guide to economic analysis of small-scale … value...illegal activities such as the illegal harvest...

User’s Guide

Edition 2.0 2014

by

Shoana Humphries, PhD Earth Innovation Institute

San Francisco, California, USA

Thomas P. Holmes, PhD

Southern Research Station USDA Forest Service

Research Triangle Park, North Carolina, USA

Green Value User’s Guide page 2/102

To receive more information about the Green Value tool, write to Dr. Shoana Humphries: [email protected]. You can also find more information at www.earthinnovation.org.

Copyright © 2014 Shoana Humphries and Thomas Holmes.

mailto:[email protected]

http://www.earthinnovation.org/


OVERVIEW The Green Value tool provides a simplified method for evaluating the financial viability of forest-based

initiatives (FIs). The first version was based on the authors’ experience in developing and testing methods for

organizing and analyzing financial data from two community-based forest enterprises producing timber in the

Brazilian Amazon: the Ambé Project in Santarém (Pará) and one of the 30 forestry associations working with

the Mamirauá Sustainable Development Institute in Tefé (Amazonas). This second version of the tool is based

on experience with its use in Bolivia, Peru, and Brazil with 15 family and community forest-based initiatives

producing a variety of products and services, including Brazil nut, natural rubber, tourism, traditional crafts,

carbon credits, and timber.

The Green Value tool is comprised of this User’s Guide, a set of pre-formatted worksheets, and a Facilitator’s

Manual. The tool provides guidance on how to monitor and analyze production costs and sales revenue over

one year or productive period for forest-based initiatives, including families, community associations,

cooperatives and other businesses, that produce and sell forest products or services. This form of analysis is

commonly referred to as a “cash flow”, “net return”, “profitability”, or “viability” study. Potential users of the

tool include families who collect forest products, community members, organizations that work with family

and/or community forest-based initiatives, consultants who provide services to FIs, staff of training centers,

professors, and students.

Our goal for the Green Value tool is to help forest-based initiatives gain confidence in conducting financial

analyses so that they can improve their financial viability and long-term sustainability. By developing a

practical understanding of how financial analyses can be conducted for small-scale enterprises, it is hoped that

the capability of FIs to continue providing jobs in their communities and managing forests for multiple

products and services will be enhanced.

ACKNOWLEDGEMENTS The development of the Green Value tool would not have been possible without the financial support of the

USDA Forest Service’s Office of International Programs and the US Agency for International Development

(USAID). In addition, the following people were indispensable in the improvement of this tool through their

involvement in its use with forest-based initiatives in the Amazon region, critical reflection on how to make the

worksheets more versatile and the User’s Guide’s text clearer, and the review of translations, for which we

thank them and their respective organizations: Marco Antonio Albornoz (CESVI Fundazione), Roberta Amaral

(Instituto Internacional de Educação do Brasil – IEB), Javier Bejarano (Servicio Holandés de Cooperación al

Desarrollo – SNV Bolivia), Alberto Bermeo (Instituto de Bien Común), Alvaro Cabrera (International Network

for Bamboo and Rattan), Luis Fernando Cueva (World Wildlife Fund Colombia), Leo Ferreira (Instituto de

Manejo e Certificação Florestal e Agrícola – IMAFLORA), Paul Ramirez (Asociación para la Investigación y el

Desarrollo Integral – AIDER), y José Romero (Naturaleza y Cultural Internacional), Stella Schöns (Instituto de

Pesquisa Ambiental da Amazonia – IPAM), Ana Luiza Violato Espada (Instituto Florestal Tropical – IFT), and

Ruth Delgado. The Peru Forest Sector Initiative has also provided great support for this work. We would also

like to thank Paulo Amaral of IMAZON, Manuel Amaral of IEB, and Marco Lentini of IFT for their continued

enthusiasm and support of this initiative. We also greatly appreciate the generous comments and suggestions

of Erin Sills, Isabel Drigo, Fred Cubbage, and David (Toby) McGrath on earlier drafts of this document.


Contents

OVERVIEW ............................................................................................................................................................... 3

ACKNOWLEDGEMENTS ........................................................................................................................................... 3

1. INTRODUCTION ................................................................................................................................................... 6

Community Forest Management and Sustainable Development ...................................................................... 6

Challenges to Establishing Forest-based Initiatives ............................................................................................ 7

Who Are the Intended Users of this Tool? ......................................................................................................... 7

What Results Does the Tool Provide? ................................................................................................................. 8

Why Are Financial Monitoring and Analysis Important? .................................................................................... 8

Overview of the User’s Guide ............................................................................................................................. 8

2. FINANCIAL CONCEPTS FOR ANALYZING FOREST-BASED INITIATIVES ............................................................... 10

Financial Versus Economic Analysis .................................................................................................................. 10

Financial Analysis versus Accounting ................................................................................................................ 10

Computing Costs by Activity ............................................................................................................................. 11

Computing Total Cost and Average Total Cost ............................................................................................. 12

Labor costs .................................................................................................................................................... 14

Depreciation costs of machinery and equipment ......................................................................................... 14

Calculating Total Revenue and Average Total Revenue ................................................................................... 18

Calculating Net Revenue, Average Net Revenue, and Rate of Return ............................................................. 19

3. FINANCIAL ANALYSIS OF FOREST-BASED INITIATIVES IN THE AMAZON BASIN ................................................ 21

Case Study 1: Brazil nut Collection ................................................................................................................... 21

Costs .............................................................................................................................................................. 22

Revenue and profit ........................................................................................................................................ 23

Case Study 2: Industrial-scale Timber Production ............................................................................................ 23

Costs .............................................................................................................................................................. 24

Revenue and profit ........................................................................................................................................ 25

4. MONITORING, COMPILING AND ANALYZING COSTS AND REVENUES .............................................................. 26

Step 1: Plan ....................................................................................................................................................... 27

Plan how monitoring will be implemented ................................................................................................... 29

Define assumptions related to monitoring and analysis .............................................................................. 37

Step 2: Collect data on costs for productive and administrative activities, and income from product sales .. 37

Collect labor data for each productive activity – Four options ..................................................................... 38


Collect materials & services data for each productive activity ..................................................................... 45

Collect machinery and equipment data for each productive activity ........................................................... 45

Collect data for administrative activities ...................................................................................................... 53

Frequently excluded costs and other issues ................................................................................................. 57

Collect revenue data ..................................................................................................................................... 57

Step 3. Enter data into worksheets.................................................................................................................. 58

Step 4: Compile data on productive activities, administration, and revenues/sales ....................................... 58

Step 5: Analyze data......................................................................................................................................... 60

Complete the Summary worksheet .............................................................................................................. 60

Complete the Graphs worksheet .................................................................................................................. 62

Step 6: Discuss the results ................................................................................................................................ 65

5. EXTENSIONS OF THE BASIC FINANCIAL ANALYSIS ............................................................................................ 66

Variable and Fixed Costs ................................................................................................................................... 66

Sensitivity Analysis ............................................................................................................................................ 68

The Discount Rate and Net Present Value ........................................................................................................ 69

Estimating the discount rate ......................................................................................................................... 69

Estimating net present value ........................................................................................................................ 70

Evaluation of Start-up Costs for New Community-based Forest Enterprises ................................................... 72

Bibliography .......................................................................................................................................................... 74

Annex 1. Worksheets ........................................................................................................................................... 76


1. INTRODUCTION

Community Forest Management and Sustainable Development

The first principle of the Earth Summit held in Rio de Janeiro during June, 1992, reaffirmed the Declaration that

“Human beings are at the center of concerns for sustainable development. They are entitled to a healthy and

productive life in harmony with nature (United Nations, 1992).” Although more than two decades have passed

since the first Earth Summit, the search for practical means to apply this principle to the daily lives of millions

of people around the globe continues. Balancing the goals of economic growth (including poverty reduction,

improved health care, and better education) with the protection of nature requires that new, innovative

models be developed so that predatory, boom-and-bust approaches to natural resource management can be

replaced with models based on sustainable management and growth.

The management of forest resources by families and communities is an approach to sustainable forest

management that seeks to improve the quality of life for forest-dwelling people while protecting forest

resources for future generations (Scherr et al., 2004; Amaral and Amaral Neto, 2005; Bray et al., 2005).

Beginning in the early 1980s, governments began a process of transferring lands and use rights to rural

communities and now nearly one-third of the total forest area in developing countries is owned or designated

for use by low-income forest communities (RRI 2012). At the same time, efforts to develop models of family

and community forest management grew and in the early 2000s many smallholder forest-based initiatives (FIs)

were developing into community-based forest enterprises run by families, associations, and cooperatives.

A key characteristic of FIs is that decisions affecting the management and use of forest resources are made by

community members and organizations rather than dictated by government agencies (Agrawal, 1999; Stone

and d' Andrea, 2001; Charnley and Poe, 2007). This change in perspective requires that communities have

access to the information, training, and tools they need to overcome the challenges they face in producing and

marketing forest products and services. These include both technical and financial tools necessary to plan and

carry out forest management operations and to run forest-based enterprises in a sustainable fashion.

Family and community forest management has become a key component of sustainable forest management

efforts in the Brazilian Amazon, and is increasingly important across the Amazon basin. The Green Value tool

was developed based on the authors’ experiences conducting financial analysis of forest-based initiatives in

this region. The types of initiatives analyzed with the Green Value tool to date include production and

marketing activities by families, associations, and cooperatives of timber and non-timber forest products and

services (e.g., Brazil nuts, bamboo, tourism), as well as payments for ecosystem services, such as carbon

sequestration. Although the approach to the financial analysis of forest-based initiatives presented here is

based on that experience, the concepts and tools are more broadly applicable to family and community FIs in

other regions as well.


Challenges to Establishing Forest-based Initiatives

Efforts to establish forest-based initiatives face several challenges:

Property rights: Perhaps the greatest challenge facing families and communities that wish to establish a forest-

based initiative is the ability to gain secure property or use rights that provide legal authority to harvest and

sell timber or other natural resources.

Bureaucratic requirements: In order to legally harvest and sell forest resources, families and communities

usually need a government-approved forest management plan and harvesting license, especially when it

comes to timber resources. Unfortunately, the approval processes are often quite complex and long. The

associated fees and taxes, as well as payments for technical assistance, can also be quite expensive and

represent large proportions of total costs for smaller forest-based initiatives.

Competition from illegal products: A related concern is the need for the enforcement of laws that prohibit

illegal activities such as the illegal harvest and sale of forest products, such as logs (Pagdee et al. 2006; Agrawal

et al. 2008), which flood markets with cheaper products and make it harder for small, legal FIs to compete.

Business and technical ability: FIs are often faced with limited business and organizational skills, as well as

inadequate technical knowledge for meeting complex forest management regulations (Molnar et al., 2007).

Technical training in reduced impact harvesting techniques and methods, especially for timber, is a critical

first-step for sustainable forest management. In addition, FIs typically lack basic knowledge of financial

concepts that can help them analyze their financial situation. Finally, the ability to develop community

organizations that encourage innovative learning and problem-solving, and that equitably distribute benefits

among community members, enhances the likelihood of sustainable management (Pagdee et al., 2006).

Market access and economic factors: FIs are often located in rural and remote areas where access to markets

is difficult. This isolation results in high transportation costs and travel disruptions. Also, the ability to obtain

financing or credit for FIs is extremely limited. Having the cash on hand to buy tools and other inputs such as

fuel and lubricants and to pay labor costs prior to the receipt of sales revenues is a challenge for small-scale

producers who rely, in some cases, on advance payments from sawmills or timber traders. Finally, FIs are

typically small and cannot take advantage of the economies of scale enjoyed by larger, industrial forestry

operations. This typically results in higher unit costs for FIs and lower profitability relative to larger scale

operations.

It is our aim that the Green Value tool will help FIs strengthen their financial viability and demonstrate to

others that FIs can be financially sound while providing rural employment and income for communities. By

sharing the results of selected financial analyses with policy makers and donors, it is hoped that a broader

appreciation of the role that FIs can play in sustainably managing global forests will emerge so that policy

makers and donors will make renewed efforts to address the challenges listed above.

Who Are the Intended Users of this Tool?

This tool is designed to be used by families, community organizations, engineers and technicians, consultants,

instructors at training centers, professors at universities, students, and analysts in environmental and social


organizations. Users will need a working knowledge of computer spreadsheet software, including: how to

enter and copy data; how to use links between cells; and how to use mathematical functions to sum, multiply,

and divide values within cells. Other requirements are a familiarity with the forest-based initiative to be

analyzed and data on costs and sales revenue for at least one productive period (the amount of time required

to complete a normal production cycle, such as one timber harvest season, one trimester of tourism, one

month of rubber production). It is best to use the tool for a complete production period in which there are

both costs and income. While we focus on forest-based initiatives, in reality the basic financial concepts and

the methodology presented in the User’s Guide can be applied to any product or service.

What Results Does the Tool Provide?

The Green Value tool includes a User’s Guide, a Facilitator’s Manual, and preformatted worksheets. The

worksheets are designed to help users monitor and analyze cost and income data for one product or service

over one productive period. When all cost and income data have been entered for the assigned productive

period, the tool automatically computes a variety of financial measures including the cost of each major

productive activity, administrative costs, the costs of each type of input (labor, materials and services,

machinery and equipment) and the cost per unit of production (such as the cost per hectare or cubic meter of

wood). Total cost, total revenue, net revenue (profit) and rate of return are also provided. There are also six

graphs automatically generated to help illustrate the results.

Why Are Financial Monitoring and Analysis Important?

It is often said that knowledge is power. This tool will help users better understand the financial viability (or

vulnerability) of their operation, including which activities and types of expenses are most costly and whether

product prices are high enough to cover the costs of production. This information is extremely valuable for

making decisions about how to help FIs reach their goals, such as what the minimum price should be per

product/service, how much money needs to be saved every year to replace machinery and equipment, and if

FIs can afford to hire more workers or expand their operations to include new value-added activities. In

addition, the profit and rate of return calculations may be required when applying for credit or demonstrating

financial viability during assessment for green certification. On the other hand, if an FI is not profitable, its

financial status can be used to lobby the government and/or donors for technical and financial assistance while

the initiative works to improve its viability by making adjustments in its productive activities. In summary,

financial monitoring and analysis are important to help FIs reach their goals.

Overview of the User’s Guide

The User’s Guide is made up of five chapters. In chapter two, we present an overview of the basic financial

concepts that can be used to analyze forest-based initiatives. We note that these same concepts can be used

to analyze any forest product or service for one productive period.

To help the user understand how basic financial concepts can be used to analyze FIs, chapter three

summarizes two case studies based on the use of the tool in the Amazon region. The first study presents

results of the analysis of Brazil nut harvesting by a family in Cobija state in Bolivia. The second study describes

log production by an industrial-scale community-based forest enterprise run by a community cooperative –

Cooperativa Mista da Flona Tapajos (Coomflona), located in Pará state in Brazil.


Chapter four provides a detailed description of the six steps required to use the worksheets to monitor,

compile, and analyze financial data for forest-based initiatives. Examples are provided to ensure

understanding of each step. In chapter 5, we provide some extensions of the basic elements of financial

analysis. First, we introduce the concepts of variable and fixed costs. Then, we describe how the methods

described in this Guide can be used to conduct analyses of alternative scenarios, such as how an increase in

the sales price of timber could affect the profitability of timber harvesting operations. Next, we discuss how

financial analysis could be extended to consider questions such as how investments in machinery and

equipment will likely affect the income potential for several future harvest seasons. Finally, we describe how

the methods described here can be used to address the question of how much money would be required to

start up a new FI. Finally, in addition to the information included in the main body of the User’s Guide, we

include copies of the worksheets in Annex 1.

We have included CDs with this User’s Guide that contain preformatted worksheets for monitoring and

analyzing data in written form and/or with a computer, and that provide two options based on the complexity

of the initiative and the desired precision of results. These worksheets can be used both as a tool for hands-on

learning about the financial methods presented here as well as for actual on-the-ground data collection and

analysis of forest-based initiatives.


2. FINANCIAL CONCEPTS FOR ANALYZING FOREST-BASED INITIATIVES

In this section, we define basic financial concepts that can be used to analyze the costs and sales revenue

associated with a specific productive period (i.e., how much money comes into the enterprise as revenues and

how much leaves as expenses). In section 5, we present several options for more advanced financial analysis,

including how to analyze cost and income streams that occur over several years.

Financial Versus Economic Analysis

Although there is an overlap between economic and financial concepts, and basic economic principles underlie

the Green Value tool, the focus of analysis for these two perspectives is often different. Economic analysis is

generally concerned with the costs and benefits of economic activities from the perspective of an entire

industry or society as a whole. For example, economic analysis might be used to understand whether

investments made by a governmental agency to support FIs are a good investment of public money. One of

the economic costs of an investment is the so-called ‘opportunity cost’ of capital. Opportunity costs refer to

the value of the opportunities that are given up when resources are targeted to specific projects (such as FIs)

instead of alternative projects (such as improved health care). Thus, economic analysis would typically

evaluate the full range of benefits provided by FIs – such as the creation of jobs, tax revenues from forest

product sales, improved governance of forest resources, and enhanced environmental protection. Then, these

benefits would be compared with other possible social benefits that could be gained with alternative

investments of the same public funds – such as increases in productivity, longevity and quality of life.

In contrast to economic analysis, financial analysis is primarily concerned with the financial viability of a single

enterprise. By using market prices to document, analyze, and forecast the costs and income generated by

productive activities, financial analysis can help FIs evaluate the current and future profitability of a FI, identify

which activities are most costly, and track changes in cash flow over time. In short, financial analysis helps FIs

make decisions about which activities should be maintained, discontinued, or adjusted to help them achieve

their overall goals (which likely include non-financial objectives).

Financial Analysis versus Accounting

The purpose of the Green Value tool is to help forest-based initiatives understand the steps required to

monitor and analyze their financial costs and returns in order to improve financial decision-making and

planning. The methods and worksheets presented are not intended to replace or serve as an accounting

system. Accounting procedures are governed by laws and it is important for FIs to comply with laws.

Nonetheless, it could be beneficial for FIs to integrate their accounting and financial analysis systems so that

basic cost and income data are compatible for both types of analyses. In fact, the method we recommend for

assigning costs to products is compatible with an accounting system referred to as activity based costing (ABC)

(e.g., Cooper and Kaplan 1991).


Computing Costs by Activity

The Green Value tool is based on a simple model of economic production in which inputs are combined

through different activities to produce outputs (products or services). Figure 2.1 provides an overview of how

inputs are transformed into outputs using the example of a FI that is producing logs and boards.

Figure 2.1. Examples of inputs and principal activities required for the production of logs and lumber.

Two primary benefits result from using the Green Value tool to analyze forest-based production1 from small

enterprises. First, FIs can compare the total costs of production (including any subsidized activities such as

training, technical assistance, or equipment) with the income received from selling products or services to

determine whether or not the FI is making a profit. Second, by assigning production costs to the inputs used in

specific activities, financial analysis can reveal how a production system might be changed to become more

profitable. For example, consider a timber harvesting FI that produces two products - logs and lumber. If the

income received from selling logs and lumber is greater than the cost of all of the inputs, then the FI would be

making a profit. Note that these calculations could be made without considering how inputs are transformed

into outputs by conducting various activities. Now, suppose that the sawmilling operation is actually losing

money due to the amount of time it takes to set up, adjust, and repair the sawmill. If the costs of sawmill-

related activities are not identified in a financial analysis, then the FI would not understand how that activity

1 “Production” is used here loosely to refer to a FI’s activities related to preparing a product or service to be sold.

Throughout the User’s Guide we refer to “production” or “productive” activities. For some FIs these activities may involve

growing a product, for others it may be collecting or harvesting it, and for others it may be an array of activities related to

preparing a service to be sold.

Labor

● Sawyer

● Tree identifier

● Supervisor

Machinery &

Equipment

● Chainsaw

● GPS

● Sawmill

Materials & Services

● Oil and gasoline

● Food for workers

● Transportation

Inventory &

Planning

Harvest

Skidding

Product

measurement &

Loading

Administration

Sawmilling

Logs

INPUTS ACTIVITIES OUTPUTS

Lumber


increases or reduces profitability. However, use of the Green Value tool clearly shows how each activity

contributes to overall profitability.

The Green Value tool can be especially helpful for family and community enterprises that are engaged in many

productive activities and have not taken the time to calculate the total cost for each specific product or

service. Similarly, for initiatives that have received financial help getting started, the Green Value tool reveals

the real total cost per product or service. It is this real cost which should be considered in setting prices, as

well as in determining how much capital is needed each year to stay in business.

To use the Green Value tool, it is therefore necessary to identify all of the principal activities required to

produce specific products or services during a normal productive period. We have found that it is ideal to have

three to four major activities, each of which may include several minor activities. For example, the major

activity “Inventory and Planning” in Figure 2.1 may include several minor activities such as demarcating the

annual harvest area, putting in trails for the inventory, implementing the inventory, creating maps, preparing

the annual operating plan, and so forth. The Green Value tool requires users to estimate the costs of each

major activity during the production period.

To facilitate the assignment of costs by activities, the Green Value tool provides pre-formatted worksheets.

Worksheets are provided for each of the three types of inputs shown in Figure 1: labor, materials and services,

and machinery and equipment. Each worksheet contains pre-formatted tables that can be used to monitor

and record expenses associated with each major activity. For the labor input, these tables require the FI to

record the work (based in time worked or quantity produced) and expense (pay rate) for each worker involved

in each major activity. These expenditures are then automatically subtotaled and compiled by Green Value

into expenditures by each type of input and by major activity. For the machinery-equipment and materials-

services inputs, the FI records the quantity and unit price of all of the items used in each major activity. In a

similar fashion, these expenditures are automatically compiled by Green Value by type of input.

The activities implemented by FIs vary greatly and are influenced by a variety of factors such as traditional uses

of the forest; access to technical assistance, training, and credit; forest type; availability and cost of purchased

inputs; distance to markets; and market demand. The activities may change over time as better harvesting or

manufacturing methods and/or additional capital become available. However, because the principles

underlying the Green Value tool are very general, the tool can be easily adapted to monitor, record, and

analyze the financial aspects of a wide variety of forest-based activities and products.

Computing Total Cost and Average Total Cost Once the costs of major activities have been calculated, the Green Value tool automatically computes the total

cost of production. This can be accomplished by either adding up the cost of each major activity or by adding

up the cost of each input category. The way in which costs are added up provides different information. For

example, in Table 2.1 we present the costs recorded for an FI in southern Bolivia that produced 2,668 m3 of

timber from 364 ha of semi-tropical forest. Examining costs by activity, we can see that harvesting was the

most costly activity ($16,763) and accounted for 53% of the total cost. Looking at costs by input category, it

can be seen that materials & services was the most costly input category ($16,425) and accounted for 52% of

the total cost. Understanding which activities and input categories cost the most is useful because it identifies

where changes in the production system may have the largest impact on total costs. For example, we can see


that improvements in timber harvest productivity will likely have a greater impact on total cost than would

improvements in pre-harvest planning simply because harvesting (planning) costs are high (low) relative to the

other activities.

Table 2.1. Timber production costs categorized by principal activity and input type for a Forest-based Initiative in southern Bolivia (in USD).

Activity Labor Materials &

Services Machinery & Equipment

Total Cost ($)

Percent (%)

Average Cost per Unit Sold

($/m3)

Preharvest 61 116 1 179 1 0.07

Forest Inventory 4108 1267 454 5 829 18 2.19

Harvest 6483 9635 645 16 763 53 6.28

Postharvest 0 116 0 116 0 0.04

Administration 3355 5290 146 8 791 28 3.30

Total Cost $ 14 007 $ 16 425 $ 1 247 $ 31 679 100% $ 11.88

Percent 44% 52% 4%

As you can see from this example, the total cost of timber production can be computed by adding up the costs

of the major activities:

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 (𝑓𝑜𝑟 5 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠) = 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑦 1 𝑐𝑜𝑠𝑡 + 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑦 2 𝑐𝑜𝑠𝑡 + ⋯ + 𝐴𝑐𝑡𝑖𝑣𝑖𝑡𝑦 5 𝑐𝑜𝑠𝑡

or by adding up the costs of the input categories:

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 (𝑓𝑜𝑟 𝑎𝑙𝑙 𝑖𝑛𝑝𝑢𝑡𝑠) = 𝐿𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡 + 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 & 𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑐𝑜𝑠𝑡 + 𝑀𝑎𝑐ℎ𝑖𝑛𝑒𝑟𝑦 & 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡

Of course, both methods result in a total cost of $31,679.

Average total cost is a measure that summarizes how much each unit of output costs to produce and is

computed by dividing total cost by the quantity produced:

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑

Typically, the units chosen for calculating average total cost should be the same as the units used to measure

the amount of the product or service sold. Some products, such as Brazil nuts, may be measured by weight

(e.g., kilograms) while other products, such as logs, may be measured by volume (e.g., cubic meters or board

feet). You should convince yourself that, for the above example, the average total cost of producing timber is

$11.87/m3. Because this average total cost is lower than the average price that the FI received for timber, the

FI was able to cover all of its costs and generate a profit.

Average total cost is a useful measure for financial analysis because it takes account of all of the factors that

affect production and cost on a daily basis. For example, weather events such as rain storms can reduce the

ability to harvest and transport forest products on any given day. However, average cost does not focus on


production amounts or costs on any specific day, but rather averages productivity and cost across the entire

productive period. That is, low production days are balanced against days when productivity is high to arrive

at an average measure. Because unusual days are averaged out, this financial measure can help a FI monitor

the relative efficiency of production activities over time. For example, if a FI would like to understand whether

or not production efficiency is increasing over time, this could be accomplished by comparing the average total

cost of production over successive productive periods. If average total cost is decreasing (increasing) over

time, then this indicates that production efficiency is increasing (decreasing).

Labor costs

A forest-based initiative will often employ both permanent and temporary staff. Permanent staff will usually

receive an annual salary paid on a monthly basis. Various alternatives exist for paying people who are

temporarily employed by the FI (that is, they are not part of a permanent staff). Some FIs pay a monthly salary

to temporary workers while others pay a daily salary for the number of days worked or units produced (e.g.,

trees harvested, nuts transported). Another option is to divide the profits received from selling forest products

or services among the temporary workers at the end of the harvest season. In all cases, the amount of time

worked by each person involved in a FI needs to be recorded so that their labor costs can be accounted for,

including any additional required legal personnel costs, such as health benefits and workers’ compensation.

Depreciation costs of machinery and equipment

Machinery and equipment, such as chainsaws and trucks, can be used during several harvest seasons or

productive periods, but will eventually wear out to the point that they become useless. Depreciation is the

accounting method used to compute the cost per year (or other productive period) of using a specific piece of

machinery and equipment that eventually wears out. Depreciation may be calculated in terms of annual

depreciation when the productive period is one year, meaning that production occurs over the entire year

(e.g., tourism), and/or there is only one productive period per 12 month period (e.g., timber, Brazil nut

harvests). Or, depreciation may be calculated for different periods of time. For example, if a tourism

operation wants to look at costs and revenue for the first six months of the year and compare it to the last six

months of the year, then the productive period would be 6 months and this depreciation would be referred to

as periodic depreciation, not annual depreciation.

Textbox 2.1. Depreciation of machinery and equipment When you purchase a new piece of machinery or equipment, you shouldn’t assign the entire cost to one production period or harvest. Rather, you should divide the cost of the item by the number of productive periods during which you plan to use it. The result is referred to as the depreciation cost for the item. In addition, to generate a cost for machinery and equipment used in each activity, you need to divide the cost of depreciation between the activities in which each article is used. In order to do this, use the proportion of “Days Worked” in each activity relative to the total number of “Days Worked” for all activities in which the item is used. The Green Value tool presents two methods for doing this – one method that provides more precise results, and one that provides less precise, but still valid, results.


How do you calculate depreciation costs? Although several methods for computing depreciation may be used, the Green Value tool is designed to

compute the periodic depreciation cost using the ‘straight-line’ method. This method reveals the proportion

of the purchase price of machinery and equipment that is used up during each productive period. We note

that, because many items of machinery or equipment are expensive to purchase, the FI needs to plan for

subsequent purchases when these items wear out.

The ‘straight-line’ depreciation method is a simple method for computing depreciation for each item of

machinery or equipment:

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒 − 𝑅𝑒𝑠𝑎𝑙𝑒 𝑣𝑎𝑙𝑢𝑒

𝑈𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒

In order to calculate depreciation, the purchase price, the resale value, and the useful life of the item are

needed. The purchase price is the price paid for the item when it was purchased. The resale value is the

amount, if any, for which the item could realistically be sold. It is expected that many items will be used until

they no longer have any value, so they will have a resale value of zero. The useful life of an item is the

estimated amount of time (measured in the number of productive periods) that the item will last until it needs

to be replaced.

For example, if a chainsaw has a purchase price of $3000, a resale value of zero, and a useful life of three

harvest seasons (production periods), the depreciation cost is $1000 per season ($3000 / 3 seasons) (Figure

2.2). This means that although the entire cost is paid at the time of purchase, only one-third ($1000) of the

purchase price is being used up each harvest season. In order to purchase a new chainsaw, the FI will need to

save an adequate amount of their income during the items’ useful life to do so. The annual depreciation cost

provides an estimate of how much needs to be saved each harvest season or productive period to purchase

new machinery or equipment.

Year 1 = $ 1.000

Costs $ 3.000 &

lasts 3 years

Year 2 = $ 1.000

Year 3 = $ 1.000

Figure 2.2 The division of the cost of a chainsaw over 3 years, which is equivalent to its annual depreciation

cost.

How do you determine the useful life? Machinery and equipment dealers will often provide an estimate of useful life in terms of hours of use.

However, these estimates are typically based on good storage, regular maintenance, industrial usage of the

machinery, and moderate climate. In contrast, operating conditions vary a lot for FIs. Some FIs implement

forest management activities 8 months of the year, while others may only operate for 2 weeks or 3 months. In


addition, operating conditions are often severe for machinery and equipment used by tropical FIs – such as

high humidity, inadequate storage conditions, and limited availability of maintenance skills and replacement

parts. On the other hand, the accounting laws of a country often define a specific number of years (e.g., 5

years) for the useful life of all machinery and equipment, however, in reality the useful life varies a lot

depending on the use of the items. Therefore, we recommend that FIs use their best guess of how many

harvest seasons or productive periods they expect each item to last based on their experience, or the

experiences of others.

How do you divide the annual depreciation cost between productive activities? In addition to dividing the depreciation of each machine or equipment over the years in which it is used, you

should also divide the depreciated cost over the activities in which each item is used. This can be done with

the Green Value tool using an estimate of the number of days for which each item was used. Instead of using

the number of calendar days for which each item was used, we use the total of “Days Worked”, which is

calculated at the end of the harvest or productive period based on Labor monitoring data (the unit “Days

Worked” is used as follows: 10 people worked one day = 10 Days Worked). Therefore, the first step is to

identify in which activities each item is used. Then, to calculate the part of the deprecation cost that will be

assigned to each activity, the depreciation cost is multiplied by the proportion of the number of Days Worked

in one activity over the total of Days Worked for all of the activities in which the item was used.

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑖𝑡𝑒𝑚 𝐴 𝑓𝑜𝑟 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑦 1 = 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡 𝑥 𝑑𝑎𝑦𝑠 𝑤𝑜𝑟𝑘𝑒𝑑 𝑖𝑛 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑦 1

𝑡𝑜𝑡𝑎𝑙 𝑑𝑎𝑦𝑠 𝑤𝑜𝑟𝑘𝑒𝑑 𝑓𝑜𝑟 𝑖𝑡𝑒𝑚 𝐴

We are going to look at two items of machinery and equipment as examples. First, we suppose that an FI buys

a pair of boots for each temporary worker, that workers are divided in different work teams, and they all use

boots when they work. Let’s consider that the FI implements two activities – inventory and tree felling - and

the number of workers assigned to each activity is as follows:4 teams with 4 people each (16 in total) in the

activity inventory, and 2 teams of 3 people each (6 in total) in the activity harvest or tree felling. Therefore, if

the FI buys a total of 22 pairs of boots at a cost of $50/ pair, and if the useful life of the boots is three harvest

seasons, the total annual depreciation cost of the boots is $367 ($1,100 / 3 harvest seasons). To keep the

example simple, assume that the two teams work (only) one day. Then, the number of Days Worked would be

16 for inventory and 6 for tree felling, or 22 in total. To calculate the boot depreciation cost for the inventory

activity, multiply the total depreciation cost ($367) by the ratio of the 16 Days Worked to the total of 22 Days

Worked, and we get $267 (Figure 2.3). The remainder of the total annual depreciation cost ($100) is assigned

to the tree felling activity. Of course, we could also obtain the same result using the proportion of days

worked in this activity relative to the total days worked (6/22).


Figure 2.3. The division of the annual depreciation cost of boots among two activities

The methodology used for the boots works well for cases where all of the machinery or equipment is used at

the personal level - that is, every member of each team uses the same equipment all the time. However, for

items that are normally used by only one person per team (differentiated as equipment used at the team

level), the use of the same methodology would distort the value of depreciation cost assigned to each activity.

Returning to the example of the chainsaw, let’s assume that the FI has 6 chainsaws and they are used by the

same work teams for the same activities. However, in this case, within each team there is only one person

who uses the chainsaw. Therefore the number of workers using the chainsaw in the inventory activity is 4 (1

per team) and in the tree felling activity is 2 (1 per team). The total cost of the 6 chainsaws at $3,000 each is

$18,000, and their useful life is 3 harvests. Therefore, the annual depreciation cost of the chainsaws is $6,000

($18,000 / 3 harvests). If the same six teams work 1 day, the sum of units of Days Worked for the workers that

use the chainsaws is 4 for the inventory activity and 2 for tree felling. The proportion of depreciation costs of

the chainsaws would be $4,000 for inventory and $2,000 for tree felling (Figure 2.4).

If we had used the same method that we used for the boots (equipment used at personal level) to divide the

cost of the chainsaws (equipment used at the team level) among activities, we would have assigned 72% of the

cost of the chainsaws to inventory instead of 66%. The difference is small for this example in which we used

units of Days Worked for one calendar day, but if we compared the results of both methods for a whole

harvest season the difference would likely be much larger.

Year 1 = $367

Year2 = $367

Inventory Tree felling $367 x 6/22 Days Worked =

$

100 (28%)

$367 x 16/22 Days Worked = $

267 (72%)

Year3 = $367

Cost of a pair of

boots in year 1

for the two

activities:

Total cost is $1,100 ($50 x

22), last 3 years and are

used in 2 activities


Year 1 = $6,000

Year2 = $6,000

Inventory Tree felling $6,000 x 2/6 Days Worked =

$ 2,000 (34%)

$6,000 x 4/6 Days Worked = $ 4,000

(66%)

Year3 = $6,000

Total cost for 6 chainsaws

is $18,000 ($3,000 x 6),

last 3 years, & used in 2

activities

Cost of 6

chainsaws in

year 1 for the

two activities:

Figure 2.4. The division of annual depreciation cost for chainsaws between two activities.

