Capital Input Analysis 1
Last Updated: August 04, 2016; First Released: May 13, 2014)
Author: Kevin Boyle, President, DevTreks (1*)
Version: DevTreks 2.0.0
A. Introduction
This reference explains how to start to collect, measure, and analyze, capital input cost data (2*). DevTreks believes that every capital input, from the machinery used to grow crops to the x-ray machine used to diagnose bone breaks, has a story to tell and lessons to teach. Those lessons can only be learned when data about the input is collected, measured, aggregated, analyzed, explained, and stored in online knowledge banks. A full, uniform, and accurate accounting of the costs, benefits, and outcomes for capital investments made in tractors, robots, trucks, medical equipment, sewing machines, and cloud computing servers, should be one or two links away for everyone. If a business owner, worker, government official, or citizen needs to make a decision involving capital inputs, they should have ready access to the best data and advice available. This reference introduces another DevTreks way to build these types of knowledge banks.
B. Data
The Ag Production Analysis 1, Construction Analysis 1, and Health Care Analysis 1 tutorials demonstrate how capital input data can be structured to support the analyses shown in this reference. The actual data used in this analysis was structured for the purpose of testing these analyzers.
The Analyzers demonstrated in this reference can be found at:
https://www.devtreks.org/agtreks/preview/crops/linkedviewgroup/Machinery Analyzer Group/19/none/
This reference used the cloud deployment (Version 2.0.0) to document calculations.
C. Work Breakdown Structure (WBS) and Calculator Rules
DevTreks recommends classifying all data using Work Breakdown Structures. In addition, networks or clubs should establish standard rules for members to follow explaining how to manage capital input datasets. Those rules include guidance about setting calculator properties such as interest rates, horsepower, capacity options, energy prices, and labor use. The goal of the rules is to support the uniform aggregation and analysis of capital input data. Networks and clubs should provide written documentation and videos to their members explaining the rules.
D. Capital Input Calculations
The Capital Input Calculators 1 reference documents the Input calculations that will be aggregated and analyzed in this reference (3*). Separate analyzers are available for the base elements found in Operations, Components, Operating Budgets, and Capital Budgets. The Calculator and Analyzer 1 reference documents how all DevTreks’ Analyzers work. The Calculator Type property of analyzers is used to specify the capital input calculations to analyze. The current version supports the following calculators:
Agricultural Machinery Calculator: This calculator supports the analysis of agricultural and machinery capital inputs. Operating costs calculated by this calculator include fuel, lube, repair, and labor. Allocated overhead costs calculated by this calculator include capital recovery and taxes, housing, and insurance. As explained in the next section, this calculator ignores manual OCAmount and AOHAmount data entries. Even so, the quality of the base element data appears neater by setting these values equal to the calculated amounts.
NPV Joint Machinery Calculations: The Capital Input 1 Calculator reference explains that when power and nonpower machinery inputs are combined in an Operation or Component, and Net Present Value (NPV) Calculators are run, new machinery calculations are generated. The following images display the results of running separate input machinery calculations for a tractor and a chisel plow. Note the individual differences in area, fuel, labor, width, field efficiency, and horsepower properties.
URLs:
https://www.devtreks.org/agtreks/preview/crops/inputseries/2002 Tractor, 4-Wheel Drive, 200-280 PTO HP/2147377908/none
https://www.devtreks.org/agtreks/preview/crops/inputseries/2002 Chisel Plow, Maximum 1 foot depth, Chisel or Sweep Type, Drawn or Moun/2147377820/none
https://www.devtreks.org/agtreks/preview/crops/operation/Tillage, First, 2003, Chisel Plow, NASS machinery/2091544565/none
Chisel Plow
Tractor
The following image displays the results of running a NPV Calculator for an Operation that combines the two inputs. Both inputs now have the same OCAmounts and AOHAmounts that reflect joint calculations. The joint calculations also changed all OCPrices and AOHPrices. The prices that change depend on the base calculation parameters. The implement’s width, field efficiency, and equivalent horsepower, and the tractor’s maximum horsepower were used in the joint calculations.
Chisel Plow Operation
Irrigation Power Calculator: This calculator supports the analysis of irrigation power capital inputs. Operating costs calculated by this calculator include fuel, lube, repair, labor, and water. Allocated overhead costs calculated by this calculator include capital recovery and taxes, housing, and insurance. This calculator is rerun when NPV calculators are run and will ignore manual OCAmount and AOHAmount data entries. Even so, the quality of the base element data appears neater by setting these values equal to the calculated amounts.
General Capital Calculator: This calculator supports the analysis of generic capital inputs. The operating costs calculated by this calculator include fuel, repair, and labor. Allocated overhead costs calculated by this calculator include capital recovery and taxes, housing, and insurance. This calculator is rerun when NPV calculators are run and will ignore manual OCAmount and AOHAmount data entries. Even so, the quality of the base element data appears neater by setting these values equal to the calculated amounts.
Timeliness Penalty Calculators: Step 2 of the Machinery Calculator can be used to set up to 5 feasible combination of machinery properties that can be to determine penalties for not completing machinery operations or components in a timely manner. Step 2 of NPV Operation or Component NPV Timeliness Penalty calculators must be used to set properties for calculating the timeliness penalty.
E. Multipliers
Machinery totals are multiplied by Input.Times, Operation.Amount, Component.Amount, and TimePeriod.Amount properties. This restores some of the customization taken away by not being able to manually change OCAmount or AOHAmount properties in some calculators.
F. Net Present Value (NPV) Calculators
With the exception of Input base elements, NPV calculators must be run prior to running capital input analyzers. The NPV calculated document contains the data that will be analyzed.
G. Capital Input Benefits
This reference does not explicitly include an analysis of capital input benefits (2*). Instead, their benefits have to be indirectly inferred from the Outputs and Outcomes included in Operating and Capital Budgets.
H. Capital Input Analyses
The Analysis Type property of analyzers is used to specify the type of analysis to run. The current version supports the following analyses:
1. Totals Analysis
A Totals Analysis sums capital input calculations for every base element in an analysis. No Aggregate Using or Compare Using properties are offered in the analyzers because basic totals should be documented before more complicated types of analyses are run. All analyzers run this analysis for each aggregated base element before carrying out additional calculations. This analysis is available for the Machinery, Irrigation, and General Capital calculators. The Operating and Allocated Overhead total costs displayed in this calculator is a summation of the non-discounted individual costs calculated by the calculator.
The following Machinery Totals Operation Analysis displays typical results for agricultural machinery used in crop operations.
https://www.devtreks.org/agtreks/preview/crops/operationgroup/Nutrient Management, Nashua corn and beans research plots, N application/326/none
Note how the 10 crop operations in this example all have equal machinery costs. Also note how the Operation Group’s costs verify that they are a summation of the 10 children machinery operations. This is likely to be an example of an expeditious, but not necessarily fully accurate, machinery analysis. The same machinery was used in each crop operation even though 10 years of crop operations are being analyzed. Networks need to provide thorough guidance about the data standards employed by their clubs. In general, high quality data does not employ expeditious techniques. It might be forgiven in this example because 10 years of machinery data was simply not available and the analysis was mainly concerned about nutrient management, not machinery management.
The following Totals Operating Budget Analysis displays typical results for the farm equipment used in a corn soybean rotation.
https://www.devtreks.org/agtreks/preview/crops/budget/2- Corn Soybean Rotation/273071632/none
The following Totals Capital Budget Analysis displays typical results for the irrigation power equipment used in a center pivot irrigation investment. Footnotes 3 and 4 are particularly relevant for these types of analyses.
https://www.devtreks.org/agtreks/preview/cropsconservation/investmentgroup/Capital Budgets, Irrigation Examples/275505672/none
The following Totals Capital Budget Analysis displays typical results for general capital inputs used in a simple capital investment analysis.
2. Timeliness Penalty Analysis (4*)
These analyses can be completed for Operations, Components, Operating Budgets, and Capital Budgets. Operations or Components that can’t be completed in a timely fashion, as determined by the properties set in the underlying calculators, will be assessed a penalty based on the number of extra days needed to complete the operation. The following image displays a typical analysis.
https://www.devtreks.org/agtreks/select/crops/operationgroup/Seeding and Planting, corn/44/none
Besides regular machinery properties, these analyses include the following properties:
* Labor Available (hours per day): This property is set in the NPV Calculators.
* Area Covered (ac/ha per day) = Field Capacity (ac/hour) / Labor Available (hours/day)
* Planned versus Actual Start Date: The Planned Date derives from the Start Date in the NPV Calculators. In Least Cost Analysis, the actual start date derives from an analysis of sequential feasible machinery operations/components.
* Probable Field Days Needed = Operation/Component Amount (or Time Period Amount) / Area Covered
* Probable Finish Date: Actual Start Date + (Field Days Needed / Probably Workdays from NPV Calculators)
* Timeliness Penalties Days from Start: This property is set in the NPV Calculators.
* Timeliness Penalty (percent): This property is set in the NPV Calculators.
* Additional Penalty (percent): This property is set in the NPV Calculators.
* Total Revenue = Operations and Components: Operation/Component.Amount * Output.Price * Output.Amount * Output.CompositionAmount * Output.Times
Time Periods: The output with the highest revenue will be used in the following formula:
TimePeriod.Amount * Outcome.Amount * Output.Price * Output.Amount * Output.CompositionAmount * Output.Times
* Timeliness Penalty ($) = ((Probable Field Days Needed - Timeliness Penalties Days from Start) * (Timeliness Penalty * Total Revenue)) + ((Probable Field Days Needed – Additional Timeliness Penalties Days from Start) * (Additional Timeliness Penalty * Total Revenue))
* Timeliness Penalty Cost per Hour: Timeliness Penalty / ((1 / Field Capacity) / * Operation/Component Amount (or Time Period Amount))
A numeric example can be found in the Capital Input 1 Calculator reference. Operation and Component Analyses use the Output properties set in their underlying NPV Operation or Component NPV Timeliness Penalty Calculator, to determine penalties. Operating and Capital Budgets use the Outputs in the budgets to determine the penalties. They use the Output with the highest revenue that contains, or equals, the Operation/Component’s Ouput.Name. They use the Outcome.Amount property in the revenue calculation but the Operation/Component’s Amount property to compute penalty days. The TimePeriod.Amount property is a multiplier used in both calculations.
Actual Timeliness Penalty Analysis: These analyses can be completed for Operations, Components, Operating Budgets, and Capital Budgets. Operations or components that can’t be completed in a timely fashion, as determined by the properties set in the underlying calculators, will be assessed a penalty based on the number of extra days needed to complete the operation. These analyses use the default, rather than size range, properties of machinery inputs to determine penalties.
The following Actual Timeliness Penalty Operating Budget analysis displays basic machinery totals associated with a corn soybean rotation.
https://www.devtreks.org/agtreks/preview/crops/budget/7- Corn and Soybean Same Year Machinery Stock Analysis/273071763/none
Feasible Timeliness Penalty Analysis (4*): A Feasible Timeliness Penalty Analysis can be completed for Operations and Components. Operations or components that can’t be completed in a timely fashion, as determined by the properties set in the underlying calculators, will be assessed a penalty based on the number of extra days needed to complete the operation. These analyses use the default and size range properties of machinery inputs to determine penalties. All feasible combinations are analyzed. A non-power input’s feasible Maximum Horsepower size range properties are used to limit the feasible combinations. Power inputs that are within +-10 Maximum Horsepower are considered feasible.
The following Feasible Timeliness Penalty Operation analysis displays basic machinery totals associated with a planting operation group. The difference in penalties shown here derives from implement width and tractor size. [These specific calculations were not proofed in Version 2.0.0. The source hasn’t changed in that version and the general principle remains true]. The equipment used in the first Operation can plant at a rate of 0.24 hours per acre (implement width of 10 feet, 70 equivalent pto hp). The equipment in the second Operation can plant at a rate of 0.20 hours per acre (implement width of 12 feet, 85 equivalent pto hp). Although the tractor in the second Operation is more expensive than the first tractor, the total capital recovery costs per acre are allocated over a greater area (50.9 versus 42.4).
Least Cost Timeliness Penalty Analysis (5*): A Least Cost Timeliness Penalty Analysis can be completed for Operating Budgets and Capital Budgets. Operations or components that can’t be completed in a timely fashion, as determined by the properties set in the underlying calculators, will be assessed a penalty based on the number of extra days needed to complete the operation. These analyses use the size range properties of machinery inputs to determine penalties. This analysis returns the least cost combination of machinery. Unlike the Actual and Feasible Penalty Analyzers, this analyzer uses the Operation/Component.Amount, rather than Outcome.Amount, in the Revenue calculation.
Budgets use the TimePeriod.Date property to specify the sequential priority of time period budgets. Enterprises, or Practices, with earlier dates are considered more important than ones with later dates and will be completed first.
The following Least Cost Timeliness Penalty Operating Budget analysis displays basic machinery totals and penalties associated with the same corn soybean rotation as displayed for the Actual Timeliness Penalty Analysis. The soybean crop being grown in this rotation has lower priority than the corn crop, but this analysis is able to use the feasible combinations of machinery for each Operation and select the lowest cost combination.
https://www.devtreks.org/agtreks/preview/crops/budget/7- Corn and Soybean Same Year Machinery Stock Analysis/273071763/none
3. Other Analyses
Future releases will include additional types of analyses.
I. Performance Analysis
The data generated by the Capital Input Analyzers can be used in Performance Measures to support decisions related to capital inputs. These Measures, which include Net Returns, Net Savings, Return on Investment, Output per Unit Input, and Input per Unit Output, are documented in the Performance Analysis 1 reference.
J. Comparative Analysis
DevTreks does not currently support the comparative analysis of capital input data.
K. Sample Data Sets (6*)
This section contains links to sample data sets that display the results of running these analyzers. Keep in mind that these data sets were structured for the purpose of testing the analyzers. The data is fictitious and no weight should be assigned to the absolute numbers –pay attention to the aggregation techniques only. Refer to Footnote 1. These date sets also contain the exact same NPV calculators and analyzers. All of the capital input cost data found in the NPV totals derive from the calculated capital input results.
https://www.devtreks.org/agtreks/select/crops/operationgroup/Seeding and Planting, corn/44/none/
https://www.devtreks.org/agtreks/preview/crops/budgetgroup/Operating Budgets, Common Agricultural Examples/2140761538/none/
L. Multimedia (Resources)
Pictures and videos of the capital input should be part of all stories that accompany capital input calculations. Videos that explain how to manage the capital input should also accompany stories.
M. Stories (Linked Views)
Machinery specifications, such as pdf files, can be part of the all stories that accompany capital input calculations. The story should explain the significance of the capital input analysis.
N. Knowledge Bank Standards
All capital input analyses should be entered into online knowledge banks (i.e. production servers as contrasted to development servers) that can be used to analyze the costs, benefits, and performance of capital inputs. That structured evidence must be passed down to future generations. These knowledge banks aggregate and analyze all of the data in a network. Future references will demonstrate how these knowledge banks will evolve (i.e. semantic data, forecasts) to support future decision making needs. The flexibility offered by DevTreks in documenting capital input costs means that networks need to develop “rules” explaining the “standards” that should be followed by clubs in their network. The “standards” make it possible to build knowledge banks.
Summary
Clubs using DevTreks can start to carry out the basic analysis of certain capital inputs. Clubs can solicit help understanding and managing capital inputs. Networks can build knowledge banks that explain why some capital inputs fit better than others. They can pass that knowledge down to future generations. The result may be farmers that conserve scare water resources better, hospitals that treat patients more affordably, software programmers who access international audiences quicker, factories that balance workers and machines fairly, and people who improve their lives and livelihoods.
Footnotes
1. While employed as a county supervisor for the USDA, Farmers Home Administration, the author routinely appraised the value of farms, farm machinery and chattel property. He also managed up to 5100 acres of capital intensive farmland (irrigated Imperial Valley, CA, USA inventory cropland) that required managing capital inputs (irrigation pumps). While employed as an agricultural economist for the USDA, Natural Resources Conservation Service, the author routinely built tools that analyzed the costs of capital inputs, especially farm equipment.
2. Capital Input Analysis has a long tradition that includes more advanced analytic techniques than those used in this reference. Future releases will include some of these techniques.
3. In the past, the author has mostly worked with multi-disciplinary teams to build these types of calculators. In the recent past, DevTreks focus has been IT first, rather than multi-disciplinary first. These types of calculators will continue to evolve and improve over the years –especially as customers provide feedback or contract with us for new or improved tools.
4. The types of calculations in this example help to explain why farmers often seek to expand their acreage.
5. This supplements Footnote 3. A potential customer identified the need for these types of analyses when DevTreks was still in beta testing. Optimization algorithms use a wide variety of techniques –this algorithm uses an extremely simple sorting technique. These types of algorithms can do a particularly good job of analyzing resource allocation data. They’ll expand over the years.
6. These calculators and analyzers were tested using limited, sample data sets. Full industry support should be tested using larger data sets. Email us if you’d like to pursue that avenue.
References
References for Capital Input analysis can be found in the introductory Capital Input Calculators 1 reference.
References Note
We try to use references that are open access or that do not charge fees.
Improvements, Errors, and New Features
Please notify DevTreks (devtrekkers@gmail.com) if you find errors in these references. Also please let us know about suggested improvements or recommended new features.
Video tutorials explaining this reference can be found at:
https://www.devtreks.org/commontreks/preview/commons/resourcepack/Machinery Costs 1/437/none/
https://www.devtreks.org/commontreks/preview/commons/resourcepack/Irrigation Costs 1/443/none/
https://www.devtreks.org/commontreks/preview/commons/resourcepack/General Capital Costs 1/465/none/
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