Cost factors associated with owning farm machinery

One of the reasons for large investment in farm machinery in the current farming practices is to reduce the labor cost and increase the net return of the farmers output. The investment is, obviously not worthwhile if the net returns of the farmers output are unachievable. The farm machinery cost are in two categories, fixed cost and variable or operating cost. The fixed costs are such costs which are the initial investment, depreciation, interest on investment and other minor items – taxes, insurance and shelter. The fixed cost is added up even when the equipment is not in use.

Variable costs are costs which are attributed to such costs as fuel and lubricant including miscellaneous supplies, repairs, maintenance and labor to operate, these costs add up only when the equipment is in use.

The cost of owning a farm machine generally is also affected by the number of hours per year that the machine is in operation (use).