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3. CALCULATION OF MACHINE RATES
3.1 Introduction
3.2 Classification of Costs
3.3 Definitions
3.4 Fixed Costs
3.5 Operating Costs
3.6 Labor Costs
3.7 Variable Effort Cycles
3.8 Animal Rates
3.9 Examples
3.1 Introduction
The unit cost of logging or road construction is essentially derived by dividing cost by
production. In its simplest case, if you rented a tractor with operator for $60 per hour -
including all fuel and other costs - and you excavated 100 cubic meters per hour, your
unit cost for excavation would be $0.60 per cubic meter. The hourly cost of the tractor
with operator is called the machine rate. In cases where the machine and the elements
of production are not rented, a calculation of the owning and operating costs is
necessary to derive the machine rate. The objective in developing a machine rate
should be to arrive at a figure that, as nearly as possible, represents the cost of the
work done under the operating conditions encountered and the accounting system in
use. Most manufacturers of machinery supply data for the cost of owning and operating
their equipment that will serve as the basis of machine rates. However, such data
usually need modification to meet specific conditions of operation, and many owners of
equipment will prefer to prepare their own rates.
3.2 Classification of Costs
The machine rate is usually, but not always, divided into fixed costs, operating costs,
and labor costs. For certain cash flow analyses only items which represent a cash flow
are included. Certain fixed costs, including depreciation and sometimes interest
charges, are omitted if they do not represent a cash payment. In this manual, all fixed
costs discussed below are included. For some analyses, labor costs are not included in
the machine rate. Instead, fixed and operating costs are calculated. Labor costs are
then added separately. This is sometimes done in situations where the labor associated
with the equipment works a different number of hours from the equipment. In this paper,
labor is included in the calculation of the machine rate.
3.2.1 Fixed Costs
Fixed costs are those which can be predetermined as accumulating with the passage of
time, rather than with the rate of work (Figure 3.1). They do not stop when the work
stops and must be spread over the hours of work during the year. Commonly included in
fixed costs are equipment depreciation, interest on investment, taxes, and storage, and
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insurance.
3.2.2 Operating Costs
Operating costs vary directly with the rate of work (Figure 3.1). These costs include the
costs of fuel, lubricants, tires, equipment maintenance and repairs.
Figure 3.1 Equipment Cost Model.
3.2.3 Labor Costs
Labor costs are those costs associated with employing labor including direct wages,
food contributions, transport, and social costs, including payments for health and
retirement. The cost of supervision may also be spread over the labor costs.
The machine rate is the sum of the fixed plus operating plus labor costs. The division of
costs in these classifications is arbitrary although accounting rules suggest a rigid
classification. The key point is to separate the costs in such a way as to make the most
sense in explaining the cost of operating the men and equipment. For example, if a
major determinant of equipment salvage value is the rate of obsolescence such as in
the computer industry, the depreciation cost is largely dependent on the passage of
time, not the hours worked. For a truck, tractor, or power saw, a major determinant may
be the actual hours of equipment use. The tractor's life could be viewed as the sand in
an hour glass which is only permitted to flow during the hours the equipment is working.
3.3 Definitions
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3.3.1 Purchase Price (P)
This is the actual equipment purchase cost including the standard attachments, optional
attachments, sales taxes, and delivery costs. Prices are usually quoted at the factory or
delivered at the site. The factory price applies if the buyer takes title to the equipment at
the factory and is responsible for shipment. On the other hand, delivered price applies if
the buyer takes title to the equipment after it is delivered. The delivered price usually
includes freight, packing, and insurance. Other costs such as for installation should be
included in the initial investment cost. Special attachments may sometimes have a
separate machine rate if their lives differ from the main equipment and form an
important part of the equipment cost.
3.3.2 Economic Life (N)
This is the period over which the equipment can operate at an acceptable operating
cost and productivity. The economic life is generally measured in terms of years, hours,
or in the case of trucks and trailers in terms of kilometers. It depends upon a variety of
factors, including physical deterioration, technological obsolescence or changing
economic conditions. Physical deterioration can arise from factors such as corrosion,
chemical decomposition, or by wear and tear due to abrasion, shock and impact. These
may result from normal and proper usage, abusive and improper usage, age,
inadequate or lack of maintenance, or severe environmental conditions. Changing
economic conditions such as fuel prices, tax investment incentives, and the rate of
interest can also affect the economic life of equipment. Examples of ownership periods
for some types of skidding and road construction equipment, based upon application
and operating conditions, are shown in Table 3.1. Since the lives are given in terms of
operating hours, the life in years is obtained by working backwards by defining the
number of working days per year and the estimated number of working hours per day.
