Annex 3 (Reference Chapter 4) - Example of calculating the costs of operating processing machinery

This example is given only to indicate how the calculations are carried out. It cannot be transposed as such to concrete case studies. Assuming that:

a farmers' organization has purchased a rice thresher through a local agricultural credit office;

they plan to work on their own farms, but also possibly for farmers out of the organization;

they need to determine the operating cost of the machine.

(i) Assumptiom

Purchase conditions in Fcfa

- Purchase price 1,600,000

including the price of the machine,

commissioning costs, cost of the loan, etc.

- Personal contribution 320,000

- Bank loan: * amount 1,280,000

* annual rate of interest 15%

* maturity 5 years

* constant annuities 381,844

TOTAL INTEREST 629,220

The machine has not been insured and no shelter has been specially built for it.

Technical Specifications

- Diesel engine horsepower 8hp

- Fuel cost 210 Fcfa/l

- Lubricant mean cost 800 Fcfa/l

- Output per hour 500kg

- 2 operators 3,000 Fcfa

The other workers required for feeding the machine, bagging and winnowing operations are paid by the customer.

- Repair costs over the useful life, i.e. 0.5 as coefficient 800,000 Fcfa

- Useful life 5 years

- Working time per day 6 hours

For a labour presence of 8 hours (maintenance and transport of the machine from stock to stock)

- Paddy mean yield St per ha

- Sundries: machine transport, bags, etc... 2,000 Fcfa/day Because custom services are paid a percentage of the crop, marketing costs are included.

(ii) Annual performances

- Work time * in days 110 per year

* in hours 660 per year

- Fuel consumption: 0.121/hp/h x 8 hp x 660 hr/year 6341 per year

(iii) Annual costs

Fixed costs

The interest rate of the bank is applied to the personal contribution (i.e. 320,000 Fcfa actually paid by the purchaser), the remaining sum being borrowed.

When refunding a loan with constant annuities, interest amounts decrease each year. To make the calculation easier, 1/5th of interest is used here as annual financial charges.

As the annual use (fur) is lower than the ratio of the useful life in hours (Hr) to years of depreciation (N), amortization is considered as a fixed cost(A): A = Purchase price/N

- Interest on capital: 320,000 x 15 / 2 24,000 Fcfa

- Amortization: 1,600,000 / 5 320,000 Fcfa

- Financial charges: 630,000 / 5 126,000 Fcfa

TOTAL FIXED COSTS 470,000 Fcfa

Variable costs

- Fuels: 634 L x 210 Fcfa/L 133,140 Fcfa

- Lubricants: 634 L x 2,5 x 800 Fcfa/L/100 12,700 Fcfa

- Repairs: 1,600,000 x 0,7 x 660 hr/year x 5 years / 3500 hr = 105,600 Fcfa

- Labour cost: 3,000 Fcfa/d x 110 d/year 330,000 Fcfa

- Sundries: 2,000 Fcfa/d x 110 d/year 220,000 Fcfa

TOTAL VARIABLE COSTS 801,440 Fcfa

That is a gross total of 1,271,440 Fcfa per year, or 1,896 Fcfa per hour. For an efficiency of 5000kg per ha, the operating cost can therefore be estimated at 18,960 Fcfa per ha.