Estimating Machinery Costs

Fixed Costs, Operating Costs, How to Reduce Machinery Costs

 Estimating Machinery Costs
Introduction
 Knowing how to accurately estimate costs for owning
and operating farm machinery is an important step to
becoming a top-notch manager.
 Once one knows how to estimate costs, it becomes much
easier to come up with those profit-making decisions.
 This chapter provides information on how to estimate
fixed costs, operating costs and total costs for any
machine, according to its initial cost and annual use.
 Estimating Machinery Costs
Estimating Fixed Costs
One of the most important costs influencing profit in farming operations
is the cost of owning and operating machinery.
Good management , resulting from learning how to accurately estimate
machinery costs will help minimise such costs
Some of the vital machinery management decisions to be made include:
 when to trade machines
 which size of machines to buy and
 how much machinery to buy.
There are two main types of machinery costs, viz:
1. Fixed Costs:
costs that depend more on how long the machine is owned other
than how much it is used.
Examples of fixed costs include the following:
•Depreciation •Taxes •Shelter •Insurance •Interest
 Estimating Machinery Costs
2. Operating Costs:
costs varying in proportion to the amount of machine use, e.g.
•Fuel •Lubrication •Maintenance •Repairs •Labour
Note:
• Depreciation is a fixed cost although it is somewhat affected
by the amount of use of a machine, particularly if the
machine`s annual use is unusually high or low.
• Repairs usually vary according to the amount of use of a
machine. However, the need for some repairs seems to
result from deterioration due to the age of the machine as
well as how much it is used.
 Estimating Machinery Costs
Depreciation
As a cost, depreciation means the loss in value of a machine
due to time and use.
Often it is the largest of all machine costs.
Machines depreciate due to:
 Age
 Wear
 Obsolescence
There are several different ways to calculate depreciation viz:
 Straight line depreciation
 Sum-of-the-digits depreciation
 Declining-balance depreciation
 Estimating Machinery Costs
Straight-Line Depreciation
An equal reduction of value is used for each year the machine is
owned. Average Annual Depreciation (AAD) is calculated using the
formula below:
AAD = (Cost) – (salvage Value)
Ownership Period in years
The salvage value is the machine`s worth at the end of its useful life
Example:
A self-propelled swather is purchased at US$40,000. Its useful life span
is assumed to be 10 years and its salvage value after ten years is
assumed to be 10% of its original cost. Compute its AAD.
AAD = US$40,000 - (10/100 x US$40,000)
10 years
AAD = US$40,000 - US$4,000 = US$36,000 = US$3,600 per year
10 years 10 years
 Estimating Machinery Costs
Straight-Line Depreciation (10% Salvage Value)

