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The Concept
Crop's total cost is broken down into a number of Operations (Activities). Each operation requires Inputs (Needs), such as machinery, labour, raw materials, energy, labour and sometimes rented services at specified quantities. Crop's cost breakdown accordning ABC analysis method may be better represented to the next diagram :

ABC methodology approaches cost analysis results in both ways;
  • Cost analysis by Operation
  • Cost analysis by Operation Need (By Factor)
The Cost break-down
There are ready made, user editable tables (databases) with all categories of required inputs with associated costs for each item. The cost of Land and Overheads that may not be allocated to operations, are treated separately.

The economic characteristics of each Input are described in the relevant database and are supplied automatically to the Cost Analysis when the input is used in any of the Operations. The databases of input details which are beeing used in ABC software are:
  • Machinery including the characteristics and energy requirements of any number of machines
  • Labour
  • Input Materials such as fertilisers, pesticides, water, seeds, saplings, etc.
  • Energy and Fuels
  • Rentals, holding the cost of rented whole operations
Fixed & Variable Costs
The cost of different types of Land (land rent), non-allocated Overheads and the type and amount of various schemes of subsidisation are also present, available for use in the context of the economic analysis of various plants and crops. All these cost items are sorted in an Activity Based Costing format automatically.

Fixed assets are annuitised in order to calculate their economic rent. Labour and Consumables are valued at relevant market prices. For each Operation, the average annual cost is estimated by adding together the annuitised cost of the required fixed assets plus the sum of the average annual costs of all consumables and labour.

The sum of the costs of all Operations plus the average cost of Land and Overheads is the Total Annual Cost of the investment under examination.