Lec 14 Flashcards
(48 cards)
The costs associated with machinery and equipment in farming have increased significantly due to several factors, what are these?
-the use of larger machines
-the adoption of new technology
-rising prices for parts and new machinery
-higher energy prices
____ plays a vital role in agricultural machinery management.
Economics
Selection of the ____ of a machine for a particular job
requires careful evaluation of all cost items.
size and capacity
____ require higher investment and may be too large
for economical operation with the rest of the machines on the farm.
Oversized machines
____ may give a lower investment but the increased labor cost may offset the savings.
Undersized machines
The machine with lower total cost _____is recommended.
(investment + operating)
The final decision is influenced by the following:
-suitability of the machine to the crop, to the field, and to weather conditions
-timeliness of field operation which is governed by the capacity of the machine
-availability of capital
-cost and availability of labor and fuel
Benefits from agricultural machinery operation:
-time and cost savings
-income from custom work
-value of yields
-salvage value
costs of owning the machine
fixed costs
costs of electricity, fuel, oil, labor and other inputs
variable costs
Also called “Fixed Costs”
Ownership Costs
Also called “Fixed Costs”
Ownership Costs
Expenses incurred regardless of whether the machine is operated or
not.
Ownership Costs / Fixed Costs
Under fixed costs are the following:
1.Depreciation (D)
2. Interest on Investment (IOI)
3. Shelter
4. Insurance
5. Taxes
6. Repair and Maintenance
Reduction in the value of the machine as a result of use (wear
and tear) and obsolescence (availability of newer and better
models).
Depreciation
Value of the machine at the end of its useful life usually estimated at zero to 10 percent of initial cost.
Salvage value (SV)
Based on experience and similar machines
Useful life (L)
Factors of Depreciation
- Age
- Accumulated hours of use
The number of years over which costs are to be estimated. It is often
less than the machine’s service life
because most farmers trade a machine for a different one before it is completely worn out.
Economic Life
A good rule of thumb for farm machines
10-12 years
A good rule of thumb for tractors
15 years
Estimate sale value of the
machine at the end of its economic
life.
It is the amount you could
expect to receive as a trade-in
allowance, an estimate of the used
market value if you expect to sell the
machine outright, or zero if you plan
to keep the machine unit until it is
worn out.
Salvage Value
Change for the use of the money invested on the machine regardless of
whether the money was borrowed or not.
Interest on Investment
Provided to protect the machine from robbers and adverse weather conditions, for ease of making repairs, and for a better appearance of
the farm.
Shelter
