COST ANALYSIS LAYOUT

Two main forms of cost analysis are used in the model, in order cover the majority of the needs of
the analyst.

• Cost breakdown by operation or activity

• Cost breakdown by input factor

The structure of the first is:

The second structure (by Factor) is somewhat similar, but it emphasises on the use of resources
such as labour, machinery and raw materials. The layout can be inspected below:

Each of the cost analysis forms and formats may be inspected in a large number of monitoring
(pivot) tables which are calculated on the fly for

• Each crop
 • Each land type
• Each year
• Each month

in any combination. This is very useful mainly for auditing purposes, since every detail is being
available to the user.

However, if overall cost estimation is required, inspecting the individual cost in such analysis is of
no use because some operations are not performed regularly and uniformly year after year and
therefore, annual cost may differ among the years of the plantation life.

The overall cost estimates are calculated as annual equivalent costs, i.e. costs that express
lifetime averages incorporating the time value of money. To calculate the annual equivalent cost,
the present value of all costs over the useful life of the plantation is transformed into an equivalent
annuity with an annual uniform payment which is the annual equivalent cost.

As an example, assume the following annual costs of a project:

The present value of all costs, including the base year (year zero) investment cost, is equal to
156.66 thousand eur, which is then distributed by means of an annuity to 49.42 thousand eur per
typical year.

The present value of total cost (PV) is calculated by means of the Present Value formula:
where d is the discount rate, and TCt is the Total Cost in year t, and n is the number of years of
useful economic life.

The Annual Equivalent Cost is then calculated from the annuity formula:

The format of a standard Annual Equivalent Cost table is as in the following example: