given greater emphasis. Incidentally, it is interesting to note as corroborative both of the ratio method and the cost-of-production method as employed by Professor Pearson, that the two methods give very similar results. Of course, it is conceivable that if Professor Pearson had made his cost-accounting investigation in a year either of extremely good pasture or extremely poor pasture, the two methods would not agree. But taking as he did fairly average years, the results check very closely. While the Chicago Milk Commission adopted the principle of the ratio method, it did so with certain modifications. To illustrate the method as adopted by the Chicago Milk Commission, we quote from the report as follows: