PER UNIT COSTS TO OWN AND OPERATE FARM MACHINERY

machinery is used and how much labor is devoted to each operation, the producer could estimate
the amount of each expense to be allocated to crops, and how much to be allocated to other
enterprises. A producer must remember that the labor allocated to crop enterprises must also be
prorated between machinery labor, and non-machinery labor related to the crop enterprises.
Because a share of labor allocated to crop enterprises is not directly related to operating
machinery, such as time spent making management decisions, complying with government
programs, crop scouting, etc.

Step six, finding prorated actual field operation costs, is the product of field operation
percentages (step four) and the actual aggregate crop machine costs (step five) to determine the
prorated actual field operation costs. This represents the farm’s prorated cost to perform the
respective operation, as compared to the estimated cost to perform the operation, as found in step
two.

Step seven, finding actual per unit machinery costs, finds the actual per unit machine
costs by dividing the prorated field operation costs (step six) by the number of units that
operation was performed over. This is the farm specific cost to perform that particular field
operation on a per unit basis. Since it includes the farm’s own machinery costs it is not based on
averages or assumptions that do not reflect the farm’s individual management.

For a farm to determine its relative standing to other farms with respect to machinery
ownership and operating costs, it can benchmark its machinery costs. To do this, the farm would
calculate a relative crop machine cost coefficient, B, where B is calculated as

actual aggregate crop machine costs (step 5)

(8) B--

expected aggregate crop machine costs (step 3)

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