The straight-line method is not very accurate in giving the true value of
a machine at some age short of the end of its assumed life.
In actual practice, machines depreciate much faster in the first few
years of their useful life than in the later years.
 Estimating Machinery Costs
Sum-Of-The Digits Depreciation
 The sum-of-the-digits depreciation method means the
sum-of-the-years digits method.
 It is a much more accurate method of estimating the true
value of a machine at any age because the annual
depreciation rate decreases as the machine gets older.
The amount of the depreciation by the sum-of-the-digits
method is determined in three (3) steps, viz:
 Add up the numbers representing the years covered by the
depreciation period
 Divide the total depreciation by the sum of the digits of the
years for the depreciation period
 Proportion the depreciation in reverse of the years over
which the depreciation occurs:
 Estimating Machinery Costs
Sum-of-the Digits Depreciation (10 years life, 10 % Salvage Value)
 Estimating Machinery Costs
Apply the sum-of-the-digits method to the US$40,000 swather, assuming
10% Salvage Value:
The total amount to be depreciated is:
(Total value) – (10% of total value) US$40,000 – US$4,000 =
US$36,000
The sum-of-the-digits for ten years is:
10 + 9 + 8 +7 + 6 + 5 + 4 + 3 + 2 + 1 = 55 depreciation units
Depreciation per unit = US$36,000 = US$654.545 per unit
55 units
Each year`s depreciation is calculated as follows for the first three years:
Year 1: 10 x US$654.545 = US$6,545.45
Year 2: 9 x US$654.545 = US$5,890.91
Year 3: 8 x US$654.545 = US$5,236.36
The final (tenth) year is calculated as: 1 x US$654.545 = US$654.55
 Estimating Machinery Costs
Declining-Balance Depreciation
 Declining-Balance Depreciation better reflects the actual
value of a machine at any age than either of the two methods
discussed above.
 The value of a machine on the farm is, sometimes, referred to
as the “as is” value.
 The “as is” value assumes that the machine must be sold on
the open market without a trade-in or at the farm auction.
 The formulae for declining-balance depreciation are listed for
the more-mathematically inclined.
 For a more practical and quicker approach, tables are used.
First, we look at the principle of declining-balance formula for
the US$40,000 swather, assuming a life span of 10 years as
above.
 Estimating Machinery Costs
The formula is:
RV = C x (1 - r/L)y
where:
RV = Remaining Value
C = Cost (initial)
r = rate of depreciation compared
to the straight-line method
L = Life span in years
Y = age at which depreciation is
being determined
And r is determined as:
r = 2*(L/100)
When the percentage is 10%, r=1
When it is 20%, r=2 and so on
With reference to the swather
example above and with the
following assumptions:
C = US$40,000
r = 2*(10/100) = 2*0.1 = 0.2 (20%)
Therefore, r = 2
L = 10 years
At y = 1, the end of the first year
of ownership, the remaining value
(RV) of the swather is:
RV = US$40,000 x (1 - 2/10)1
= US$40,000 x (1 - 0.2)
= US$40,000 x 0.8
= US$32,000
 Estimating Machinery Costs
Declining Balance Depreciation
 Estimating Machinery Costs
At y = 2, the end of the
second year of ownership, the
remaining value (RV) of the
swather is:
RV = US$40,000 x (1 - 2/10)2
= US$40,000 x (1 - 0.2)2
= US$40,000 x (0.8)2
= US$40,000 x (0.64)
= US$25,600
Simply, the declining
balance method works
on the basis that
whatever value a
machine has at the
beginning of the year, it
will be worth a fixed
percentage of that value
one year later.
In the case of the new
US$40,000 swather, its
value one year later is
80% of cost. With this
method, the value of the
machine never reaches
zero.
 Estimating Machinery Costs
In the past few Average Remaining Value
years, a careful
study of the “as
is” values of
agricultural
machinery has
indicated that, on
the farm,
remaining values
more nearly fit
the declining-
balance method
than either of the
other two
methods.
 Estimating Machinery Costs
In actual practice, the first year depreciation is considerably
higher, percentagewise, than the later years (see figure 6.4).
To provide a more accurate method for estimating the value
of a machine, a first year correction factor is added to the
declining-balance formula.
For all combines and tractors, including 4WD tractors and
crawlers, the remaining value (RV) formula is:
RV = List price x 0.68 x 0.94y
In this formula, the correction factor for the first year
depreciation is 0.68.
The annual depreciation factor is 0.94. The “y” exponent
indicates how many times 0.94, or the annual depreciation
factor, is multiplied by itself.
 Estimating Machinery Costs
For example, a US$50,000 tractor is worth US$28,240
after three years:
RV = list price x 0.68 x 0.943 = US$50,000 x 0.68 x
0.943 = US$28,240 (verify in table 6.1, row 3 years)
For all farm machines, other than tractors, the formulae
are:
• Combines: the same formula as tractors.
• Cotton harvesters and balers: = list price x 0.64 x
0.921
• All others, RV = 0.6 x 0.9y
Remaining values are listed in table 6.1 as percentages of
list prices for all tractors and farm machinery.
 Estimating Machinery Costs
Remaining Value as a Percentage of List Price
 Estimating Machinery Costs
Other Fixed Costs
The other four fixed costs are:
Tax: The annual charge for taxes would be from 1% to 2% of
the value of the machine at the beginning of the year.
Shelter
Typical annual costs for providing shelter including a service or
repair shop will average 1% to 2% of the remaining value of
the machine.
Insurance
The annual charge for insurance or risk is assumed to be from
0.25 to 0.5 percent of the remaining value of the machine
Interest
Interest rates vary but will, usually, be in the range of 8% to
12% of the remaining value of the machine
 Estimating Machinery Costs
Estimating Fixed Costs
Taxes, Shelter, Insurance and Interest (TSII) can be
combined in order to estimate costs.
If the interest rate is set at 9% and the others
combined at 4%, then an annual charge of 13%
of the remaining value at the beginning of the
year would be reasonable to cover fixed costs
For such a case, the first three (3) years
depreciation and TSII costs for a US$50,000
tractor are shown in table 6.2 below
 Estimating Machinery Costs
Example of Total Fixed Costs
Year Remaining Depreciation TSII Costs TSII Costs +
Value at Start (US$) (US$) Depreciation
of Year (US$) (US$)
1 50,000 18,040 05,850 23,890

2 31,960 01,918 04,155 06, 072

3 30,042 01,803 03,906 05,708

4 28,240 01,594 03,671 05 366

5 26,545 01, 593 03, 451 05, 044

6 24,953
 Estimating Machinery Costs
Table shows that TSII Age Tractors, Balers, Cotton All Others
costs are 13% of (Yrs) Combines (%) Harvesters (%) (%)
US$45,000 at the
beginning of the first 1 37.78 42.82 47.70
year. 2 24.96 27.59 30.06
By looking at the total 3 20.45 22.19 23,77
fixed costs (DTSII) it is 4 18.02 19.26 20.34
clear why frequent 5 16.43 17.33 18.08
trading without high 6 15.27 15.92 16.43
annual use results in 7 14.36 14.81 15.13
high per-hectare
machinery costs. 8 13.62 13.89 14.06
9 12.98 13.12 13.16
For purposes of 10 12.42 12.44 12.38
estimates, table 6.3
combines all fixed 11 11.92 11.84 11.69
costs. An interest rate 12 11.48 11.30 11.08
of 9% is used.
Table 6.3: Average annual depreciation and other
fixed costs as a percentage of original/list price
 Estimating Machinery Costs
How to Reduce Fixed Costs
Have the proper Amount of Equipment
Properly matching one`s tractors and equipment is very important as
part of saving costs.
A farmer who is efficient with, say, two 125 hp tractors with an initial
cost of US$60,000 each, decides to buy an extra 75 hp tractor that
costs US$36,000 to pull some of their lighter draft equipment.
If they plan to own the tractors for eight (8) years, then, their average
annual fixed costs for eight years is 13.62% according to table 6.3.
13.62% x US$60,000 x 2 = US$16,344 per year
Adding the 75 hp tractor to the fleet would have the effect of
increasing the fixed costs as follows:
13.62 x US$36,000 = US$4,903 per year.
US$4,903 x 100% = ~30% increase
US$16,344
 Estimating Machinery Costs
Certainly the added tractor would make some
of the farming operations more convenient,
but the farmer needs to be very careful about
having equipment that add to the cost of
production without a proportional increase in
production.
It is much less expensive for the farmer to use
the larger tractors for lighter loads, than for
them to purchase an extra tractor
 Estimating Machinery Costs
Longer Ownership of machinery Remember, to own equipment longer,
one needs a good maintenance and
Table 6.4 below, illustrates how trading repair program.
too frequently will increase fixed costs. A saving of US$9,675 per year would
The equipment listed is a basic set for more than meet the maintenance and
producing 800 acres (328 ha) of row repair needs.
crops... (ref: table 6.3)
Machine Cost (US$) Ave.Annual Ave.Annual
The ten-year trading interval lowered the Fixed Costs Fixed Costs
annual fixed costs by (US$48,149 – Every 6 years Every 10 years
(US$) (US$)
US$38,474) = US$9,675 per year.
Tractor1 060,000 09,162 07,452
Regarding that the farm size 800 acres,
the added costs for trading every six Tractor2 060,000 09,162 07,452
years is:
Combine 120,000 18,324 14,904
US$9,675 = US$12.09 per acre
800 acres Tillage Tools 050,000 08,215 06,190
OR
Seeding 020,000 03,286 02,476
US$9,675 = US$29.50 per hectare Equipment
328 ha 48,149 38,474
Totals

Table 6.4: Ave. Annual Fixed Costs When Trading

 Estimating Machinery Costs
Buy Used Equipment
 As long as they are in good working condition, buying used
equipment is cheaper
 Possible sources of used equipment would be:
 Implement dealers
 Auction sales and
 Direct owners

Dealers may be more expensive than direct owners because:

 They are likely to include a reconditioning and warranty
charge
 They also have to earn a profit for their business.
The examples following illustrate the potential for reducing
fixed costs by purchasing used equipment.
 Estimating Machinery Costs
Determine the price which one may pay for a used 4-year old
tractor with a US$50,000 list price.
Compute the saving in fixed costs for this purchase
Table 6.1 shows that a 4-year-old tractor would have a RV of
53.09% of the list price of US$50,000
53.09/100 x US$50,000 = US$26,545.
If the tractor is bought from an implement dealer and pay the
“add on” charge for reconditioning, then the cost might
include the US$26,545 plus 25% (“add on”)
US$26,545 x 1.25 = US$33,181
Now, compare the fixed costs for the used tractor and the new
tractor:
Using table 6.3 to estimate costs for the new tractor. After 4
years, the new US$50,000 tractor would have average annual
fixed costs of US$9,010 (18.02% of US$50,000).
 Estimating Machinery Costs
The used tractor would have the following fixed costs for the first
4 years of ownership.
Fixed Costs for a Used Tractor (4 Years)
Age Remaining Depreciation TSII (US$) Total (US$)
(Yrs) Value (US$) (US$)
5(1) 33,181 08,226 O4,314 12,540
(33,181-24955) (13%*33,181)
6(2) 24,955 01,500 03,244 04,744
(49.91%*50,000) (24,955-23,455) (13%*24,955)
7(3) 23,455 01,405 3,049 04,454
(46.91%*50,000)
8(4) 22,050 01, 325 2,867 04,192
(44.10%*50,000)
9(5) 20,725
(41.45%*50,000)
Total fixed costs after 4 years 25,930
 Estimating Machinery Costs
The new tractor with list price of US$50,000 would have had the
following fixed costs for the first 4 years of ownership.
Fixed Costs for a New Tractor (4 Years)
Age Remaining Depreciation TSII (US$) Total (US$)
(Yrs) Value (US$) (US$)
1 50,000 18,040 6,500 24,540
(50,000-31960) (13%*50,000)
2 31,960 01,920 4,155 06,075
(63.92%*50,000) (24.96%*50,000) (13%*31,960)
3 30,040 01,800 3,905 05,705
(60.08%*50,000) (20.45%*50,000) (13%*30,040)
4 28,240 1,695 3,671 05,366
(56.48%*50,000) (18.02%*50,000) (13%*28,240)
5 26,545
(53.09%*50,000)
Total fixed costs after 4 years 41,686
 Estimating Machinery Costs
 The average annual fixed costs of the used tractor would be
US$ 25,930 divided by 4 or US$6,483 a year.
 The average annual fixed costs of the new tractor would be
US$ 41,686 divided by 4 or US$10,422 a year.
 The used tractor would have (US$ 10,422 – US$6,483 =
US$3,939 less annual fixed costs.
 This example shows the savings in fixed costs that might be
obtained by purchasing used equipment.
 It is especially economical when you buy equipment
without engines and power trains such as chisels and discs.
 The buyer`s disadvantage is that they may not know the
condition of the used machinery or equipment.
 The potential cost for excessive repairs and downtime is
unknown.
 Estimating Machinery Costs
Estimating Fuel and Lubricant Costs
Fuel and lubricant costs are true operating costs because fuel
consumption is directly proportional to the amount of use.
Table 6.6: Typical tractor operating costs
Annual Use in Hours

Type of Cost 400 600 800 1,000

Fuel and 29% 34% 37% 37%

Lubricants
Fixed 63% 55% 51% 51%

Repair 8% 11% 11% 11%

 Estimating Machinery Costs
Estimating Fuel Needs for Crop Production
The amount of fuel needed per hectare to carry out operations
such as plowing and disking depends on:

 Horsepower-hours (kilowatt-hours) capacity

 Fuel type
 Fuel consumption of the machine

In present-day, Zambia, except for some walking tractors, all

tractor operations use diesel fuel.
 Estimating Machinery Costs
Horsepower-Hours Capacity
The amount of fuel needed per hectare is in proportion to the
amount of energy required as indicated in the table below:
Table 6.7: Average Energy & Fuel Requirements

Operation Energy Required, Diesel Fuel (Ltrs/Ha)

PTO kW-Hrs/Ha
Plowing (20 cm deep) 44.9 15.7
Heavy Off-set Disc Harrowing 25.4 8.9
Chisel Plow 29.5 10.3
Tandem Disking (Plowed Land) 17.3 6.1
Field Cultivation 14.7 5.6
Cultivation of row crops 11.0 4.2
Planting row crops 12.3 4.7
Grain Drilling 8.7 3.3
 Estimating Machinery Costs
Average Energy & Fuel Requirements cont`d
Operation Energy Required, Diesel Fuel (Ltrs/Ha)
PTO kW-Hrs/Ha
Combine Harvesting (Small Grain) 20.3 9.3
Combine Harvesting (Corn) 32.4 15
Mowing (Cutter Bar Mower) 6.4 3.3
Mowing (Rotary Mower) 17.6 7.5
Swathing 12.2 5.1
Baling 9.2 4.2
Spraying 1.8 0.9
Forage Harvesting (Green Forage) 22.8 8.9
Forage Harvesting (Corn Silage) 86.0 33.6
Hauling Forage (Corn Silage) 7.4 2.8
 Estimating Machinery Costs
Types of Fuel
 Diesel fuel tractor engines require less fuel when
compared to petrol engines.
 For the same amount of work, diesel engines will average
about 70% as much fuel as the consumption of a petrol
engine.
 Cropping systems also play an important role in
determining the quantity of fuel consumed, thereby the
cost as shown in the following table, considering row
crop production.
 Estimating Machinery Costs
Table 6.8.: Comparing fuel consumption for different tillage/cropping systems

System 1 (Conventional System 2 (Reduced Tillage)

Tillage)
Operation Litres of Diesel Litres of Diesel
Consumed/Ha Consumed/Ha
Plowing (Chisel Plow) 15.71 10.29
Discing 06.08 00.00
Pre-emergency Spray 00.94 00.94
Cultivation 05.61 05.61
Planting 04.68 03.74
Cultivation (Weeding) 04.21 04.21
Combine Harvesting 14.96 14.96
Total 52.17 39.74
 Estimating Machinery Costs
Estimating Lubricant Costs
 Modern agricultural machinery (tractors and self propelled machines)
use a wide variety of lubricants, ranging from engine oil, grease,
hydraulic oil, transmission oil .
 These count for about 10% of the fuel costs.
Fuel saving Tips
 Do not make unnecessary tillage trips
 Combine operations and operate at full load
 Shift to higher gears and lower acceleration when pulling a lighter loads
 Select tire size properly and match ballasting for proper wheel slippage
 Keep the tractor/machine in top running condition. Prolonged lack of
service can lead up to 25% over-consumption of fuel.
 Follow recommended storage practices for fuel tanks. Use rust-proof
storage tanks and keep them shaded. Also use pressure caps which conform
to local regulations
Diesel engines will generally consume at a rate of 0.223 ltrs per kW.hour
(unit factor method)
 Estimating Machinery Costs
Estimating Repair Costs
 The more a machine is used, the greater is its need for
repairs.
 Repairs are needed to get machines running again or
indeed to maintain their reliability and keep them
performing their tasks properly.
The aspects of repair costs and reliability to be
considered in this unit include:
● Types of repairs
● Calculating lost-time costs
● Estimating repair costs
● Establishing life of equipment
 Estimating Machinery Costs
Types of Repairs
Routine wear: of plow-shares, tyres, batteries, which are inevitable to
replace ultimately no matter how careful one may be in using them. Of-
course with regular maintenance and depending on soil conditions
units/parts may work longer than without.
Accidental breakage or damage: Can occur even with the best operator
but are more likely to happen when operators try to rush a job or operate
roughly. Damage involving major components that are not normally
stocked tend to be very costly. Good management/judgement can easily
minimise or eliminate most of such accidents/damage.
Repairs due to operator neglect: Putting off maintenance and minor
repairs can be costly as what may be a minor problem may blow into
bigger repair needs/proportions
Routine Overhaul: Machines are overhauled to replace worn out parts
and restore original performance. With good management, routine
overhaul can be reduced by 25% or more.
 Estimating Machinery Costs
Calculating Lost-Time Cost
 Suppose a combine can harvest soybeans with a 6-row (75
cm) header at 4.6 km/h. The theoretical capacity is 2.4 ha/h
or 19.2 ha in 8 hrs.
 Records show that 75% field efficiency is possible in this
case with proper management and no breakdowns.
 At 75% field efficiency, it is possible to combine 1.8 ha/h
and 14.4 ha in an 8 hrs day.
 If just 1 hour a day is lost due to unplanned stops for minor
repairs, capacity would be further reduced to 12.6 ha per
day.
 At a custom rate of US$65.00/ha, the 1.8 ha per day loss of
production would cost an equivalent of about US$117.00
 Estimating Machinery Costs
Establishing Life of Equipment
Table 6.9: Guide for estimating useful life-span of agricultural machinery.