For equipment that works very few hours per day, the derived equipment lives may be
very long and local conditions should be checked for the reasonableness of the
estimate.
3.3.3 Salvage Value (S)
This is defined as the price that equipment can be sold for at the time of its disposal.
Used equipment rates vary widely throughout the world. However, in any given used
equipment market, factors which have the greatest effect on resale or trade-in value are
the number of hours on the machine at the time of resale or trade-in, the type of jobs
and operating conditions under which it worked, and the physical condition of the
machine. Whatever the variables, however, the decline in value is greater in the first
year than the second, greater the second year than the third, etc. The shorter the work
life of the machine, the higher the percentage of value lost in a year. In agricultural
tractors for example, as a general rule 40 to 50 percent of the value of the machine will
be lost in the first quarter of the machine's life and by the halfway point of lifetime, from
70 to 75 percent of the value will be lost. The salvage value is often estimated as 10 to
20 percent of the initial purchase price.
3.4 Fixed Costs
3.4.1 Depreciation
The objective of the depreciation charge is to recognize the decline of value of the
machine as it is working at a specific task. This may differ from the accountant's
depreciation schedule-which is chosen to maximize profit through the advantages of
various types of tax laws and follows accounting convention. A common example of
this difference is seen where equipment is still working many years after it was "written
off" or has zero "book value".
Depreciation schedules vary from the simplest approach, which is a straight line decline
in value, to more sophisticated techniques which recognize the changing rate of value
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loss over time. The formula for the annual depreciation charge using the assumption of
straight line decline in value is
D = (P' - S)/N
where P' is the initial purchase price less the cost of tires, wire rope, or other parts
which are subjected to the greatest rate of wear and can be easily replaced without
effect upon the general mechanical condition of the machine.
Table 3.1.a - Guide for selecting ownership period based on application and
operating conditions.
1/
ZONE A ZONE B ZONE C
TRACK-TYPE
TRACTORS
Pulling scrapers, most
agricultural drawbar,
stockpile, coalpile and
landfill work. No impact.
Intermittent full throttle
operation.
Production dozing in
clays, sands, gravels.
Pushloading scrapers,
borrow pit ripping,
most landclearing and
skidding applications.
Medium impact
conditions.
Heavy rock ripping.
Tandem ripping.
Pushloading and
dozing in hard rock.
Work on rock
surfaces. Continuous
high impact conditions.
Small 12,000 Hr 10,000 Hr 8,000 Hr
Large 22,000 Hr 18,000 Hr 15,000 Hr
MOTORGRADERS Light road maintenance.
Finishing. Plant and
road mix work. Light
snowplowing. Large
amounts of traveling.
Haul road maintenance.
Road construction,
ditching. Loose fill
spreading.
Landforming,
land-leveling. Summer
road maintenance with
medium to heavy
winter snow removal.
Elevating grader use.
Maintenance of hard
pack roads with
embedded rock. Heavy
fill spreading. Ripping-
scarifying of asphalt or
concrete. Continuous
high load factor. High
impact.
20,000 Hr 15,000 Hr 12,000 Hr
EXCAVATORS Shallow depth utility
construction where
excavator sets pipe and
digs only 3 or 4
hours/shift. Free
flowing, low density
material and little or no
impact. Most scrap
handling arrangements.
Mass excavation or
trenching where
machine digs all the
time in natural bed clay
soils. Some traveling
and steady, full throttle
operation. Most log
loading applications.
Continuous trenching
or truck loading in rock
or shot rock soils.
Large amount of travel
over rough ground.
Machine continuously
working on rock floor
with constant high load
factor and high impact.
12,000 Hr 10,000 Hr 8,000 Hr
1/
Adapted from Caterpillar Performance Handbook, Caterpillar Inc.
Table 3.1.b - Guide for selecting ownership period based on application and
operating conditions.
1/
ZONE A ZONE B ZONE C
WHEEL
SKIDDERS
Intermittent skidding
for short distances, no
decking. Good
underfoot conditions:
level terrain, dry floor,
few if any stumps.
Continuous turning,
steady skidding for
medium distances with
moderate decking. Good
underfooting: dry floor
with few stumps and
gradual rolling terrain.
Continuous turning,
steady skidding for long
distances with frequent
decking. Poor
underfloor conditions:
wet floor, steep slopes
and numerous stumps.
