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
(Yrs) Combines (%) Harvesters (%) (%)
costs are 13% of
US$45,000 at the 1 37.78 42.82 47.70
beginning of the first 2 24.96 27.59 30.06
year. 3 20.45 22.19 23,77
By looking at the total 4 18.02 19.26 20.34
fixed costs (DTSII) it is 5 16.43 17.33 18.08
clear why frequent 6 15.27 15.92 16.43
trading without high 7 14.36 14.81 15.13
annual use results in high 8 13.62 13.89 14.06
per-hectare machinery 9 12.98 13.12 13.16
costs. 10 12.42 12.44 12.38
11 11.92 11.84 11.69
For purposes of 12 11.48 11.30 11.08
estimates, table 6.3
combines all fixed costs.
An interest rate of 9% is Table 6.3: Average annual depreciation and other
used. 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$16,344
 Estimating Machinery Costs
Certainly the added tractor would make some
of the farming operations more convenient,
but the farmer needs to be very careful about
having equipment that add to the cost of
production without a proportional increase in
production.
It is much less expensive for the farmer to use
the larger tractors for lighter loads, than for
them to purchase an extra tractor
 Estimating Machinery Costs
Longer Ownership of machinery Remember, to own
Table 6.4 below, illustrates how trading too
frequently will increase fixed costs.
equipment longer, one
The equipment listed is a basic set for needs a good
producing 800 acres (328 ha) of row crops...
(ref: table 6.3) maintenance and repair
Machine Cost (US$) Ave.Annual
Fixed Costs
Ave.Annual
Fixed Costs
Every 6 years Every 10 years
The ten-year trading interval lowered the program. (US$) (US$)

annual fixed costs by (US$48,149 – Tractor1 060,000 09,162 07,452

US$38,474) = US$9,675 per year.
Regarding that the farm size 800 acres, the
A saving of US$9,675
Tractor2 060,000 09,162 07,452

added costs for trading every six years is: per year would more
Combine 120,000 18,324 14,904

US$9,675 = US$12.09 per acre than meet the

Tillage Tools 050,000 08,215 06,190
800 acres
OR maintenance and repair
Seeding
Equipment
020,000 03,286 02,476

US$9,675 = US$29.50 per hectare

328 ha
needs.
Totals 48,149 38,474

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$50,000 tractor would have average annual fixed costs
 Estimating Machinery Costs
The used tractor would have the following fixed costs for the first
4 years of ownership.
Fixed Costs for a Used Tractor (4 Years)
Age Remaining Depreciation TSII (US$) 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
Machine Hours Cost Hours Cost Hours Cost Hours Cost RF1 RF2
Blah
All Wheel
Tractors
3,000 6.3% 6,000 25% 9,000 56.2% 12,000 100% 0.006944 2.0

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
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