Calculating Total Revenue and Average Total Revenue

In addition to accounting for the costs of production, it is essential to account for the value of the products

that are sold. The revenue received by an FI is computed by multiplying the unit price of a product or service

sold by the quantity of product or service sold. For some timber products, for example, this can be computed

by multiplying the price received per cubic meter times the number of cubic meters sold. For non-timber

forest products, this could be computed by multiplying the price received per kilogram of nuts or per liter of

oil, for example, times the number of units (in kilograms or liters) sold. For services, such as tourism, this could

be computed by multiplying the price per tourism package times the number of tourist packages sold.

𝑅𝑒𝑣𝑒𝑛𝑢𝑒 =𝑝𝑟𝑖𝑐𝑒

𝑢𝑛𝑖𝑡∗ 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑠𝑜𝑙𝑑

In many cases, the price of products and services depends upon their quality or other attributes. For example,

timber product prices are often grouped into three value classes. Low value species are often used to

manufacture plywood or are used in rough construction. Medium value species may be used in general

construction. High value species may be used in the manufacture of furniture or flooring. When price

depends upon quality, it is necessary to account for the price and quantity of products or services sold in each

value class. The revenue for each value class is simply computed as the price times the quantity sold within

each class, and the total revenue is computed as the sum of the revenue obtained from each value class:

𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = 𝑝𝑟𝑖𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 1 ∗ 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 1

+ 𝑝𝑟𝑖𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 2 ∗ 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 2

+ 𝑝𝑟𝑖𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 3 ∗ 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 3

Referring again to the timber production example from southern Bolivia, this FI had a total revenue of $58,392

from the sale of three classes of logs. Table 2.2 shows the volume sold, the price received, and revenue per

class, as well as the total revenue.


Table 2.2. Revenue from the sale of logs for a FI in southern Bolivia (in US$).

Product Product class Quality Unit of Sale

Volume sold

Price/Unit (US$/unit)

Total Revenue (US$)

logs light wood 1 m3 724.30 137.20 14,496.57

logs wood for construction

1 m3 999.38 171.50 25,002.72

logs light wood 1 m3 943.93 137.20 18,892.37

2,667.61 $ 58,391.66

Finally, just as average total cost could be computed from a measure of total cost, average total revenue can

be computed by dividing the total revenue by the quantity of products sold:

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = 𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 1 + 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 2 + 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑣𝑎𝑙𝑢𝑒 𝑐𝑙𝑎𝑠𝑠 3

Continuing our example from southern Bolivia, average total revenue is computed as follows:

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = $58,392

2,668 m3= $21.89 𝑝𝑒𝑟 𝑚3

Note that this average total revenue is almost twice as large as the average total cost ($11.88/m3).

Calculating Net Revenue, Average Net Revenue, and Rate of Return

With the total cost and revenue information in hand, your FI can compute the net revenue (profit or loss)

which indicates whether it is making or losing money during the harvest period. Net revenue is simply

computed as the total revenue minus the total cost:

𝑁𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 (𝑝𝑟𝑜𝑓𝑖𝑡) = 𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

If net revenue is positive, after including all of the costs associated with a FI, then the FI has some ‘excess’

funds that are available for other uses. In some cases, communities may decide to allocate profits to different

funds or accounts for social benefits, such as to improve community roads or schools, provide scholarships, or

improve public health.

In contrast, if net revenue is negative at the end of the productive period (total costs are greater than total

revenue) after including all costs, the FI will not have money available to pay for all of the inputs used in

production. In order to reduce costs, the production process may need to be modified, for example by

simplifying the product (standing trees instead of logs) or, conversely, adding value to the product (blocks

instead of logs). In some cases, the FI may need to seek help subsidizing some costs, such as technical

assistance or training of workers.

Average net revenue is also a useful calculation as it provides an assessment of the profit earned (or loss if the

result is negative) per unit of quantity sold. Average net revenue is computed by subtracting the average total

cost from the average total revenue:


𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒 − 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

A final measure that is useful in evaluating the financial condition of a FI is the rate of return. This measure

indicates the amount of income (revenue) that is gained for each unit of cost:

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 = 𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡− 1

Continuing the southern Bolivia example, the rate of return for this FI is $58,392/$31,679 – 1 = 0.84. This

result indicates that for each $1 invested in the production of timber, the sale of timber provided $1.84 in

income.


3. FINANCIAL ANALYSIS OF FOREST-BASED INITIATIVES IN THE AMAZON BASIN

To illustrate the financial concepts described above, we present an overview of two FIs in the Amazon region

where the authors have used the Green Value tool to conduct financial analyses. For the first case study, we

analyze a Brazil nut FI in Bolivia, and for the second case study, an industrial-scale timber production FI in

Brazil. Each case study is introduced with a description of the general characteristics of the initiative. Then, a

summary of the financial analysis for each initiative is presented and discussed.

Case Study 1: Brazil nut Collection

Our first case study is of the Yaminaua Machineri community located in the Pando Department of northern

Bolivia. The population in this region is descended from a variety of indigenous and mixed ancestries and is

now living on communal (TCO) land. Communities maintain a strong commitment to their cultural heritage

and continue to pursue traditional uses of the forest. Although rubber extraction was commonly practiced

until the late 1980’s, since that time Brazil nut collection has been the main source of income and offers

employment to about one-half of the working population in the area.

Pods containing Brazil nuts can weigh as much as 2 kilograms and fall to the ground during the months of

November and December in this region. Because it is dangerous to enter collection areas during this period,

nuts are collected during January. Brazil nut collection is a family activity and each family typically collects nuts

from a forest area ranging in size from 100 to 500 hectares. Depending on the distance between the

collection area and the community, a family may depart in the morning and return home in the evening or,

alternatively, may spend days or weeks at a time collecting in the forest. Adults typically use a forked stick to

collect the pods which are placed into a handmade basket. After many pods are collected, the woody husks

are opened using a machete and the nuts are placed in large plastic bags (“barrica”). The barricas are then

carried to collection points where they are transferred to processors from nearby cities.

Recently, the communities in this region began developing a management plan which assures equitable

distribution of the economic benefits of nut collection. This plan, required by the government, is being

developed with the participation of community members and will include maps showing the locations of trees

within the areas where families traditionally collected Brazil nuts. The Yaminaua Machineri community is

receiving assistance in this activity from a non-governmental organization (CESVI Foundation Bolivia) who is

also providing assistance in the construction of nut storage facilities.

For this case study, data were collected from a family of three (mother, father, daughter) who collect, on

average, about 20 barricas of nuts (or 1,320 kilograms) from an area of approximately 200 hectares of forest.

It should be noted that the density of Brazil nut trees in this area is low relative to the region. Information

used in the analysis was collected during a Green Value training workshop during April, 2013. The information

we present is based upon the recollection of the family members as well as information provided by other

community members and participants from the NGO. During the 2013 collection season, this family spent

about 15 days collecting pods, 9 days opening the pods to extract the nuts and place them in the barricas, 2

days transporting barricas along trails to the road, and 1 day selling the product to a processor.


Costs

Several assumptions were required to account for the costs of inputs used in collecting Brazil nuts during the

productive period. First, although family labor was not paid a daily wage, it was assumed that the value of a

day’s work would be estimated by the opportunity cost of time based upon daily wages paid for adult unskilled

labor in the region (80 Bolivianos, or US$11.67). The labor cost of the daughter was assumed to be half the

adult rate. Second, daily food costs were assumed to be Bs 10 (US$1.46) for each person. Third, although the

family used a motorcycle to access the collection area, it was used for many other activities, so the cost of

motorcycle use was assumed to be the amount that would be required to rent a motorcycle during the nut

collection period. Fourth, because the head of the family administered the collection and sale, 3 days of his

time were charged to administrative activities. Finally, it was assumed that the costs associated with the

census and mapping of Brazil nut trees for this family would be charged as administrative costs to account for

the required time plus the rental cost of a computer.

Table 3.1. Costs of Brazil nut production by a traditional family in the TCO Yaminahua Machineri, in Pando, Bolivia (in US$).

Activity Labor Materials & Services

Machinery & Equipment

Subtotal ($) Percent Average cost per unit sold

($/barrica)

Collection 219 302 0 521 57% 26

Nut extraction 131 46 0 177 20% 9

Transport 29 32 0 61 7% 3

Sale 15 19 0 34 4% 2

Administration 44 67 3 113 12% 6

Subtotal ($) 438 466 3 907 100% 46

Percent 48% 51% 0%

Based on these assumptions, and other information collected during the workshop, the total costs of the

collection and sale of Brazil nuts was estimated to be US$906.93 for this family (Table 3.1). Brazil nut

collection and sale are labor intensive and, not surprisingly, the analysis showed that nearly one-half of the

total cost (48%) is labor related (Figure 3.1). Material and service costs accounted for almost all of the

remaining costs (51%), and covered items such as plastic bags (barricas), machetes, cooking utensils and food

while in the field.

Figure 3.1. The proportion of cost per input for Brazil nut production by a traditional family in the TCO

Yaminahua Machineri, in Pando, Bolivia.

Labor

Materials &Services

Machinery &Equipment


The average total cost per barrica of nuts (66 kilograms) is computed as:

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 (𝑏𝑎𝑟𝑟𝑖𝑐𝑎) = $906.93

20 𝑏𝑎𝑟𝑟𝑖𝑐𝑎𝑠= $45.35/barrica

or about US $45/barrica. As there are about 66 kilograms in a barrica, the average total cost per kilogram is

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 (𝑘𝑖𝑙𝑜𝑔𝑟𝑎𝑚) = $45.35

66 𝑘𝑖𝑙𝑜𝑔𝑟𝑎𝑚𝑠= $0.69/kilogram

Revenue and profit

The price received for each barrica of nuts was US$49.64, so the total revenue from the sale of 20 barricas of

nuts was $993.

The profit, or total net revenue, is simply the difference between the total revenue and the total cost:

𝑃𝑟𝑜𝑓𝑖𝑡 (𝑡𝑜𝑡𝑎𝑙 𝑛𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒) = $993 − 907 = $86

Although this is a modest profit for the time spent collecting nuts, recall that all of the labor cost is paid to the

family for their work. So, in addition to the profit, the family earned about $438 in income during the

collection period.

The rate of return for Brazil nut collection is computed using the following ratio:


𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡− 1 =

$993

$907− 1 = 0.095

This indicates that, for each $1 in total costs, the collection and sale of nuts resulted in about $1.10 in revenue.

Case Study 2: Industrial-scale Timber Production

Our second case study is for the Cooperativa Mista da Flona do Tapajós (Coomflona), which is located in the

Tapajós National Forest, a Conservation Unit of approximately 527 thousand hectares of upland forest, near

the city of Santarém in the state of Pará, Brazil. Within the National Forest, approximately 32.5 thousand

hectares are managed by Coomflona, which has more than 200 participating members from 24 traditional

communities. Some workers in the cooperative had received previous training in an experimental project

conducted by the International Tropical Timber Organization (1999-2004) to test whether industrial scale

reduced-impact logging operations in the Amazon could be profitable. The financial success of the ITTO

project (Caetano Bacha and Estraviz Rodriguez, 2007) provided an incentive to organize a FI using similar

harvesting technology.

The FI, originally referred to as the Ambé Project, was initiated in 2005 with the assistance of a federal

government program (ProManejo - Support for Sustainable Forest Management in the Amazon) and technical

and financial support provided by a variety of governmental and non-governmental institutions. Coomflona

has consistently demonstrated financial success since the time when most of its external funding was

discontinued in 2008, and is able to provide social benefits to more than 5,000 people living in local forest


communities using funds generated by timber harvests. These benefits provide a clear incentive for those

communities to act as stewards for protecting local forest resources.

The first timber harvest by Coomflona occurred in 2006 and consisted of 100 hectares. Harvests increased to

1,000 hectares for the 2010 to 2013 annual harvests, and increased to 1,600 in 2014. The Cooperative

received Forest Stewardship Council (FSC) certification for responsible forest management in 2013 which may

help expand the market for their products.

The financial analysis we present here is based on data collected from the 2011 harvest season during which

15,064 m3 of logs were harvested and sold, representing an average harvest intensity of about 15 m3 per

hectare. The cooperative employed 67 people during this production period.

Costs

Labor, materials & services, and machinery & equipment costs for each activity are shown in Table 3.2.

Looking at the labor cost column, it can be seen that the timber harvesting operation generated more than

US$254,428 in income for workers in this project. The largest share of the labor costs were for the

administrative activities, which employed 28 workers. Substantial labor costs were also associated with

skidding (US$49,086) and inventory (US$46,699).

Expenditures associated with materials and services were the largest cost category (US$392,883, Table 3.2).

This project had administrative offices both in the city (Santarem) and in the field, and administrative

expenditures included food and associated kitchen and dining material for both operations (Figure 3.2). Rental

costs for heavy equipment (paid for road building, skidding and log loading activities) were also substantial and

included in the material and services cost category.

Although the project owns several transportation vehicles for traveling to and from the field site and along

logging roads, it does not own any heavy equipment. Consequently, the machinery and equipment cost was

modest (about 6% of total cost).

Table 3.2. Annual total costs for the Coomflona forest initiative (US$)

Activity Labor Materials & Services

Machinery &

Equipment

Subtotal Cost ($)

Percent Average Cost per unit sold

($/m3)

Inventory 46 699 1 873 1 496 50,068 7% 3 Planning 3 757 35 655 1 014 40,427 6% 3 Harvest 30 771 15 750 7 504 54,025 8% 4 Skidding 49 086 57 589 6 040 112,714 16% 7 Product measurement & loading

39 213 162 485 3 184 204,881 30% 14

Administration 85 024 119 532 23 070 227,626 33% 15

Subtotal Cost ($) 254,550 392,883 42,308 689,741 46 Percent 37% 57% 6%


Figure 3.2.Costs per activity for the Coomflona forest initiative in Santarem, Brazil (US$).

The average total cost of producing logs for Coomflona can be computed by dividing total cost by the volume

produced:

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = $689,741

15,064𝑚3= $46/𝑚3

Revenue and profit

The average price received for logs delivered to the mill was $106/m3. The volume sold was 15,064, so the

total revenue was $1,601,004.

The profit, or total net revenue was:

𝑃𝑟𝑜𝑓𝑖𝑡 (𝑡𝑜𝑡𝑎𝑙 𝑛𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒) = $1,601,004 − $689,741 = $911,263

The rate of return for this timber production FI, during this productive period, is very high:


𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡− 1 =

$1,601,004

$689,741− 1 = 1.32

The Coomflona cooperative has voted to allocate the profits from the timber harvest operation to serve

various purposes. For example, about 45% of the profits are placed in a capital account that can pay start-up

costs for the next productive period (such as conducting the inventory).Other funds have been created to

provide health plans, training and other support for workers and other members of the participating

communities.

-

200,000

400,000

600,000

800,000C

ost

in U

S$

Administration

Product measurement &loadingSkidding

Harvest

Planning

Inventory


4. MONITORING, COMPILING AND ANALYZING COSTS AND REVENUES

Having described basic financial concepts, and then illustrating the application of these concept with real

examples from a simple and a more complex FI, we now present a detailed description of the Green Value six-

step process for conducting financial analyses. This presentation includes a description of how to use the set

of preformatted worksheets that accompany this User’s Guide. We use some data from the Coomflona

cooperative described in Section 3 as examples. After studying this section, you should have a good idea of

how to conduct a financial analysis of a forest-based initiative.

The six steps provided by Green Value are: (1) plan, (2) collect data on costs and sales revenue, (3) enter data

in worksheets, (4) compile data collected over time, (5) analyze the data, and (6) discuss the results. These six

steps are summarized in Table 4.1 and Figure 4.1. Each step has a specific worksheet (or set of worksheets)

associated with it, as presented in Figure 4.2.

Table 4.1. Description of the six steps.

Steps Description

Step 1. Plan Enter general information about the product, the producer, the period of time

(production period) to be analyzed, the producer’s goals, the principal activities to

be monitored, and the responsibilities for monitoring. Also note any assumptions

used in the financial analysis.

Step 2. Collect Collect cost and income data and record it in written form using printed

worksheets for each type of input (labor, materials and services, and machinery

and equipment). This step can be combined with Step 3.

Step 3. Enter Enter the collected data in digital form in worksheets using a computer.

Step 4. Compile Calculate subtotals per type of input and per activity.

Step 5. Analyze Present the costs per activity and per input type, and calculate total income, net

income, and rate of return. Illustrate results using graphs and charts.

Step 6. Discuss Register the main points from the discussion of the results.

For steps 2 to 5, data are collected on three main types of activities:

Productive activities: all activities necessary to complete a production period, from initial planning to

the sale of the product or service

Administrative activities: all activities necessary to keep the forest-based initiative in operation

Sales: all sales of products and/or services.


For the productive and administrative activities, you will collect three main types of input (or cost) data:

Labor: time worked or quantity produced by each worker in each activity

Materials and services: items purchased that are used up quickly and/or services provided within the

productive period; these do not usually last more than one productive period and are usually

purchased for one specific activity

o For example, materials may include gasoline, oil, or food for workers, and services may include

harvesting, loading, or transportation of products by third parties (or people who are not usually

employed by the initiative).

Machinery and equipment: tools that are used to implement field and administrative activities; these

usually last more than a few years and are often used in more than one productive activity.

o For example, chainsaws, portable sawmills, computers.

As a rule for this User’s Guide, if a hand tool or machine lasts less than one year or productive period,

it is considered a “material”, and if it lasts more than one year or productive period it is considered a

piece of “machinery” or “equipment”.

Step 1: Plan The very first planning activity for getting ready to analyze a forest-based initiative should be a discussion

about what monitoring is and why it is important. This discussion should involve everyone involved with the

initiative such as the business manager/administrator, professional foresters and technicians, temporary field

staff, community leadership, and partner organizations. Everyone should understand that monitoring will

require time and that the people involved (staff, family members) will need cooperation from everyone, as

well as some training. The amount of time and training will depend on the size and complexity of the initiative.

For example, if the initiative sells standing trees, then the number of field activities to be monitored will be

fewer than for larger initiatives that cut and process trees. In this case, the collection and processing of data

would take less time.

Text Box 4.1. Before entering data into the worksheets It is very useful to compare the results of financial analysis for distinct productive periods. To facilitate this process, BEFORE ENTERING ANY DATA in the worksheets, we recommend saving a clean copy of the worksheets with a file name that includes “Original”. Next, save another copy of the worksheets with the name related to the productive period, e.g., “Harvest 2013,” or “Period July 2013 to June 2014”. This will help avoid reduce the risk of erasing data from the previous period when new data is entered.


Figure 4.1. Flowchart showing the six steps in the Green Value tool for conducting a financial analysis of a forest-based initiative. Tree felling is used as one example of the many products and services that can be analyzed with the Green Value tool.

Plan how monitoring will be implemented

*worksheet: (1) Plan: Monitor (Annex 1)

It is very important to plan and record exactly what will be monitored. This includes the activities required to

produce the product or service to be monitored and analyzed (e.g., logs, nuts, tourism), the period of analysis,

and other basic information.

Note: Financial analysis with the Green Value tool can be conducted using different frames of reference. You

may decide to analyze an entire productive period (which may fall within one calendar year or may span parts

Labor Salaries,

Materials & Services,


Step 4:

Compile

data

Materials &

Services

Machinery &

Equipment

Machinery &

Equipment

Phases 1-3

Labor Step 3:

Enter data

Quantities

and Values Salaries,



Materials &

Services

Machinery &

Equipment

Phase 1

Labor Step 2:

Collect

data

Materials &

Services

Productive Activities:

e.g., Tree felling

Administrative

Activities Product Sales

Step 1:

Plan

Major activities, goals for the initiative,

monitoring plan, & assumptions

Step 5:

Analyze

data

Cost subtotals Income

Summary & Graphs:

Total Cost, Total Income, Profit, Rate of Return

Reflection and discussion regarding if goals have been met and

how to adapt management and monitoring for next year

Step 6:

Discuss

results

Salaries,



Quantities

and Values


of two calendar years). In the case of timber production, for example, it is common for inventory and planning

activities to occur before the end of one year and for the harvesting, skidding, and transport activities to occur

the following year. Or you may decide it is useful for you to analyze a part of the productive period (for

example, for tourism, it may be useful to compare the costs and profit for the high season to the low season in

the same year). The most important thing is to clearly define the period of time to be analyzed (or productive

period) and to include all costs and income for that period.

Open the Green Value worksheets (Simple) file and go to the (1) Plan: Monitor worksheet and prepare to go

through the information requested with the participants.

Goals of monitoring The next planning activity is to identify the goals of the forest-based initiative with respect to financial

measures and other social goals that participants in the FI may consider important as measures of success.

Although we developed Green Value to calculate financial measures such as profit and rates of return, we

recognize that families and communities may have additional goals for forest-based initiatives. For example, in

Guatemala, some of the community-based forest enterprises in the Petén region have identified the creation

of jobs for community members as their main goal. Thus, zero profit after all costs are accounted for would

be acceptable if it meant that their goal for employing a certain number of people for a certain number of days

is met. In another example, a community might not be as interested in generating a specific rate of return as

in generating adequate funds, after all other costs are accounted for, to pay for community projects, such as

constructing a meeting hall or raising money for a scholarship fund. Still, in other cases, a community might

want to document a certain minimum rate of return in order to attract investors. It is important to identify

these goals in the beginning of the monitoring process in order to ensure that adequate data are collected to

be able to determine if the identified goals have been met. We have included the (1) Plan Monitor worksheet

to help you document the goals you want to measure with this monitoring tool.

Text Box 4.2. Filling in the worksheets

When filling in the worksheets using a computer, please note that the cells you need to enter data into are marked by an arrow (↓) in the column heading. If the worksheet column does not have an arrow in the heading, this means that numbers in that column are either transferred into the cells automatically through links to another worksheet and/or computed automatically through formulas in the cells in this column. However, it is always a good idea to verify that the numbers in the cells that are transferred or computed automatically are correct. If worksheets are being filled in by hand first, you can disregard the columns without arrows until the data is entered using a computer.

The order of the worksheets mirrors the order in which they are completed, with the exception that each (2, 3) Enter worksheet is followed by the corresponding (4) Compile worksheet. This is to make it easier for you to confirm that the subtotals in the (2,3) Enter worksheet were copied over correctly to the (4) Compile worksheet.


Major productive activities As described in section 2 above, it is very important to identify all of the major productive activities to be

monitored, as these activities will be the basis for organizing cost data for productive activities. This list should

include all of the different productive activities involved in the product or service to be monitored and

analyzed – even activities that are usually subsidized by others, such as management planning, road building,

or training. Each major activity may contain several minor or sub-activities.

A good way to identify the major and minor activities is to hold a meeting of technical staff and note all of the

activities using a flipchart or whiteboard. It is often helpful to proceed in sequential order, that is, list the

activities in the order in which they occur for one productive period. These activities can then be grouped into

major activities. Alternatively, it may also be helpful to list major activities first, such as “inventory”, and then

to list sub-activities, such as “delineate areas to be inventoried”, “open inventory trails” and so forth. It is a

good idea to aggregate the sub-activities into as few major activities as possible, such as four to six major

activities, as this will help minimize the chance of making errors when subtotals in (2,3) Enter worksheets are

linked to and summed in the (4) Compile worksheets. In Table 4.2 we include a list of major and minor

productive activities that might be included for a community timber harvesting initiative in the tropics.

As part of the planning process before monitoring begins, several decisions regarding how monitoring will be

implemented must be made. In some cases these decisions will influence which worksheets will be used. The

decisions are: (1) how labor data will be collected, (2) the level of precision desired for the final results, and (3)

in which form data will be recorded and/or analyzed. Table 4.3 presents information on the options for

decisions 1 and 2 and their implications for monitoring different types of data, and Table 4.4 presents

information on the four options for decision 3.