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12,000 Hr 10,000 Hr 8,000 Hr
WHEEL
TRACTOR
SCRAPERS
Level or favorable
hauls on good haul
roads. No impact.
Easy-loading materials.
Varying loading and haul
road conditions. Long
and short hauls. Adverse
and favorable grades.
Some impact. Typical
road-building use on a
variety of jobs.
High impact condition,
such as loading ripped
rock. Overloading.
Continuous high total
resistance conditions.
Rough haul roads.
Small 12,000 Hr 10,000 Hr 8,000 Hr
Large 16,000 Hr 12,000 Hr 8,000 Hr
OFF HIGHWAY
TRUCKS &
TRACTORS
Mine and quarry use
with properly matched
loading equipment.
Well maintained haul
roads. Also
construction use under
above conditions.
Varying loading and haul
road conditions. Typical
road-building use on a
variety of jobs.
Consistently poor haul
road conditions.
Extreme overloading.
Oversized loading
equipment.
25,000 Hr 20,000 Hr 15,000 Hr
WHEEL
TRACTORS &
COMPACTORS
Light utility work.
Stockpile work. Pulling
compactors. Dozing
loose fill. No impact.
Production dozing,
pushloading in clays,
sands, silts, loose
gravels. Shovel cleanup.
Compactor use.
Production dozing in
rock. Pushloading in
rocky, bouldering
borrow pits. High impact
conditions.
15,000 Hr 12,000 Hr 8,000 Hr
1/
Adapted from Caterpillar Performance Handbook, Caterpillar Inc.
Table 3.1.c - Guide for selecting ownership period based on application and
operating conditions.
1/
ZONE A ZONE B ZONE C
WHEEL
LOADERS
Intermittent truck loading
from stockpile, hopper
charging on firm, smooth
surfaces. Free flowing,
low density materials.
Utility work in
governmental and
industrial applications.
Light snowplowing. Load
and carry on good
surface for short
distances with no
grades.
Continuous truck
loading from
stockpile. Low to
medium density
materials in properly
sized bucket. Hopper
charging in low to
medium rolling
resistance. Loading
from bank in good
digging. Load and
carry on poor
surfaces and slight
adverse grades.
Loading shot rock (large
loaders). Handling high
density materials with
counterweighted machine.
Steady loading from very
tight banks. Continuous
work on rough or very soft
surfaces. Load and carry in
hard digging; travel longer
distances on poor surfaces
with adverse grades.
Small 12,000 Hr 10,000 Hr 8,000 Hr
Large 15,000 Hr 12,000 Hr 10,000 Hr
TRACK-TYPE
LOADERS
Intermittent truck loading
from stockpile. Minimum
traveling, turning. Free
flowing, low density
materials with standard
bucket. No impact.
Bank excavation,
intermittent ripping,
basement digging of
natural bed clays,
sands, silts, gravels.
Some traveling.
Steady full throttle
operation.
Loading shot rock, cobbles,
glacial till, caliche. Steel mill
work. High density materials
in standard bucket.
Continuous work on rock
surfaces. Large amount of
ripping of tight, rocky
materials. High impact
condition.
12,000 Hr 10,000 Hr 8,000 Hr
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1/
Adapted from Caterpillar Performance Handbook, Caterpillar Inc.
3.4.2 Interest
Interest is the cost of using funds over a period of time. Investment funds may be
borrowed or taken from savings or equity. If borrowed, the interest rate is established
by the lender and varies by locality and lending institution. If the money comes from
savings, then opportunity cost or the rate this money would earn if invested elsewhere is
used as the interest rate. The accounting practice of private firms may ignore interest
on equipment on the ground that interest is a part of profits and, therefore, not a proper
charge against operating equipment. Although this is sound from the point of view of the
business as a whole, the exclusion of such charges may lead to the development of
unrealistic comparative rates between machines of low and high initial cost. This may
lead to erroneous decisions in the selection of equipment.
Interest can be calculated by using one of two methods. The first method is to multiply
the interest rate by the actual value of the remaining life of the equipment. The second
simpler method is to multiply the interest rate times the average annual investment.
For straight-line depreciation, the average annual investment, AAI, is calculated as
AAI = (P - S) (N + 1)/(2N) + S
Sometimes a factor of 0.6 times the delivered cost is used as an approximation of the
average annual investment.
3.4.3 Taxes
Many equipment owners must pay property taxes or some type of usage tax on
equipment. Taxes, like interest, can be calculated by either using the estimated tax rate
multiplied by the actual value of the equipment or by multiplying the tax rate by the
average annual investment.
