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Because of the growing need for wood fiber in the pulp and paper industry there is an opportunity for sawmill operators to increase their income by converting hardwwood sawmill residues (slabs, edgings, and trim) to pulp chips. By selling wood chips and reducing residue-disposal costs, sawmills could improve their utilization of sawlogs. But to justify the installation of debarking and chipping machines, and to know what such machines could contribute to his business, the sawmill owner must have a thorough understanding of the costs involved in chip production. To help him in this we have made case studies of seven sawmills in southeastern Ohio, eastern Kentucky, and Tennessee, and have analyzed all the factos of cost involved in chip production.