A simple way of calculating total costs in farming

November 30, 2022

•

What is the cost?

This is the amount incurred in producing one unit of a product or service. Cost determines the profit margin one can get. Cost analysis helps the farmer in production decision-making; that is, what product to produce and in what quantity.

However, most farmers do not calculate it correctly and therefore ends up not knowing their farm true profit.It is advisable to carry out a provisional cost analysis before the actualization of the project with aim of determining how viable the enterprise will be.

Actual cost analysis is done later at the end of the project where it is lessed from the selling price to determine profit.

How to calculate the cost

First, identify all the variables incurred in the production. These costs vary with the level of production.

Labour cost – wages for farm workers
Input costs – costs of seeds, fertilizers and chemicals.
Water cost – water bills used for irrigation.
Electricity cost – bills for electricity used in pumping water.
Sales and marketing cost – cost incurred in advertising the produce
Transport cost – cost incurred in transporting farm produce
Repair and maintenance – the cost of repairing machinery used during the farm production.
Lease cost – the cost of leasing should be appropriated per season
Any other costs.

All these costs are summed together to make the total cost of production.

To determine the cost per kg/unit produced, the total output is divided by the total cost.

Example: Rainfed beans farming

How to calculate cost — *A bean crop Image:courtesy*

Production of beans (one acre) which takes 90days (depending on variety planted).Here is how you can farm beans successful

#	Task/variables	Cost KES
1.	Labor cost (land preparation and management)	40,000.00
2.	Inputs cost (seed, chemicals and fertilizers)	40,000.00
3.	Water cost	0.00
4.	Electricity cost	0.00
5.	Sales and management	1,000.00
6.	Transport of inputs	500.00
7.	Other costs	1,500.00
	Total Cost	83,000.00

Cost analysis chartfor rainfed beans

Our team are standby to help you in your costing and farm audits.Book a service NOW!!

About Post Author

Kelvin Wairimu

Kelvin Wairimu is a Young Passionate Agripreneur, Manager and Chief Editor Of The Farmworx. He is an Experienced and Practicing Farmer, Agricultural Economist and a Consultant.He holds a Bacherors Degree in Agricultural Economics From University of Eldoret,CPA 3 And a Certificate in Advanced Computer Software.

See author's posts