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Space Rental Approach Costing Overview

[latexpage] In this method, nursery growing space is rented to plants. It is an overall approach, so costs are not calculated at the time of any Inventory, sale or purchase transaction. Costs are shown LIVE based on transactions and other input parameters. Using this costing approach takes the guess-work out of costing and allows you to have more accurate costing and, therefore, pricing.

Cost types associated with a plant​

  1. Direct Cash Costs: These are known costs that are directly associated with a plant such as container or pot cost, soil, tray, etc.
  2. Indirect Cash Costs: These are operational costs that cannot be directly associated with a plant such as labor, pesticides, packaging, machinery, equipment, fuel, overheads (utilities, insurance), etc.
  3. Non-Cash Costs: These are depreciation costs that cannot be directly associated with a plant such as depreciation values of buildings, equipment, inventory changes, etc.
  4. Opportunity Costs: These are return on investment costs (ROI) or equity that cannot be directly associated with a plant such as ROI on land, machinery, equipment, buildings used in operation, etc.
  5. Shrinkage Costs: These are losses encountered with a plant, a cost that can be directly attributed to a plant

Information needed for this approach​

To determine the cost of a plant using this approach, following parameters must be known for a particular costing year.

  • Total Production Areas (Growing Space)
  • Return on Investment (ROI) percent on Capital Investments
  • Depreciation Amount
  • Operational Costs
  • Origin Costs (If buying in and propagating in-house, for example: Seed, cuttings, etc)
  • Container or Pot Cost
  • Soil Cost
  • Space used by Plant
  • Plant Loss Percent
  • Time on the ground (Residency)