Table 4.2. List of productive activities that a community timber harvesting initiative might implement in the tropics. Major activity Minor Sub-activities

Inventory (usually for following year’s harvest unit) and planning

Delineate areas to be inventoried Open inventory trails Record inventory data Cut vines Inventory analysis Map and plan for harvest (delineate skid trails, log decks) Prepare annual operating plan Present plan and pay fees

Planning and construction of roads

Plan the location of secondary roads and log decks Open secondary roads and log decks Maintenance of primary roads

Cut trees Fell trees Record information on trees that are cut Prepare the log for transport

Log transport within forest (also known as Skidding)

Transport logs to log deck (this may not be necessary if logs are processed in the forest with a portable sawmill or chainsaw.) Cut logs to merchantable lengths

Product Measurement Measure the diameters and lengths of logs to calculate total volume If processing, measure the volume of blocks or lumber

Load and transport product to market

Load products onto a truck or boat for transportation Transport products to a location (sawmill, roadside, port) where they will be processed or transported further to the buyer.

Decision 1: Labor data collection - 3 options This decision will be based on how workers are paid, and this may vary by major productive activity or even

within activities (Table 4.3). The three options available are to monitor and enter labor data in terms of either:

units of time worked (e.g., days or hours), units of production (e.g., trees cut or area inventoried per day), or a

combination of these. A worksheet is provided for each option: the “Time” option and the “Production”

option (Figure 4.2). In fact, the total of days worked per activity is calculated for both options (Time and

Production) to facilitate the division of the costs of machinery and equipment between the activities in which

they are used.

Decision 2: Level of precision of cost data per activity - 2 options There are two options for monitoring and analyzing data that determine the precision of the results of

analysis: the less precise “Simple” option and the more precise “Advanced” option. FIs should choose an

option based on the importance of the level of precision of cost allocation for machinery and equipment across

major productive activities, and the number of items of machinery and equipment used (Table 4.3). The

“Simple” option allows for less detailed monitoring of labor, and has a more straightforward method for

dividing of the costs of machinery and equipment between productive activities. However, the subtotal “cost

per activity” calculated is less precise than for the “Advanced” option.


This is our guidance for making this decision:

If the level of precision is not important, the FI should use the “Simple” option.

If the level of precision is important to the FI or its partners, but the FI uses few items of machinery

and equipment in its productive activities (not including its administrative activities), then the “Simple”

option should be adequate.

If the level of precision is important, and the FI uses several (e.g., more than five) items of machinery

and equipment in its productive activities, the FI should use the “Advanced” option.

We have found that the “Simple” option is more appropriate for smaller and less complex initiatives, such as

the family production of non-timber forest products, which does not require a lot of workers or machinery.

There are worksheets specifically designed for each option (Figure 4.2). The implications of each option for

monitoring are described in Table 4.3.

Text Box 4.3. VERY IMPORTANT

The decision to use the Simple or Advanced option will determine which worksheet file is used. All users begin with the Simple version of the worksheets, but if necessary, will switch to the Advanced version.


Table 4.3. Options for monitoring and analysis of productive activity costs.

Two options for data monitoring and analysis

Less precise (“Simple”) More precise (“Advanced”)

Issues to consider in

choosing the best option

Importance of the level of

precision for cost allocation

for machinery and equipment

between productive activities

Not so important Important

Number of items of

machinery and equipment

used

Few (1-5) Many (more than 5)

Implications for monitoring

and analysis

Labor Calculate one subtotal of time for

all workers per activity

Calculate two subtotals of time

per activity: (1) all workers and (2)

team leader

Machinery and Equipment 3 Phases

• In Phase 1, indicate if each item

is used or not

• In Phases 2 & 3, use one

subtotal of time for all workers

per activity.

3 Phases

• In Phase 1, differentiate if each

item is used at the personal or

team level.

• In Phases 2 & 3, use one of two

subtotals of time per activity:

(1) team leader and (2) all

workers, depending on if the

equipment was used at the

personal or team level.


Figure 4.2. The six steps and the worksheets to use for each step.

(2,3) Enter: Labor (Time)

(2,3) Enter: Labor (Prod)



(4) Compile:

Labor

(5) Analyze:

Summary &

Graphics

Step 2: Collect, and Step 3: Enter

(same worksheets) Step 4: Compile Step 5: Analyze

(2,3) Enter: Mach-Equip

Ph. 1


Ph. 1

(4) Compile:

Mach- Equip


Ph. 2


Ph. 2

(2,3) Collect:

Machinery &

Equipment III

Step 6: Discuss Step 1: Plan

(6)

Discuss

(1) Plan:

Monitor &

Assumptions

(2,3) Enter: Mat-Services

(2,3) Enter: Admi

(2,3) Enter: Sales

(4) Compile:

Admin

(4) Compile:

Mat-Services

Decide:

(1) Simple or Advanced

(2) Time or Production

Based on decision

above, use Simple or

Advanced option


Decision 3: Form of recording and analyzing the data – 3 options The initiative must decide how it wants to collect data: either in written or digital form. This decision should

be based on access to a computer (which facilitates digital data entry and analysis), the frequency with which

data is generated, and/or the location where data is generated (Table 4.4). The three options are:

(1) Collect data in written form, but enter and analyze it in digital form (complete both Steps 2 and 3

(2) Record and analyze all data in digital form (i.e., skip Step 2)

(3) Choose the best method for each activity, i.e., collecting data in written form for some activities and in

digital form for others, and then analyzing all data in digital form for Steps 3-5.

For example, if we consider timber production, some costs, such as those related to the purchase of machinery

and equipment, may only occur a few times during a production period, and it may be best to enter this cost

data directly into the (2,3) Enter: Mach-equip Ph. 1 worksheet in digital form. There is less chance that the

data will be lost, as there are usually receipts related to purchases. On the other hand, for labor-related costs

for activities which occur in remote forest areas and which last for several days or weeks, it may be best to

enter the data every day in written form, and then enter the data later in digital form using a computer. This

can improve accuracy of data for labor and/or materials and services for productive activities, as it can be hard

to remember details if they are not recorded the same day that they occur (Table 4.4).

These decisions should be recorded in the (1) Plan Monitor worksheet and will determine which Collect and

Enter worksheets are used for monitoring labor, as well as machinery and equipment data.

Table 4.4. Options on the form of recording and analyzing cost and income data.

Option Description Characteristics of FIs which Favor this Option

First written and then Digital

All data will be collected in written form first, and then entered in digital form with a computer

Field activities which last over several days or weeks

Field activities which occur in remote places

Digital All data will be entered directly in digital form with a computer (written form will not be used); the analysis will proceed from Step 1 to Step 3, skipping Step 2.

Good access to a computer

Few field activities

Choose best method for each activity

For some activities data will be entered in written form, and for other activities it will be entered directly in digital form.

Good access to a computer

Some field activities

Responsibilities for Monitoring The final phase of planning is to decide who will be responsible for implementing different aspects of the

monitoring plan, such as collecting, entering, and verifying the quality of the data for each type of input (labor,

machinery, materials) and for each field activity, and presenting and discussing the results. These

responsibilities should be noted and shared with everyone at the FI.


Define assumptions related to monitoring and analysis

* worksheet: (1) Plan: Assumptions (Annex 1)

It is important to list any assumptions being made for the financial monitoring and analysis of the FI. The list of

assumptions could include information that is important to consider or remember regarding how the

monitoring and/or analysis is completed. It is very likely that new assumptions will be made as monitoring and

analysis proceed, and these should be recorded in this worksheet as they are identified.

Go to the (1) Plan: Assumptions worksheet and enter any assumptions being made under the appropriate title.

There is a title for each type of input: Labor, Materials and Services, Machinery and Equipment, as well as for

Administrative assumptions and for general assumptions.

Here are two scenarios with examples of assumptions that should be noted:

It is common for people to exclude the cost of labor when they calculate costs of production for products that are collected, harvested, or caught by family members, such as Brazil nuts or fish.. This cost is often excluded because family members usually do not pay themselves when they work for their own family. However, if a family member, such as an adult son, was not collecting nuts or fish for the family, he or she could be engaged in some other productive activity, for example, as a day laborer on a farm. The daily wage the family member could earn in this other activity (but did not because they were working for their own family) is known as the “opportunity cost”, and can be used as an approximation of the daily wage for family production. For example, in the analysis of family production of Brazil nuts, the average daily wage for temporary farm workers in the region could be multiplied by the number of days worked per family member to calculate the family labor costs. The use of this daily wage estimate in the monitoring of labor costs for family member is an important assumption that needs to be recorded.

In situations where equipment or machinery is donated to an initiative, it is common to exclude the cost of that item when calculating the costs of production for the initiative who received it. However, it is important to include the annual depreciation cost of that item so that the initiative will recognize how much it needs to save each year to replace the equipment when it is no longer useable. However, if this is not noted in the assumptions, the inclusion of this cost may be confusing to those who know the initiative did not purchase the equipment.

Step 2: Collect data on costs for productive and administrative activities, and income from product sales

The worksheets for Steps 2 and 3 are identical, and this is why the beginning of the titles of the worksheets for

Steps 2 and 3 is (2,3) Enter. For Step 2, the worksheets will be completed in written form, and for Step 3 will

they will completed in digital form, using a computer.

There are two files (or documents) with worksheets: one for the Simple option, and one for the Advanced

option; choose the file that corresponds with the decision made in Step 1 regarding the type of monitoring

chosen. Since all users should start with the Simple version of the worksheets for Step 1, if the Advanced

option is chosen, you can copy the (1) Plan Monitor worksheet and the (1) Plan Assumptions worksheets from


the Simple worksheets file to the Advanced worksheets file, and delete the duplicate worksheets that were not

used (i.e., the versions that were not filled in) from the Advanced worksheets file.

Next, choose the (2,3) Enter worksheet for the type of input data that will be recorded in written form, for

example, the (2,3) Enter: Labor, (2,3) Enter: Materials and Services worksheets. If Labor data will be collected

in written form, choose either the (2,3) Enter: Labor (Time) or the (2,3) Enter: Labor (Production) worksheet,

based on the decision made in Step 1 regarding how labor will be monitored. If necessary, modify the

worksheets so that they are appropriate for the initiative and product or service being monitored and

analyzed. Then, print one copy per activity of the worksheets that will be used. If you decided to use a

combination of both time and production methods to monitor Labor data, then you can print both worksheets

as needed. Finally, at the end of each day or when the worksheets are full, the written data can be entered in

digital form using a computer into the corresponding (2,3) Enter worksheets in Step 3.

Collect labor data for each productive activity – Four options

It is important to collect information on labor every day to minimize mistakes or errors that can occur when

people try to remember who worked what days and for how long. There are four options for collecting and

recording Labor data, and each option has its own worksheet. The options are based on decision 1 (on level of

precision: Simple or Advanced option) and decision 2 (Labor data monitoring unit: time worked or production)

in Step 1:

1. Simple option with labor monitored in terms of time worked

2. Simple option with labor monitored in terms of production

3. Advanced option with labor monitored in terms of time worked

4. Advanced option with labor monitored in terms of production

Go to the option below that corresponds to decisions made in Step 1 regarding the Simple or Advanced

option, and the monitoring of labor in terms of time or production.

Simple Option with labor monitored in terms of time worked * worksheet: (2,3) Enter: Labor (Time) (Annex 1)

As noted above, the “Simple” option provides less precise information on costs per activity than the

“Advanced” option, and will allow you to monitor labor in units of time: half days or whole days.

Go to the (2,3) Enter: Labor (Time) worksheet (Table 4.5, Annex 1). First, enter the name of each major

productive activity and the supervisor for that activity at the beginning of a table. If there are four major

productive activities, then four tables will be used; additional tables may be added as necessary (remember

Text Box 4.4. To print worksheets It is a good idea to view the worksheets in the Print Preview screen and to print the table for one activity per sheet of paper. Enter data in each column marked by an arrow (↓). Details on how to complete these worksheets are provided below and instructions are included at the beginning of each worksheet.


that information about administrative labor is entered in the worksheet (2,3) Enter: Admin). The "Supervisor"

is the person in charge of supervising the completion of the activity. Then, each time someone works, go to the

table for the appropriate activity and enter information in the columns with an arrow (↓). The date entered

should be for the first day of the week (Monday). To enter the "Days Worked" data, in the columns for each

day of the week (Monday to Sunday) enter if each person worked 1 complete day, a half day, or did not work.

The columns without an arrow contain formulas that automatically calculate values when data are entered

using a computer. The “Subtotal of Days Worked” is the sum of the days worked for each worker from

Monday to Sunday. The “Subtotal of Wages” is the product of multiplying the “Subtotal of Days Worked” by

the “Daily Wage” for each worker. At the bottom of each table are the subtotal of days worked for the

activity, and the subtotal of wages for the activity. These subtotals can be calculated in Step 2 and written in

the worksheet; these subtotals will be calculated automatically in Step 3.

Table 4.5 shows labor data in the table for the Inventory activity. One week of data is shown for two workers.

As can be seen, the team leader is Edivan, who is also the compass operator, and he is working with Paulo, a

note taker. Edivan worked full days on Monday, Wednesday, Thursday, Friday, and Saturday, but, as noted in

the “Observations”, he worked on another activity on Tuesday. We see that for the week of June 10, 2011, he

worked a total of 5 days for a wage of $25 per day, and earned a total of $125. Paulo worked full days on

Monday, Tuesday, Wednesday, Friday, and Saturday, but worked only a half day on Thursday because he got

sick in the afternoon. For the same week, he worked a total of 5.5 days for a wage of $20 per day, and earned

a total of $110. Patricia collected and noted this information on the same day the work occurred.

Simple Option with labor monitored in terms of production * worksheet: (2,3) Enter: Labor (Prod) (Annex 1)

This “Simple” option will provide less precise information on costs per activity than the “Advanced” option,

and will allow you to monitor labor in units of production: e.g., trees cut, area inventoried per day, etc.

Go to the (2,3) Enter: Labor (Prod) worksheet (Table X, Annex 1). First, enter the name of each major

productive activity and the supervisor for that activity at the beginning of a table. If there are four major

productive activities, then four tables will be used; additional tables may be added as necessary (remember

that information about administrative labor is entered in the worksheet (2,3) Enter: Admin). The "Supervisor"

is the person in charge of supervising the completion of the activity. Then, each time someone works, go to the

table for the appropriate activity and enter information in the columns with an arrow (↓). The date entered

should be for the first day of the week (Monday). Identify the unit of production used to monitor Labor, such

as number of trees harvested, kilograms of nuts harvested, etc. To enter the “Quantity Produced” data, in the

columns for each day of the week (Monday to Sunday) enter the quantity that each person produces per day.

The columns without an arrow contain formulas that automatically calculate values when data are entered

using a computer. The “Subtotal of Quantity” is the sum of the quantity produced by each worker for each day

of that week. The “Subtotal of Wages” is the product of multiplying the “Subtotal of Quantity” by the “Wage

per unit” for each worker. The “Subtotal of Days Worked” is the sum of the number of days worked that week.

At the bottom of each table are the subtotal of quantity produced for the activity, the subtotal of wages for

the activity, and the subtotal of days worked. We monitor days worked in order to use the subtotal per

activity in the division of costs of machinery and equipment between activities. These subtotals can be

calculated in Step 2 and written in the worksheet; these subtotals will be calculated automatically in Step 3.


Table 4.6 shows example labor data in the table for the activity Inventory. One week of data is shown for two

workers. As can be seen, the team leader is Edivan, who is also the compass operator, and he is working with

Paulo, a note taker. The unit of production for the inventory was the number of inventory trails worked.

Edivan worked on the activity Inventory on Monday, Wednesday, Thursday, Friday, and Saturday, but, as noted

in the “Observations”, he worked on another activity on Tuesday. We see that for the week of June 10, 2011,

he worked on a total of 12 inventory trails for a wage of $10.50 per trail, earned a total $126 in wages, and the

number of days he worked was 5. Paulo worked on Monday, Tuesday, Wednesday, Friday, and Saturday, but

worked only a half day on Thursday because he got sick in the afternoon. We see that for the same week,

Paulo worked on a total of 11 inventory trails for a wage of $10 per trail, earned total of $110 in wages, and

the number of days he worked was 5.5. Patricia collected and noted this information on the same day the

work occurred.

Advanced option with labor monitored in time worked * worksheet: (2,3) Enter: Labor (Time) (Annex 1)

This “Advanced” option will provide more precise information on costs per activity than the “Simple” option,

and will allow you to monitor labor in units of time: half days or whole days.

Go to the (2,3) Enter: Labor (Time) worksheet (Table 4.7, Annex 1). For the Advanced option, it is important to

keep separate the time worked by the team leader from the time worked by the other workers. First, enter

the name of each major productive activity and the supervisor for that activity at the beginning of a table. If

there are four major productive activities, then four tables will be used; additional tables may be added as

necessary (remember that information about administrative labor is entered in the worksheet (2,3) Enter:

Admin). The "Supervisor" is the person in charge of supervising the completion of the activity. Then, each

time someone works, go to the table for the appropriate activity and enter information in the columns with an

arrow (↓). The columns without an arrow contain formulas that automatically calculate values when data are

entered using a computer. The date entered should be for the first day of the week (Monday). To enter data

for "Days Worked", in the columns for each day of the week (Monday to Sunday), enter if each person worked

1 complete day, a half day, or did not work. Continuing in the same line, in the column "Sum", the subtotal of

days worked for each worker for the week should be calculated if the worksheet is being completed in written

form (Step 2) or it will be automatically calculated if entered using a computer (Step 3). Next, for each worker,

the subtotal of days worked from the column "Sum" should be entered again as follows: if the worker was the

leader of the work group (or one of various work groups), enter the same subtotal of days worked in the

column "Leader"; if the worker was not the leader of a work group, enter the subtotal of days worked in the

column "Other". At the bottom of each table are the subtotal of days worked for all workers (“Sum” column),

the subtotal of days worked by the Leaders, the subtotal of days worked by Others, and the subtotal of wages

for the activity. These subtotals can be calculated in Step 2 and written in the worksheet; these subtotals will

be calculated automatically in Step 3.

Table 4.7 shows example labor data in the table for the Inventory activity. One week of data is shown for two


Paulo, a note taker. Edivan worked full days on Monday, Wednesday, Thursday, Friday, and Saturday, but, as

noted in the “Observations”, he worked on another activity on Tuesday. We see that for the week of June 10,


2011, he worked a total of 5 days for a wage of $25 per day, and earned a total of $125. Edivan’s subtotal of

days worked are repeated in the column “Leader”. Paulo worked full days on Monday, Tuesday, Wednesday,

Friday, and Saturday, but worked only a half day on Thursday because he got sick in the afternoon. For the

same week, he worked a total of 5.5 days for a wage of $20 per day, and earned a total of $110. Paulo’s

subtotal of days worked is repeated in the column “Other”. Patricia collected and noted this information on

the same day the work occurred.

Advanced option with labor monitored in production * worksheet: (2,3) Enter: Labor (Prod) (Annex 1)

This “Advanced” option will provide more precise information on costs per activity than the “Simple” option,

and will allow you to monitor labor in units of production: e.g., trees harvested, area inventoried per day.

Go to the (2,3) Enter: Labor (Prod) worksheet (Table 4.8, Annex 1). For the Advanced option, it is important to

keep separate the production by the team leader from the production by the other workers. First, enter the

name of each major productive activity and the supervisor for that activity at the beginning of a table. If there

are four major productive activities, then four tables will be used; additional tables may be added as necessary

(remember that information about administrative labor is entered in the worksheet (2,3) Enter: Admin). The

"Supervisor" is the person in charge of supervising the completion of the activity. Then, each time someone

works, go to the table for the appropriate activity and enter information in the columns with an arrow (↓).

The date entered should be for the first day of the week (Monday). Identify the unit of production used to

monitor Labor, such as number of trees harvested, kilograms of nuts harvested, etc. The columns without an

arrow contain formulas that automatically calculate values when data are entered using a computer. To enter

data for "Quantity produced", in the columns for each day of the week (Monday to Sunday), enter the quantity

that each person produces per day. Continuing in the same line, in the column "Sum," under the headings

"Work-Days" and "Subtotals of Days Worked," count and enter the subtotal of days worked for each worker

for the corresponding week. Next, for each worker, the subtotal of days worked from the column "Sum"

should be entered again as follows: if the worker was the leader of the work group (or one of various work

groups), enter the same subtotal of days worked in the column "Leader"; if the worker was not the leader of a

work group, enter the subtotal of days worked in the column "Others". At the bottom of each table are the

subtotals of quantity produced, wages, days worked for all workers (“Sum” column), days worked by the

leaders, and days worked by others. We monitor days worked in order to use the subtotal per activity in the

division of costs of machinery and equipment between activities. These subtotals can be calculated in Step 2

and written in the worksheet; these subtotals will be calculated automatically in Step 3.

Table 4.8 shows example labor data in the table for the activity Inventory. One week of data is shown for two


Paulo, a note taker. The unit of production for the inventory was the number of inventory trails worked.

Edivan worked on the activity Inventory on Monday, Wednesday, Thursday, Friday, and Saturday, but, as noted

in the “Observations”, he worked on another activity on Tuesday. We see that for the week of June 10, 2011,

he worked on a total of 12 inventory trails for a wage of $10.50 per trail, earned a total $126 in wages, and the

number of days he worked was 5. Edivan’s subtotal of days worked is repeated in the column “Leader”. Paulo

worked on Monday, Tuesday, Wednesday, Friday, and Saturday, but worked only a half day on Thursday

because he got sick in the afternoon. We see that for the same week, Paulo worked on a total of 11 inventory


trails for a wage of $10 per trail, earned total of $110 in wages, and the number of days he worked was 5.5.

Paulo’s subtotal of days worked is repeated in the column “Other”. Patricia collected and noted this

information on the same day the work occurred.


Table 4.5. Excerpt from the (2,3) Enter: Labor (Time) worksheet for the “Simple” option, with example data for the activity “Inventory”.

Table 4.6. Excerpt from (2,3) Enter: Labor (Production) worksheet for the “Simple” option, with example data for the activity “Inventory”.

Activity: Supervisor:

Day Mo. Year M T W Th F Sat Sun

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

10 6 2011 1 Edivan Sosa Compass

operator

1.0 0.0 1.0 1.0 1.0 1.0 0.0 5.0 25.0 125.0 He left on Tues. to

work on another

activity

10 6 2011 1 Paulo Rocha Note taker 1.0 1.0 1.0 0.5 1.0 1.0 0.0 5.5 20.0 110.0 He got sick on Thurs.

in the afternoon.

10.5 235.00$

Observations

Workers

Position

Edivan Inventory

General Information

Name of Worker

Subtotal of

Days

Worked

Days Worked

(1 = one complete day, 0.5 = half day,

0 = did not work)

Work

location

Daily Wage

($)

First day of the

week

Subtotals per activity

* Subtotal of

Wages ($)



↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

Inventory

trails

3.0 0.0 3.0 1.5 3.0 1.5 0.0 12.0 10.5 126.0 5.0 He left on Tues. to work

on another activity

10 6 2011 1 Paulo Rocha Note taker Inventory

trails

3.0 1.0 3.0 0.5 3.0 0.5 0.0 11.0 10.0 110.0 5.5 He got sick on Thurs. in

the afternoon.

