Within the Budget Generation module, the Total Cost of Ownership (TCO) tab provides an analysis tool for predicting what the overall cost of a piece of equipment will be throughout the future life of that equipment. A variety of infographics are available; however they are only viewable if the asset has been made a capital item (this is set in the Capital Item module).
Setting a Capital Item
To set a functional location (i.e. an asset such as a haul truck) as a capital item:
- Select location in your hierarchy and then the Capital Item module.
- Select the Set as Capital Item button and input all relevant details into the fields (see table below for more information).
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Save your changes.
| Field | Description |
|---|---|
| Diminishing Value Percentage | When Diminishing Value is selected for the depreciation method the decline in value of the asset is expressed as a percentage of the original purchase price. |
| Disposal Cost | The cost associated with disposing the capital item (asset) in context to the Capital Cost Date. |
| Residual Value | The remainder of non-depreciated value against the capital Item over the course of its life. The Residual Value is the On-Paper value remaining after depreciation has been applied over time. |
| Scrap Value | The inherent value of the scrap associated with the selected capital item. |
| Salvage Value Coefficient | Key input to the salvage value calculator. The default value is 0.7 which infers a maximum return of 70% of capital cost if the asset is disposed of in year 1. |
| Depreciation Method | The method used for reporting depreciation of the asset. Orien supports Declining Method, Diminishing Value, Double Declining Balance, Prime Cost and Straight-Line methods. |
| Estimated Life | The estimated life of the capital item is the number of years that the asset is going to be used before replacement occurs. |
| Capital Cost Date | The date that the Capital cost is valid for when considering inflation over time. Due to Orien providing the ability to escalate costs annually we require a date to determine whether it has since increased in value to purchase. |
| Acquisition Date | The date the asset was acquired and is used to calculate any variance in the calculated Capital Cost due to escalation against the provided Capital Cost as specified at the Capital Cost Date. |
Total Cost of Ownership (TCO)
The TCO tab (within the Budget Generation module), provides an analysis tool for predicting what the overall cost of a piece of equipment will be throughout the future life of that equipment. Currently there are four data info-graphics available in the module, and there are two reports and two charts.
To generate a TCO:
- Select location in your hierarchy and then the Budget Generation module.
- Select the TCO tab and a report or chart from the list on the left side.
- If Detail Report is selected, make sure to adjust Retain Insitu to adjust the amount of years to show in the report.
| Field | Description |
|---|---|
| Business Unit Age | The year associated to the TCO data and costs. |
| Production Forecast | The production amount allocated for each year. |
| TCO Asset Age | The age of the asset based on the acquisition date defined in the Capital Item Module. |
| Insitu. Year No. | The production age of the asset based on the acquisition date defined in the Capital Item Module. |
| Capital Cost | The sum of all capital costs for each defined year. This value is sourced from the Capital Cost value in the Capital Item Module. |
| Non-Captial Costs | The sum of all non-capital costs for each defined year. This value is sourced from the Non-Capital Cost value in the Capital Item Module. |
| Disposal Costs | The sum of all disposal costs for each defined year. This value is sourced from the Non-Capital Cost value in the Capital Item Module. |
| Corrective Labour | The sum of all Corrective Labour Costs for this asset. |
| Corrective Material | The sum of all Corrective Material Costs for this asset. |
| Corrective Custom Costs | The sum of all Corrective Custom Costs for this asset. |
| Corrective Downtime Costs | The sum of all Corrective Access Time Hours multiplied by the Hourly Downtime Cost. |
| Corrective Downtime Hours | The sum of all Corrective Access Time Hours. |
| Planned Labour | The sum of all Planned Labour Costs for this asset. |
| Planned Material | The sum of all Planned Material Costs for this asset. |
| Planned Custom Costs | The sum of all Planned Custom Costs for this asset. |
| Planned Downtime Hours | The sum of all Planned Access Time Hours for this asset. |
| Total Downtime Hours | The sum of all Corrective and Planned Access Time Hours for this asset. |
| Project Labour Costs | The sum of all Labour Project Costs for this asset. |
| Project Material Costs | The sum of all Material Project Costs for this asset. |
| Project Custom Costs | The sum of all Custom Costs for Project Costs for this asset. |
| Operational Costs | The sum of all Operational Costs for this asset. |
| Depreciation | The sum of the asset's Residual Value and Write Off Costs. If the Asset's age is 0, this is blank. |
| Write Off Costs | The Capital Cost minus the Residual Value. Then minus the depreciation value. Then adding the residual value back. |
| Salvage Value | The value provided in the Scrap Value field of the Capital Item Module. |
| Gross Profit/Loss | The difference between all costs (Corrective, Planned, Project Costs, Corrective Downtime, Depreciation, and Write-Off Costs) and the Salvage Value. |
| Tax Provision | -1 multiplied by Gross Profit/Loss multiplied by (Tax Rate / 100) |
| Net Income | The sum of the year's Gross profit and the Tax Provision. |
| Depreciation Add-Back | The sum of the year's depreciation and its Write Off Costs. |
| Cash Flow | -1 multiplied by the Capital Cost which then has the Net Income and Depreciation Add Back added. |
| Discount Factor | The Discount Rate value provided in the Capital Item Module. |
| Present Value | The Cash Flow multiplied by the Discount Value. |
| Net Present Value | The sum of the Present Value of the current year and the previous year |
| TCO | The sum of the Cash Flow of the current year and the previous year |
| Availability Percentage | 100 minus ((Total Downtime Hours divided by 8760) multiplied by 100). 8760 is the amount of hours in a year. |
| Equivalent Annual Cost | The first Year Net Present Value divided by the Annuity Factor |
The process of producing a TCO is also demonstrated in the video tutorial below:
