The true cost of MACHINERY OWNERSHIP
Andrew Turnbull says it is vital to grasp a working understanding of financial planning in order to
influence the decision makers that can make it worthwhile for you to get up in the morning
When setting out a yearly budget, the machinery section should show costs to be split up into five separate sections: fuel, lubrication, maintenance, repairs, and labour. These sections make up the Operating Costs, or the cost of using the machine. In this article, we shall look at how we can use these figures, and then how to calculate the true ownership costs.
The total costs of owning a machine include the operating costs and fixed costs.
Operating costs are the cost associated with using the machine for its intended use, e.g. mowing. Fixed costs are those that have to be paid even if the machine is parked in a locked building and not used.
Operating Costs
To calculate the operating costs of using machinery and equipment, the following costs need to be calculated:
1. Fuel 2. Lubrication (greases and oils) 3. Maintenance (regular servicing)
4. Repairs (damage from accidents and misuse)
5. Labour (maintaining and repairing the machine)
This can be a daunting task and highlights the necessity of keeping good records. I used to set this as an assignment exercise when I was teaching and it taught those enthusiastic, outdoor loving greenkeepers that the “paper work” was important after all!
The following guide may help to gather the correct information for each section.
1. Fuel
i. Determine how much fuel the tank holds
ii. Fill the tank before mowing and, afterwards, look inside the tank to calculate how many litres of fuel is used per cutting session
iii.Calculate the number of cuts per year
iv. Find out the fuel cost per litre
Multiply the amount of fuel used per cut (ii) by the number of cuts per year (iii), and then multiply by cost of fuel per litre (iv).
2. Lubricants OILS
i. Find the quantity of engine oil, axle oil, hydraulic oil etc. in the machine. This may be from the Service Manual or from the manufacturer's website (see Useful Websites below for guidance)
ii. Determine the number of times the machine is serviced during the year and calculate the quantities of oil used per service and multiply by the number of services
iii.Find the cost of a barrel of oil and calculate the cost per litre (price paid divided by the quantity of oil in the barrel in litres)
iv. Multiply the quantity of oil used (ii) by the cost of oil per litre by per year (iii)
v. To this figure (iv) add the cost of oil used during normal use, e.g. engine oil topped up during the year
GREASE i. Find cost of grease per tube
ii. Calculate number of tubes used per year
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