3.4.4 Insurance
Most private equipment owners will have one or more insurance policies against
damage, fire, and other destructive events. Public owners and some large owners may
be self-insured. It could be argued that the cost of insurance is a real cost that reflects
the risk to all owners and some allowance for destructive events should be allowed. Not
anticipating the risk of destructive events is similar to not recognizing the risk of fire or
insect damage in planning the returns from managing a forest. Insurance calculations
are handled in the same way as interest and taxes.
3.4.5 Storage and Protection
Costs for equipment storage and off-duty protection are fixed costs, largely
independent of the hours of use. Costs of storage and protection must be spread over
the total hours of equipment use.
3.5 Operating Costs
Operating costs, unlike fixed costs, change in proportion to hours of operation or use.
They depend upon a variety of factors, many of which are, to some extent, under the
control of the operator or equipment owner.
3.5.1 Maintenance and Repair
This category includes everything from simple maintenance to the periodic overhaul of
engine, transmission, clutch, brakes and other major equipment components, for which
wear primarily occurs on a basis proportional to use. Operator use or abuse of
equipment, the severity of the working conditions, maintenance and repair policies, and
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the basic equipment design and quality all affect maintenance and repair costs.
The cost of periodically overhauling major components may be estimated from the
owner's manual and the local cost of parts and labor, or by getting advice from the
manufacturer. Another owner's experience with similar equipment and cost records
under typical working conditions is a valuable source. If experienced owners or cost
records are not available, the hourly maintenance and repair cost can be estimated as a
percentage of hourly depreciation (Table 3.2).
TABLE 3.2. Maintenance and repair rates as a percentage of the hourly
depreciation for selected equipment.
Machine Percentage Rate
Crawler tractor 100
Agricultural tractor 100
Rubber-tired skidder with cable chokers 50
Rubber-tired skidder with grapple 60
Loader with cable grapple 30
Loader with hydraulic grapple 50
Power saw 100
Feller-buncher 50
3.5.2 Fuel
The fuel consumption rate for a piece of equipment depends on the engine size, load
factor, the condition of the equipment, operator's habit, environmental conditions, and
the basic design of equipment.
To determine the hourly fuel cost, the total fuel cost is divided by the productive time of
the equipment. If fuel consumption records are not available, the following formula can
be used to estimate liters of fuel used per machine hour,
where LMPH is the liters used per machine hour, K is the kg of fuel used per brake
hp/hour, GHP is the gross engine horsepower at governed engine rpm, LF is the load
factor in percent, and KPL is the weight of fuel in kg/liter. Typical values are given in
Table 3.3. The load factor is the ratio of the average horsepower used to gross
horsepower available at the flywheel.
TABLE 3.3. Weights, fuel consumption rates, and load factors for diesel and
gasoline engines.
Engine Weight
(KPL)
kg/liter
Fuel Consumption
(K)
kg/brake hp-hour
Load Factor
(LF)
Low Med High
Gasoline 0.72 0.21 0.38 0.54 0.70
Diesel 0.84 0.17 0.38 0.54 0.70
3.5.3 Lubricants
These include engine oil, transmission oil, final drive oil, grease and filters. The
consumption rate varies with the type of equipment, environmental working condition
(temperature), the design of the equipment and the level of maintenance. In the absence
of local data, the lubricant consumption in liters per hour for skidders, tractors, and
front-end loaders could be estimated as
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Q = .0006 GHP (crankcase oil)
Q = .0003 GHP (transmission oil)
Q = .0002 GHP (final drives)
Q = .0001 GHP (hydraulic controls)
These formulas include normal oil changes and no leaks. They should be increased 25
percent when operating in heavy dust, deep mud, or water. In machines with complex
and high pressure hydraulic systems such as forwarders, processors, and harvesters,
the consumption of hydraulic fluids can be much greater. Another rule of thumb is that
lubricants and grease cost 5 to 10 percent of the cost of fuel.
3.5.4 Tires
Due to their shorter life, tires are considered an operating cost. Tire cost is affected by
the operator's habits, vehicle speed, surface conditions, wheel position, loadings,
relative amount of time spent on curves, and grades. For off-highway equipment, if local
experience is not available, the following categories for tire life based upon tire failure
mode could be used as guidelines with tire life given in Table 3.4.
In Zone A, almost all tires wear through to tread from abrasion before failure. In Zone B,
most tires wear out - but some fail prematurely from rock cuts, rips, and non-repairable
punctures. In Zone C, few if any tires wear through the tread before failure due to cuts.
TABLE 3.4. Guidelines for tire life for off-highway equipment
Equipment Tire Life, hours
Zone A Zone B Zone C
Motor graders 8000 4500 2500
Wheel scrapers 4000 2250 1000
Wheel loaders 4500 2000 750
Skidders 5000 3000 1500
Trucks 5000 3000 1500
3.6 Labor Costs
Labor costs include direct and indirect payments such as taxes, insurance payments,
food, housing subsidy, etc. Labor costs need to be carefully considered when
calculating machine rates since the hours the labor works often differs from the hours
the associated equipment works. What is important is that the user define his
convention and then to use it consistently. For example, in felling, the power saw rarely
works more than 4 hours per day, even though the cutter may work 6 or more hours and
may be paid for 8 hours, including travel. If felling production rates are based upon a
six-hour working day, with two hours of travel, the machine rate for an operator with
power saw should consider 4 hours power saw use and eight hours labor for six hours
production.
3.7 Variable Effort Cycles
The concept that men or equipment work at constant rates is an abstraction that
facilitates measurements, record keeping, payments and analysis. However, there are
some work cycles which require such variable effort that it is more useful to construct
machine rates for parts of the cycle. One important case is the calculation of the
machine rate for a truck. When a log truck is waiting to be loaded, is being loaded, and
is being unloaded, its fuel consumption, tire wear, and other running costs are not being
incurred. Or, if these costs are incurred, they are at a much reduced rate. For the
standing truck, a different machine rate is often constructed using only the fixed cost
and the labor cost for this part of the cycle. Part or all of the truck depreciation may be
included.
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If a single machine rate were used to estimate the unit cost for truck transport and this
value was converted to a ton-km cost or $/m
3
-km cost without removing the "fixed" cost
of loading and unloading then the "variable" cost of transport would be overestimated.
This could lead to erroneous results when choosing between road standards or haul
routes.
3.8 Animal Rates
The calculation of the animal rate is similar to the machine rate, but the types of costs
differ and merit additional discussion.
3.8.1 Fixed Cost
The fixed cost includes the investment cost of the animal or team, harness, yoke, cart,
logging chains and any other investments with a life more than one year. Other fixed
costs include the upkeep of the animals.
The purchase price of the animal may include spare animals if the working conditions
require that the animal receive rest more than overnight, such as every other day. To
allow for the possibility of permanent injury, the animal purchase price may be increased
to include extra animals. In other cases, accidents can be allowed for in the insurance
premium. The salvage cost for the animal has the same definition as for a machine rate
but in the case of the animal, the salvage value is often determined by its selling value
for meat. Average annual investment, interest on investment, and any taxes or licenses
are treated the same as for equipment. To find the total fixed costs for the animals, the
fixed costs for the animal, cart, harness, and miscellaneous investments can be
calculated separately since they usually have unequal length lives and the hourly costs
added together.
Animal support costs which do not vary directly with hours worked include pasture
rental, food supplements, medicine, vaccinations, veterinarian services, shoes, ferrier
services and any after-hours care such as feeding, washing or guarding. It could be
argued that food and care requirements are related to hours worked and some part of
these costs could be included in operating costs. Pasture area (ha/animal) can be
estimated by dividing the animal consumption rate (kg/animal/month) by the forage
production rate (kg/ha/month). Food supplements, medicine, vaccinations, and
veterinarian schedules can be obtained from local sources such as agricultural
extension agents.
3.8.2 Operating Costs
Operating costs include repair and maintenance costs for harnesses, carts, and
miscellaneous equipment.
3.8.3 Labor Costs
The labor cost in the animal rate is for the animal driver (and any helpers). For full year
operations it is calculated as the labor cost per year including social costs divided by
the average number of working days or hours for the driver (and any helpers).
3.9 Examples
Examples of machine rates for a power saw, a tractor, a team of oxen, and a truck are
in the following tables. Although the machine rates in Tables 3.5 to 3.8 share the same
general format, there is flexibility to represent costs that are specific to the machine
type, particularly in the calculation of the operating costs. For the power saw (Table 3.5),
major operating expenses are identified with the chain, bar, and sprocket so they have
been broken out separately. For the oxen (Table 3.7), the fixed costs have been divided
into major cost components specific to maintaining animals, in addition to depreciation.
For the truck (Table 3.8), costs have been divided in standing costs and traveling costs
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to differentiate between costs when the truck is standing by, being loaded, or unloaded
as compared to traveling costs.
TABLE 3.5 Machine Rate Calculation for a Power Saw
1
Machine: Description - McCulloch Pro Mac 650 Power Saw
Motor cc 60 Delivered Cost 400
Life in hours 1000 Hours per year 1000
Fuel: Type Gas Price per liter 0.56
Oper: Rate per day 5.50 Social Costs 43.2%
Cost Component Cost/hour
(a) Depreciation 0.36
(b) Interest
(@ 10% )
0.03
(c) Insurance
(@ 3%)
0.01
(d) Taxes -
(e) Labor
1.89
2
where f = social costs of labor as decimal
SUB-TOTAL 2.29
(f) Fuel = 0.86 l/hr .95 CL +0.86 l/hr .05 CO) 0.51
where CL = cost of gas, CO = cost of oil
(g) Lube oil for bar and chain = Fuel cons/2.5 CO 0.45
(h) Servicing and repairs = 1.0 depreciation 0.36
(i) Chain, bar, and sprocket 0.67
(j) Other 0.22
TOTAL
4.50
3
1
All costs are in US$.
2
Labor based on 240 days per year.
3
Add 0.04 if standby saw is purchased.
TABLE 3.6 Machine Rate Calculation for a Tractor
1
Machine: Description - CAT D-6D PS
Gross hp 140 Delivered cost
142,000
2
Life in hrs 10,000 Hrs per year 1,000
Fuel: Type Diesel Price per liter .44
Oper: Rate per day 12.00 Social Costs 43.2%
Help: Rate per day 5.00 Social Costs 43.2%
Cost Component Cost/hour
(a) Depreciation 12.78
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(b) Interest
(@ 10% )
8.52
(c) Insurance
(@ 3%)
2.56
(d) Taxes
(@ 2%)
1.70
(e) Labor
5.84
3
where f = social costs of labor as decimal
SUB-TOTAL 31.40
(f) Fuel = .20 GHP LF CL 6.65
where GHP = gross engine horsepower
CL = cost per liter for fuel
LF = load factor (.54)
(g) Oil and grease = 0.10 fuel cost 0.67
(h) Servicing and repairs = 1.0 depreciation 12.78
(i) Other (cable, misc) 5.00
TOTAL 56.50
1
All costs are in US$.
2
With blade, ROPS, winch, integral arch.
3
Labor based upon 240 days per year.
TABLE 3.7 Machine Rate Calculation for a Team of Oxen
1
Description - Pair of oxen for skidding
Gross hp - Delivered cost 2,000
Life in years 5 Days per year 125
Labor Rate per day 7.00 Social Costs 43.2%
Cost Component Cost/day
(a) Depreciation
2.08
2
(b) Interest
(@ 10%)
0.96
(c) Taxes -
(d) Pasture 1.10
(e) Food supplements 1.36
(f) Medicine and veterinary services 0.27
(g) Driver
10.02
3
where f = social costs of labor as decimal
(h) After-hours feeding and care 2.62
(i) Other (harness and chain) 1.00
TOTAL 19.41
3. CALCULATION OF MACHINE RATES http://www.fao.org/docrep/t0579e/t0579e05.htm
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1
All costs are in US$.
2
Oxen sold for meat after 5 years.
3
Driver works with two pair of oxen, 250 day year.
TABLE 3.8 Machine Rate Calculation for a Truck
1
Machine: Description - Ford 8000 LTN
Gross hp 200 Delivered cost 55,000
Life in hrs 15,000 Hrs per year 1,500
Fuel: Type Diesel Price per liter .26
Tires: Size 10 22 Type Radial Number 10
Labor Rate per day 12.00 Social Costs 43.2%
Cost Component Cost/hour
(a) Depreciation 3.12
(b) Interest
(@ 10%)
2.20
(c) Insurance
(@ 3%)
0.66
(d) Taxes
(@ 2%)
0.44
(e) Labor
3.30
2
where f = social costs of labor as decimal
Standing Cost SUB-TOTAL 9.72
(f) Fuel = .12 GHP CL 6.24
where CL = cost per liter for fuel
(g) Oil and grease = 0.10 fuel cost 0.62
(h) Servicing and repairs = 1.5 depreciation 4.68
(i) Tires = 2.40
(j) Other (chains, tighteners) 0.20
Traveling Cost TOTAL 23.86
1
All costs are in US$.
2
Labor is for 240 days plus 20% overtime

3. CALCULATION OF MACHINE RATES http://www.fao.org/docrep/t0579e/t0579e05.htm
12 of 12 12-07-2014 12:37 PM