So how do we count the fixed costs?
The preferable method is to spread these costs into an hourly cost divided into the individual activities that the company carries out.
For example, let's say you have a machine to fill your product, which requires 1 operator:
- Machinery: € 100,000 (spent over 5 years) therefore € 20,000 per year
- Employee: € 25,000 per year
Your work shift is 8 hours a day, 5 days a week, 11 months a year.
However, we calculate that the machine will not always be active and in production but will have machine downtime due to start-ups and failures, therefore we only calculate 7 hours a day.
7 hours x 5 days x 4 weeks x 11 months = 1540 productive hours per year
To this, however, we must also add overheads (the secretary who does not work on a machine but still generates a cost, rent, etc.). These are our "overheads" and will have to be divided according to our cost centers, let's pretend we have 3 machines (the one we took as an example to fill the product, one to label it and one to palletize it). We will therefore divide the annual cost of these elements by the number of machines if they are used homogeneously.
- Rent: € 10,000 per year
- Account: € 25,000 per year
Overheads = (€ 10,000 per year + € 25,000 per year) / 3 machines = € 18,334
Therefore, the use of our machinery will cost the company (€ 20,000 per year depreciation of machinery + € 25,000 employee cost assigned to the machinery + € 18,334 overheads) / 1540 production hours per year = € 41.12
If this machine can fill, say, 500 bottles per hour, it will mean that the cost of our single product will increase by € 0.083.