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Cheat Sheet for Calculating Fixed and Other Costs

However when you divide the total depreciation by the

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Unformatted text preview: for any increases in asset value or additional insurance requirements. Perhaps the biggest differences in fixed cost per ton can be attributed to the volume of hay produced in relationship to the investment. For instance, the total depreciation and other fixed costs are essentially the same for a round baler that bales 50 acres per year versus 250 acres. However, when you divide the total depreciation by the larger production, you get a lower cost per ton. To show how these calculations are performed, the machinery complement for an example farm is presented in Figure 1. In this scenario, I am using all new prices for machinery. Realistically most producers will have some mixture of new and used or either all used equipment. The biggest problem many producers have is figuring out how to allocate fixed costs for equipment used in more than one enterprise. For instance, tractors and front ­end loaders are often used in the cattle, hay (they are separate), and crop enterprises. So, how do you calculate the cost to the hay enterprise? A list is given below that should make the process...
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