What are Variable Costs? y o u r k n o w l e d g e p a r t n e r - PowerPoint PPT Presentation

What are Variable Costs? y o u r k n o w l e d g e p a r t n e r • These are costs paid only when the machine works • Running costs • Calculated per hour • Components: – Fuel – Oil and lubricants – Repair and maintenance – Tyres 49 Department of Forest and Wood Science

Variable Costs – Fuel Cost • Calculated by: y o u r k n o w l e d g e p a r t n e r   cost (R/Litre) consumptio n (L/hour)   R 6.00/litre 18.74 L/hour  R 112.44/hou r 50 Department of Forest and Wood Science

Variable Costs – Calculation of Fuel Costs • Calculate consumption y o u r k n o w l e d g e p a r t n e r 257g/kWh  0 . 267 L/kWh  0.96 g/L 1000    0.267 L/kWh machine pow er (kW) load factor (decimal)    0.267 100 kW 0.7  18.69 L/hour A motor at full speed (total performance = 100 %) consumes 257g of diesel/kWh. Diesel has a specific weight of 0.96 . 51 Department of Forest and Wood Science

Variable Costs – Oil & Lubricant Calculated as a percentage of the fuel cost. y o u r k n o w l e d g e p a r t n e r Cost of oil and lubricants Type of machine Percentage (%) Decimal Chainsaw 20 % 0.20 Machines without hydraulics 10 % 0.10 Machines with simple hyraulics 15 % 0.15 Machines with extensive 20 % 0.20 hydraulics 52 Department of Forest and Wood Science

Variable Costs – Oil & Lubricant • You can also calculate oil and lubricant y o u r k n o w l e d g e p a r t n e r consumption per hour (Q) with the formula below • GHP: Gross Horse Power of the machine   Q 0.0006 GHP (crankcase oil)   Q 0.0003 GHP (transmiss ion oil)   Q 0.0002 GHP (final drives)   Q 0 .0001 GHP (hydraulic controls) 53 Department of Forest and Wood Science

Variable Costs – Repair & Maintenance y o u r k n o w l e d g e p a r t n e r • Cost of keeping a machine running in a safe and productive manner • As the machine gets older repair and maintenance costs go up 54 Department of Forest and Wood Science

Variable Costs – Repair & Maintenance y o u r k n o w l e d g e p a r t n e r Repair and Maintenance cost (r) Type of Machine Percentage (%) Decimal Tractor 100 % 1.00 Cable skidder 50 % 0.50 Grapple skidder 60 % 0.60 Chainsaw 100 % 1.00 Feller-buncher 50 % 0.50 55 Department of Forest and Wood Science

Variable Costs – Repair & Maintenance y o u r k n o w l e d g e p a r t n e r • To calculate the repair and maintenance costs/hour: – Purchase price (R 1 000 000) – Repair and Maintenance factor (r) (0.8) – Machine life in years (5 years) – PMH worked per year 56 Department of Forest and Wood Science

Calculate Repair & Maintenance Costs • Calculate the annual repair and maintenance y o u r k n o w l e d g e p a r t n e r cost/hour :  Purchase price (R) r (decimal)  Machine life (years)  R 1 000 000 0.8  5 years  R 160 000/year R 160 00/year   R/hour PMH w orked/ye ar 57 Department of Forest and Wood Science

Variable Costs – Tyres • Information needed: y o u r k n o w l e d g e p a r t n e r – Estimated tyre life in hours (2 000 hours) – Cost per tyre (R 7 500) – Number of tyres – Machine life in hours (10 000 hours) – Machine life in years (5 years) • Calculations: – Number of sets of tyres used – Cost per set of tyres – Total cost for tyres per year/month/day etc. 58 Department of Forest and Wood Science

Variable Costs – Tyres • Number of sets of tyres used y o u r k n o w l e d g e p a r t n e r 10 000 hours machine life   5 sets of tyres 2 000 hours tyre life 5 sets of tyres   1 set of tyres/year 5 years machine life • Cost per set of tyres   4 tyres/set R 7 500/tyre  R 30 000/set • Total cost for tyres per year   1 set of tyres/year R 30 000/set  R 30 000/year 59 Department of Forest and Wood Science

Variable Costs – TOTAL y o u r k n o w l e d g e p a r t n e r • Total variable costs/hour = Fuel costs/hour + Oil and Lubricant costs/hour + Repair and Maintenance costs/hour +Tyre costs/hour 60 Department of Forest and Wood Science

y o u r k n o w l e d g e p a r t n e r Operator Costs Department of Forest and Wood Science 61

What are Operator Costs? • Pay your operator for his work: y o u r k n o w l e d g e p a r t n e r – Basic wage – Overtime – Benefits – Paid travelling time • Before tax 62 Department of Forest and Wood Science

TOTAL OPERATING COSTS • Total operating costs/hour = y o u r k n o w l e d g e p a r t n e r Total Fixed costs/hour + Total Variable costs/hour + Total Operator costs/hour • To calculate the total operating cost/m 3 : Total operating costs/hour (R/hour)  3 Productivi ty/hour (m /hour)  3 R/m 63 Department of Forest and Wood Science