TYPES OF COSTS
Costs of agricultural machines fall into two categories.
Fixed (ownership) costs are incurred regardless of the number of acres or hours of use annually. Fixed costs include depreciation, interest, insurance, shelter and, in some cases, taxes.
Variable (operating) costs vary with the hours of machine use. They include fuel, lubricants, repair and maintenance, and labor.
Fixed costs
Machinery loses value due to wear, age and obsolescence. The loss in value due to age and obsolescence is called depreciation. Machines depreciate each year regardless of the hours of use. Therefore, depreciation is considered a fixed cost. The change in a machine's value divided by the number of years of ownership can be considered annual depreciation.
NOTE: Depreciation for tax purposes must be determined differently and is not discussed here.
You can use various methods to determine a machine's value at the end of a specific period of time. This article uses a schedule that considers the value of machinery on the open market.
Interest on money spent on machinery is another fixed cost. This may be a cash cost when you borrow money or an opportunity cost when you buy machinery with money that you've saved. Since interest cost does not vary with machine use, it is a fixed cost. A rate of 8 percent of the remaining machine value is used here for estimating interest cost.
Housing and insurance are also fixed costs. We use a rate of 2 percent of the machine's list price.
Table 1 allows you to estimate fixed machine costs based on a machine's age and category. To determine the fixed costs, multiply the percentage for the appropriate machine age and category from Table 1 times the purchase price. For example, a new $30,000 tractor would have an estimated fixed cost of $13,671 (30,000 times 0.4557, from Table 1) for the first year. During the sixth year of ownership, the fixed cost is $2,367 ($30,000 times 0.0789, from Table 1). The assigned categories for additional machines are found in Table 2.
Table 1. Annual fixed costs in percent of list price by machine category and age.
(Interest rate is 8 percent and housing, etc. is 2 percent.) 2006 ASAE Standards
Age
(yrs)
Equipment Categories
1
Tractors
2
Combines
S.P. Windrowers
3
Forage Harvester
Balers, Blowers
4
Other Field Machine
1
45.57
51.19
57.92
54.61
2
11.01
11.85
10.37
11.15
3
10.13
10.49
9.18
9.86
4
9.32
9.28
8.12
8.71
5
8.57
8.22
7.19
7.70
6
7.89
7.27
6.36
6.81
7
7.26
6.43
5.63
6.02
8
6.68
5.69
4.98
5.32
9
6.14
5.04
4.41
4.70
10
5.65
4.46
3.90
4.16
11
5.20
3.95
3.45
3.68
12
4.78
3.49
3.06
3.25
13
4.40
3.09
2.71
2.87
14
4.05
2.74
2.39
2.54
15
3.72
2.42
2.12
2.24
To determine average fixed costs for a selected machine life, you must average these costs over the machine life. The average fixed costs per year for a machine with a 7-year life is the sum of the first seven values in Table 1, divided by 7 and multiplied by the machine's value. An example: For a tractor, the sum of the first seven values is 99.75 percent. Dividing by 7, the average annual rate is 14.25 percent
Table 2. Remaining value groups, wear-out life, and total repairs to wear-out life.
(Source: 2006 ASAE Standards)
Machinery
Remaining Value & Fixed Cost Group No.
Estimated Wear-out Life (hrs)
Total Repairs in Wear-out Life (% of list price)
Tractor
Two-wheel dr.
Four-wheel dr.
1
1
12,000
16,000
100
80
Tillage
Moldboard pl
Offset disk
Tandem disk
Chisel plow
Subsoiler
Field culti.
Spring tooth
Rolling packer
Rotary hoe
Rolling harrow
Row cultivar
4
4
4
4
4
4
4
4
4
4
4
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
2,000
100
60
60
75
75
70
70
40
60
40
80
Planting
Planter
Grain drill
4
4
1,500
1,500
75
75
Harvesting
Picker sheller
Combine
Pull type
Self prop.
Mower cond.
Sickle
Rotary
Rake
Baler
Large rect.
Large round
Forage harv.
Pull type
Self-prop
Potato
4
2
2
4
4
4
3
3
3
3
4
2,000
2,000
3,000
2,500
2,500
2,500
3,000
1,500
2,500
4,000
2,500
70
60
40
80
100
60
75
90
65
50
70
Other
Fert. spreader
Boom sprayer
blower
wagon
4
4
3
4
1,200
1,500
1,500
3,000
80
70
45
80
اقتباس
Water resources 2