Ensuring that the machine lasts as long as possible is one way of reducing the need for the initial cost of a new machine. The service life can be extended through proper maintenance, careful adjustments, avoidance of overloads, and using skilled operators. The useful life also is extended through proper storage during the off-season.
In the previous section, we introduced the notion that the total cost per acre or hour decreases as annual use increases. This is the basis of BEU. For some operations it may be more profitable to consider hiring contract workers instead of owning and operating one's own machine. The decision to hire may hinge on the break-even usage, that is, the amount of use for which the costs of owning a machine are the same as the costs of hiring a custom operator.
Suppose for a given machine that the product of FC% and P equals $1,000. Also, suppose that the operating costs are $ 4.00 per acre. The TAC equation would be:
where A = acres of use. Next calculate the values of TAC for acre (A) values of 10, 50, 100, 200, and 500 acres. The result is Table 10.2.
Then if we wish to determine the cost of using the machine on a per-acre basis, we divide the TAC by the acres for each situation, and get the values shown in Table 10.3.
A comparison of the various levels of use shows that the cost per acre decreases as use increases. The break-even analysis in Figure 10.2 shows that for a custom
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