The cost calculation methodology
Cost calculation is one of the most important bases at machine and technology choices, and enables process optimization. The "Cost Calculation" tool was developed by the researchers of the Slovenian Forestry Institute and is the result of multiannual research in the field of forest work standardization and the study and monitoring of the costs of forestry machinery. The WoodChainManager web tool addresses most of the machines used in forestry in Slovenia. The default values of calculation attributes can be adjusted by each user according to his own machine or needs.
Before implementing the software solutions, several methods for cost calculations (including FAO, KWF ...) were examined and decision on the method used in Slovenia for calculating costs in the Catalog of Agricultural and Forestry Machinery Costs (Dolenšek, 2008) was made. The latter is based on the methodologies of comparable machine costs catalogs issued by Kuratorium für Technik und Bauwesen in der Landwirtschaft e.V. (KTBL) (Germany), Österreichisches Kuratorium für Landtechnik und Landentwicklung - ÖKL (Austria) and Agroscope Tönikön (Switzerland).
The harvesting system is the basic starting point for the "Cost Calculation" tool, which calculates costs and visualises (describes() the individual harvesting system. When using a web-based tool, it is important for the user to have a continuous overview of processes in the harversting system. The user independently determines which processes will be performed (cutting, delimbing, cross-cutting, chipping, skidding / transporting) and the location where these processes will be carried out (Forest stand, Skid Trail, Skid Road, Forest Road...). The WoodChainManager automatically offers a set of machines that can perform selected operations at desired locations. In operations that also predict movements along the roads (skidding / transport), the location where the transport will end shall also be selected (Skid Road, Forest Road, End User). The web-based algorithm uses logical controls that prevent the user to choose a harversting system that is impossible. In doing so, the user can choose between several different machines and related accessories such as different types and versions of tractor attachments (winches, forest trailers ...) and tractor accessories (safety cabin, wheel chains, etc.). WoodChainManager currently provides the following groups of machines:
For the common understanding, the meaning of the professional terms used, which define the calculation items, is explained below:
- Machine: Name of the machine or equipment to which the cost calculation refers. The calculation does not refer to any specific type or model of actual machinery manufacturers, but on an average, a machine in a group of machines or equipment. Users have to enter the name or mark of their own machines to be able to calculate their costs.
- Engine power output: Information that defines the unit to which the cost per unit is calculated or other necessary calculation. The engine power (in kW) is listed on machines powered by internal combustion engines. The calculation of the fuel consumption and the calculation of fuel costs and lubricants refer to this information.
- Purchase value: The average value of a new machine in €, taking the market shares of different machine brands and a 22% VAT into account. Prices are obtained from the providers’ price lists and by inquiries made. In the case of machine brands that have an overdue depreciation period but are still in use, we take the last known price with a corresponding revalorization into account. Market shares for tractors are determined by the data on newly registered brands of tractors and the brand proportion within the tractor population. For other machines, the market shares are estimated.
- Depreciation period: Time in years in which the machine is worn out and should be replaced with a new one, or time in years to be taken into account for the calculation of annual depreciation. The value of the average amortization value for a particular machine in our situation is determined on the basis of the average annual use of this machine in Slovenia.
- Life span: Time during which a machine is utilized and generally replaced with a new one, or time in years taken into account for the calculation of annual depreciation. The standard value is determined by the average depreciation value for a particular machine under our conditions based on experience and the average annual use of this machine in our geographical and climatic conditions.
- Annual use: The annual volume of work in hours possible within our geographical and climatic conditions. This information, determined on the basis of experience, has a significant impact on the calculation of the fixed costs per hour.
- Maintenance and service factor: % of the machine’s or equipment’s purchase value per 100 hours of use. The data is experiential in nature and covers the cost of regular maintenance and the replacement of parts subject to wear through the normal operation of the machine (eg. chain of a chain saw, replacement of filters, etc.), but not the costs of remedying the defects. For machines that are powered by internal combustion engines, this cost does not include lubricants (this is covered along with fuel), while for other machines, this cost includes lubricants as well.
- Fixed machine costs EUR/year : They include depreciation, interests on invested capital as well as storage and insurance costs. The depreciation is calculated by dividing the purchase value by the depreciation period. The interest within the invested capital is calculated at 8% of the portion of the capital which has not yet depreciated. On average, it is half of the invested capital on an annual basis. For storage (cost of garages or other buildings) and insurance we take costs in the amount of 2% of the purchase value into account.
- Fixed machine costs EUR/h: Are annual fixed costs divided by annual use.
- Variable cost of fuels and lubricants: The cost of fuels and lubricants in € / hour. The current prices for diesel fuel and unleaded 95 octane gasoline, including VAT, are taken into account (the average fuel consumption of 290 g / kWh and a 40% engine load for tractors, harvesters and forwarders and a 70% engine load for chain saws). For grease 20% of the fuel cost is taken into account. The cost of oil for two-stroke engines is also included in the cost of engine lubricants.
- Variable costs of maintenance EUR/h: The product of the maintenance factor per 100 hours and the purchase cost of the machine. At a smaller extent of the annual use, the maintenance cost is also lower than in larger and vice versa.
- Total costs EUR/h: The sum of fixed costs per hour, variable cost of fuel and lubricants and variable maintenance costs. The calculation takes the time (hours) of actual work with the machine into account. The actual time of work may, in individual cases, especially in older tractors, slightly deviate from the hours of work indicated in the tractor’s hour meter.
The described parameters are input data for calculating the material costs of machines. In addition to these "Cost Calculation" tools, they also include:
Productivity: Determined by the amount of units that a given machine can do in a time unit (1 hour). The default values can be obtained under precisely defined conditions, which are written in the information description in calculations. The user can independently adjust the value of productivity (the tool ensures meaningful minimum and maximum limits).
Labor cost: Labor costs are all forms of disbursement granted to the employees by the organization.
Number of workers: By adjusting the number of workers to the individual processes, the user has the opportunity to adjust the calculation according to the organizational form of work (for example, in the case of harvesting timber with a modified agricultural tractor without a remote-controlled winch, in practice it often happens that two workers are joinly performing the work).
Total cost of the selected process: is the sum of the total material costs of selected machines, accessories and labor costs. (For example, the chainsaw operator uses a chainsaw and personal protective equipment. The total cost of the selected process includes all the material costs of a chainsaw, small tools, protective equipment and the cost of work performed by the worker cutter).
Costs of selected harvesting system: are the sum of all work processes at the level of the selected harvesting system.
The following table shows the equations used to calculate costs using the WoodChainManager tool
|Parameter||Sigh||Unit of measurement||Indicative and derived values used|
||The average value of a new machine in € on EU market.
|Engine power output
||Estimated average use of certain machine type.
||0.07 - 0.15
|Interests on invested capital
||EUR / l
||The prices of fuel are updated twice a month.
|Variable cost of fuels and lubricants
||0.4 - 0.7
|Average fuel consumption
||liter / kWh
|Number of workers
||0 - 100
|Fixed machine costs
||EUR / hour
||((PV / DR) + DRrate * PV) / AU
||EUR / uro
||Mr * PV / LR
|Cost of fuels and lubricants
||EUR / hour
||(100% + Lr) * Ur * (Fcons * EP) * Fprice
|Variable machine cost
||EUR / hour
||Cmaint + Cfuel
||EUR / hour
||12 * n
|Total costs per hour
||EUR / hour
||Cfix + Cvar + Cwork
|Total costs per unit of product
||EUR / unit of product
||Csum / P
The user of the web tool can independently select processes and machines, thus composing his own harvesting system for which the application automaticaly calculates the costs. Using different machines the user is able to examine the impact of different machine selection on the total cost of harvesting system and thus optimize their own business process. The tool has built-in logical controls that prevent the user to choose a harversting system that is impossible.
We invite you to test the tool for calculating costs and visualizing the harvesting systems by yourself. If you are using the tool for the first time, it is advisable to check the "Content, Basis and Cost Calculation methodology" page before using it. In order to understand all the proffesional terms and methodology of the calculation. In addition, selected examples of harvesting systems and interactive user instructions are presented.