If you are in charge of handling the budget for your compost facility, you must know how to analyze your equipment costs. This part of your operational budget can impact future choices in the machines that you use. This is true whether you need a new compost turner or other equipment. It can be helpful to understand machine rates in order to analyze the costs.
What is a machine rate?
This term refers to the cost of owning (or leasing) and operating a piece of equipment. Machine rates can be based on your own professional judgment and bookkeeping records if your operation is established. A general rate that other composting facilities use can be considered for start-up composting facilities. The rate, multiplied by the hours of use in a budget period, will tell you what the annual projected cost of that piece of machinery will be.
Here are some other numbers to use when calculating your machine rate.
- Operating costs (think fuel)
- Labor costs (this is usually expressed in dollars)
What are fixed costs?
Fixed costs accumulate over a period of time and are not affected by other factors like material costs or use hours. They include things like taxes, interest rates, storage costs, and insurance. Keep in mind that there may be other fixed costs your specific operation has that you will need to use in your calculations.
- Taxes: These will be different depending upon your state and city.
- Interest: If you are leasing a machine, have purchased it with a credit card, or are paying on loan, you may have an interest rate.
- Insurance: This varies depending upon the type(s) of insurance you have and where you purchase your insurance.
What are operational costs?
These will vary depending on how you use your compost machine. Fuel (which can vary in price), maintenance (this includes labor, parts, and supplies), tires, and repairs all count as operation costs. Another aspect of operational costs is known as equipment depreciation.
The cost of depreciation
This refers to the decline in the value of a machine over its working economic life. Economic life is just the amount of time that your compost machine can operate with acceptable costs and productivity. This is typically not a monetary cost, but one to pay attention to nonetheless.
There is a calculation you can use to get the cost of depreciation D = (P’ – S)N. The letter D is the yearly depreciation amount in dollars per year, P’ is the purchase cost (minus any consumables like tires), and S is the salvage value of the machine. Finally, N is the number of years the equipment has to work effectively (economic life) and that number will depend on how you use it.
What are the labor costs?
If there are not strict break times for the employees, you will need to estimate the number of hours they work each day. If they have different salaries, you must be sure to factor those in. Add in Social Security and Medicare, as well as any other employee-related costs, and you can get a good idea of what each one costs per year.
Are you looking for a new compost turner?
If you are in the market for a compost turner, SCARAB International has what you are looking for. We provide New
, and Refurbished
machines as well as our Leasing
options. You can call us at (806) 883-7621
to learn more.