Machine Life in Hours

All Wheel Type Tractors 12,000

Self-Propelled Combines 3,000

Self-Propelled Windrowers, 3,000

Cotton Harvesters
Square Balers 3,000

Tillage Equipment, Mowers 2,000

Planters, Drills, Round Balers 1,500

Forage Harvesters 4,000

 Estimating Machinery Costs
Table 6.9: Estimated mechanical life of various
equipment
Estimating Repair Costs
Repair costs consist of all expenditures for parts
and labour for repairs.
Repair costs can be estimated for any machine
with the following formula:
Total Accumulated Repairs (TAR) = List Price x
RF1 x (Hours/1,000)RF2
The values of RF1 and RF2 may be found in the
table below;
 Estimating Machinery Costs
¼ Life ½ Life ¾ Life Full Life
Accumulated Accumulated Accumulated Accumulated

Blah
Machine Hours Cost Hours Cost Hours Cost Hours Cost RF1 RF2

All Wheel 3,000 6.3% 6,000 25% 9,000 56.2% 12,000 100% 0.006944 2.0
Tractors
Self- 750 2.2% 1,500 9.3% 2,250 21.9% 3,000 40% 0.039820 2.1
Propelled
Combines
Planters, 375 4.1% 750 17.5% 1,125 41% 1,500 75% 0.320000 2.1
Drills
Moulboard 500 8.3% 1,000 28.3% 1,500 59.6% 2,000 100% 0.287300 1.8
Plows
Chisel Plows, 500 10.1% 1,000 26.2% 1,500 46.8% 2,000 70% 0.265240 1.4
Cultivators,
Disc Harrows,
Mulch Tiller
Mowers 500 14.2% 1,000 46.2% 1,500 92% 2,000 150% 0.461700 1.7
Sq. Balers, 625 6.2% 1,250 21.5% 1.875 44.7% 2,500 75% 0.144100 1.8
Large & Small
Round 375 7.4% 750 25.9% 1,125 53.6% 1,500 90% 0.434000 1.8
Balers,
Large
Self 1,000 3.1% 2,000 12.5% 3,000 28.1% 4,000 50% 0.031250 2.0
Propelled
Forage
Harvester
Self 750 3.4% 1,500 13.7% 2,250 30.9% 3,000 55% 0.061100 2.0
Propelled
Windrower
 Estimating Machinery Costs
Table 6.10: Accumulated repair costs as percent
of purchase price
Example:
Determine the predicted accumulated repair
costs for a US$90,000 tractor after 4,000 hours
of use.
TAR = US$90,000 x 0.006944 x (4,000/1,000)2
TAR = US$10,000
 Estimating Machinery Costs
Total Cost for Machines and Operations
This unit will provide information on how to
estimate total costs for the use of an individual
machine, and for operations involving a
combination of two or more machines. Costs for
entire machine systems can be estimated once
the procedure for estimating costs for specific
machines is mastered.
 Estimating Machinery Costs
Using Machine Cost Tables
With reference to Appendix Table 1, costs are calculated for a 150 hp diesel
tractor with a list price of US$90,000. The tractor is used for 500 hours per year
for five (5) years. The engine`s fuel cost is rated as US$0.26 per litre.
In Appendix Table 1 (the table of accumulated average fixed and repair costs for
2 and 4-wheel drive tractors), check the cost figure shown opposite 500 hrs/year
under the 5-years-of-use column. This figure is US$0.346. At the top, the table
indicates that cost figures are per US$1,000 of list price (cost of new machine).
The costs included in the table are:
●Depreciation ●Taxes ●Shelter ●Insurance ●Interest & ●Repairs
Because the tractor had a new list price of US$90,000, it would have 90 cost
units of US$1.000 each.
US$90,000/US$1,000 = 90 cost units
Therefore, multiply the cost figure from the table by 90, we get:
0.346 x 90 cost units = US$31.14 per hour of use
With 5 years of use at 500 hours per year, the accumulated use of the US$90,000
tractor would be 2,500 hours.
Total expenditures for repairs, plus all fixed costs would be:
2,500 hrs x US$31.14/h = US$77,850.
 Estimating Machinery Costs
Estimating Fuel/Lubricant Cost Component

For diesel engines, the average fuel consumption is 0.223 times the maximum
kW rating.
The 150 hp (i.e.111.9 kW) diesel engine tractor would use, 111.9 kw x 0.223 =
25.0 ltrs per hour.
Now, let us calculate the fuel and lubricant costs:
For fuel: 25.0 ltrs/h x US$0.264/ltr = US$6.60 per hour
Lubricants: 10% of fuel cost = 10/100 x US$6.60 = US$0.66

Therefore, the total fuel and lubricant costs amount to: US$(6.60 + 0.66) =
US$7.26 per hour.
For 2,500 hours of use, total fuel and lubricant costs come to: 2,500 hrs x
US$7.26 = US$18,150
Including fixed costs, repair costs and operating costs, the average costs for
the US$90,000, 111.9 kW tractor over a 5-year period of use would be:
Fixed costs plus repairs = US$31.14/h
Fuel plus lubricants = US$07.26/h
Total costs = US$38.40/h
 Estimating Machinery Costs
Without including labour, average annual costs at 500 hours
of work per year would be:
500 hours/year x US$38.40/hour = US$19,200 per year
Remember that in subsequent years, the fixed costs dwindle
and, therefore, one expects that total running costs also go
down successively.
Also, if the machine is used longer hours annually, say 800
hrs, the per hour cost of use reduces
Going back to table 1 for this particular case, we get, 90 cost
units x US$0.233 = US$20.97/h of fixed costs plus repairs
Fuel plus lubricants rate at US$7.26/hour remains the same.
Therefore, total per hour costs become: US$(20.97 + 7.26)
= US$28.23/h
 Estimating Machinery Costs
From Appendix Table 7, the average cost of
operating a US$12,000 mulch tiller after 10 years
with 100 hours of use per annum and a capacity of
2.8 ha/h is:
From the table, US$1.503 (roughly, US$1.50) per
hour per US$1,000 of cost of the tiller.
The number of US$1,000 units is:
US$12,000/US$1,000 = 12.0 units
12 units x US$1.50 = US$18.04 per hour...No
fuel plus lubricant costs
 Estimating Machinery Costs
Estimating Tractor- Machine Costs
If the average capacity for a mulch tiller operation is 2.8 ha/h,
then the per ha.
Cost of mulch tilling would be:
US$56.44/h = US$20.16 per ha
2.8ha/h
Now that the cost examples for the US$90,000 tractor and the
US$12,000 mulch tiller have been computed, we can combine
the two estimations to estimate the total cost of an operation
such as mulch tilling:
Tractor costs: US$38.40 per hour
Mulch tiller costs: US$18.04 per hour
Average mulch tillage cost: US$56.44 per hour
 Estimating Machinery Costs

If the average capacity for a mulch tiller

operation is 2.8 ha/h, then the per ha. Cost of
mulch tilling would be:
US$56.44/h = US$20.16 per ha
2.8ha/h
 End
Alles de Besto!!!!!!