23.0 236.00$ 10.5

Unit of

Production

Subtotal of

Days WorkedObservations

First day of the

weekWork

locationName of Worker Position

Quantity Produced Subtotal of

Quantity

Wage per

Unit ($)

* Subtotal of

Wages ($)


Inventory Edivan

General Information Work - Production


Table 4.7. Excerpt from the (2,3) Enter: Labor (Time) worksheet for the “Advanced” option, with example data for the activity “Inventory”.


Day Mo. Year M T W Th F Sat Sun Sum Leader Other

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator


on another activity

10 6 2011 1 Paulo Rocha Note taker 1.0 1.0 1.0 0.5 1.0 1.0 0.0 5.5 5.5 20.0 110.0 He got sick on Thurs. in

the afternoon.

10.5 5.0 5.5 235.00$

Inventory Edivan

General Information Workers

ObservationsFirst day of the

weekWork


Days Worked


0 = did not work)

Daily

Wage ($)

* Subtotal of

Wages ($)


Subtotal of Days

Worked

Table 4.8. Excerpt from the (2,3) Enter: Labor (Prod) worksheet for the “Advanced” option, with example data for the activity “Inventory”. Activity: Supervisor:

Day Mo. Year M T W Th F Sat Sun Sum Leader Others

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

Inventory

trails

3.0 0.0 3.0 1.5 3.0 1.5 0.0 12.0 10.5 126.0 5.0 5.0 He left on Tuesday to

work in another

activity


trails

3.0 1.0 3.0 0.5 3.0 0.5 0.0 11.0 10.0 110.0 5.5 5.5 He got sick on

Thursday in the

afternoon.

23.0 236.00$ 10.5 5.0 5.5

Subtotals of Days Worked

Work - Days


First day of the

weekWork


Unit of

Production


Quantity

Wage per

Unit ($)

Inventory Edivan


Observations* Subtotal of

Wages ($)


Collect materials & services data for each productive activity

* worksheet: (2,3) Enter: Mat-Services (Annex 1)

Materials and services are items that are used up during one productive period, such as gasoline used for

chainsaws or identification tags used for forest inventory. Because these materials do not last longer than one

productive period, it is not necessary to calculate annual depreciation for them (as we do for machinery and

equipment).

Go to the (2,3) Enter: Mat-Services worksheet (Table 4.9, Annex 1). First, enter the name of each major

productive activity and the Supervisor of this activity at the beginning of a table; additional tables may be

added if necessary. Then, each time a material or service is purchased, go to the table for the appropriate

activity and enter information in the columns with an arrow (↓). The columns without an arrow contain

formulas that automatically calculate values when data are entered using a computer. At the bottom of each

table is the subtotal of cost of materials and services per activity. This subtotal can be calculated in Step 2 and

written in the worksheet, however this subtotal will be calculated automatically in Step 3.

Table 4.9 shows example data in the table for the Inventory activity. In the example, one unit of aluminum

tags were purchased on June 12, 2011, for a price of $13 each.

Table 4.9. Excerpt from the (2,3) Enter: Mat-Services worksheet with example data for the activity “Inventory”.

Collect machinery and equipment data for each productive activity

* worksheets: (2,3) Enter: Mach-Equip (Anexo 1)

Machinery and equipment differ from materials in two important ways. First, machinery and equipment are

typically used for multiple years or productive periods and therefore it is necessary to compute an annual

depreciation cost (the value that is used up each productive period). Second, items which are depreciated

(such as chainsaws) can be used in multiple activities (such as in inventory and tree felling activities), while

materials usually are not, therefore it is also necessary to divide the annual depreciation cost among different

activities. The process of calculating and dividing depreciation costs among productive periods and activities is

the most difficult part of the Green Value method, but if you follow the instructions and study the examples

you should do fine.

Information should be collected about each item of machinery and equipment used for the production of

the product or service being analyzed, whether it is purchased in the this productive period or it was

purchased before. This is because all machinery and equipment have a cost and need to be replaced at some

time. Therefore part of the cost of all the machinery and equipment used should be included in the cost of

Activity: Inventory Supervisor: Edivan

Day Mo. Year Item Unit QuantityPrice /

Unit ($)

* Subtotal Cost

($)

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

12 6 2011 aluminum tags (.5 m) box 1 13.00 13.00

13 8 2011 fuel liter 600 1.90 1,140.00

Subtotal per activity 1,153.00$

Date Cost Data

Observations


production. The challenge is to determine the proportion of the cost of machinery and equipment that should

be included in each productive period, and over different productive activities.

Please note, if you choose to divide the productive period into parts (e.g., trimesters), it is important to

ensure the useful life is entered in terms of the alternative productive period chosen (instead of years). For

example, if a full production period or cycle is one year, but you decide to divide the period into trimesters (4

month periods) and a chainsaw is one of the items of machinery and equipment, then the useful life of the

chainsaw used in the analysis of machinery and equipment costs should be in terms of trimesters (not years).

In this case, if the chainsaw has a useful life of three years and has a price of $3,000, then the useful life in

trimesters is 9, and the depreciated value per trimester is $333 ($3,000 / 9 trimesters). Note: It is better to

analyze full productive periods when possible. If the productive period lasts only part of the year, you can

calculate depreciation in terms of years. It is only when the productive period is divided that the useful life

should also be divided.

To estimate the annual depreciated cost of machinery and equipment that should be allocated to each activity,

three phases of monitoring are required: (1) enter purchase information (date, price, etc.) for each item,

calculate the depreciation cost for each item, and identify in which activities each item is used; (2) transfer or

copy/paste, at the end of the productive period, the total days worked per activity from the (2,3) Enter: Labor

worksheet used; (3) distribute the depreciated costs of the items across activities. The methods for phases 1

and 2 are a bit different for the Simple and Advanced options, as explained below; phase 3 is the same for both

the Simple and Advanced options.

Go to the option below that corresponds to decisions made in Step 1 regarding the Simple or Advanced

option.

Simple Option: Phase 1 – Enter information about the item and calculate depreciation cost * worksheet: (2,3) Enter: Mach-Equip Ph. 1 (Annex 1)

This “Simple” option will provide less precise information on costs per activity than the “Advanced” option, but

it is a bit easier to calculate the machinery and equipment costs with the “Simple” option.

Go to the (2,3) Enter: Mach-Equip Ph. 1 worksheet (Table 4.10, Annex 1). First enter the names of the major

productive activities below the title "Activity in which Item was Used"; columns for activity names can be

added or deleted as needed (remember that information about machinery and equipment used principally for

administrative activities is entered in the worksheet (2,3) Enter: Admin). Then, each time an item of machinery

or equipment is purchased, enter information in the columns with an arrow (↓). In the columns for the

activities, for each activity, enter a check (√) in the columns that correspond to the items that are used in this

activity. The columns without an arrow contain formulas that automatically calculate values when data are

entered with a computer. The formulas for calculating “Total cost” and the “Depreciation cost” are included in

Section 2 of this Guide, as well as in the worksheet. At the bottom of the table are the subtotals of total cost

and total depreciation cost. These subtotals can be calculated in Step 2 and written in the worksheet, however

these subtotals will be calculated automatically in Step 3.


Table 4.10 shows example data of the purchase of 8 pairs of steel-toed boots, followed by 1 pair of steel-toed

boots, and 4 chainsaws. The price for each pair of boots was $50, and the chainsaws cost $3,000 each.

Because the boots will last only two years, the annual depreciation cost is half of the total cost of these items.

Similarly, because the chainsaws will be used up in 3 years, the annual depreciation cost is one third of the

total cost, or $4,000 ($12,000/3 years). Note that the user has placed check marks (√) to indicate which

activities each item was used in. To continue the example, note that the boots are used in all of the activities

and the chainsaws are used in the activities inventory, tree felling and product measurement. In phases 2 and

3 we will begin the process of dividing the costs of the machinery and equipment items among the activities in

which the items were used.

Simple Option: Phase 2 - Enter information on total days worked * worksheet: (2,3) Enter: Mach-Equip Ph. 2 (Annex 1)

Go to the (2,3) Enter: Mach-Equip Ph. 2 worksheet (Table 4.11, Annex 1). This worksheet is used only at the

end of the period of analysis, when all of the data for this period regarding labor and machinery and

equipment purchased or used have been collected. The data for the purchase of machinery and equipment

should have first been entered in the (2,3) Enter: Mach-Equip Ph. 1 worksheet, in written form (Step 2) or using

a computer (Step 3). Now some specific labor data will be added in this worksheet.

The main steps are: (1) Enter the names of the major productive activities below the title "Subtotal of Days

Worked for each Activity"; these should be the same activities entered in (2,3) Enter: Mach-Equip Ph. 1

worksheet. (2) Copy all of the data from the table in the (2,3) Enter: Mach-Equip Ph. 1 worksheet into the

table in this worksheet for phase 2. This information can be entered in written form (Step 2) or with a

computer (Step 3), either by entering the information manually or with the copy and paste functions. (3)

Finally, at the end of the period of analysis, enter the "Subtotal of Days Worked for each Activity" found in the

(2,3) Enter: Labor worksheet used as follows. In the cells underneath the names of the activities where a check

(√) was placed in the phase 1 worksheet, replace the check in this phase 2 worksheet with the "Subtotal of

Days Worked for each Activity" for the corresponding activity; this subtotal is at the bottom of the table for the

activity in the (2,3) Enter: Labor worksheet. The columns without an arrow contain formulas that

automatically calculate values when data are entered with a computer.

Note: If the same item is purchased several times (e.g., boots, compasses) and at the same per unit price, the

cost of the items can be combined using the following steps. Select all of the rows of data in the table and sort

them by the column "Item". Then, for the items that were purchased various times at the same price, sum the

quantities purchased and, in the first line for this item, enter the total quantity in the column "Quantity". Then

delete the other lines for this item. Repeat this for other items that were purchased several times at the same

per unit price. There should be one line for each item. If the same item was purchased several times but for

different prices, do not combine these items -- keep them separate.

Table 4.11 shows the same example data for machinery and equipment costs from Phase 1, but the check

marks in the columns for the productive activities have been replaced with the “Subtotal of Days Worked for

each Activity”. These subtotals are from the completed (2,3) Enter: Labor worksheet. Under the activity

“Inventory” there are 10.5 days (the sum of days worked in the activity “Inventory”) entered in the rows for

the items “steel-toed boots” and “chainsaw” because these items were used in the activity “Inventory”.


Similarly, under the activity “Planning”, there are 8 days (the sum of days worked for this activity) in the rows

for steel-toed boots; 8 days is not entered in the row for “chainsaw” because a chainsaw was not used in the

activity “Planning”. The “Total Days Worked per Item” is the sum of days worked across the activities in which

each item was used. In our example, the “Total Days Worked per Item” is 50.5 days for the steel-toed boots

and 30.5 days for the chainsaws.

Advanced Option: Phase 1 - Enter information about the item and calculate depreciation cost * worksheet: (2,3) Enter: Mach-Equip Ph. 1 (Annex 1)

This “Advanced” option will provide more precise information on costs per activity than the “Simple” option.

Go to the (2,3) Enter: Mach-Equip Ph. 1 worksheet (Table 4.12, Annex 1). First enter the names of the major

activities below the title "Activity in which Item was Used"; columns for activity names can be added or

deleted as needed. Then, each time an item of machinery or equipment is purchased, enter information in the

columns with an arrow (↓). In the columns for the activities, for each activity, enter either a "P" or an "T" in

the column that corresponds to the items that are used in this activity as follows: enter a "P" if the item is

personal equipment (e.g., helmets are used by everyone in the team) or a "T" if the item is used at the level of

the work team (e.g., one compass is used per team). The columns without an arrow contain formulas that

automatically calculate values when data are entered with a computer. The formulas for calculating “Total

cost” and the “Depreciation cost” are included in Section 2 of this Guide, as well as in the worksheet. At the

bottom of the table are the subtotals of total cost and total annual depreciation cost. These subtotals can be

calculated in Step 2 and written in the worksheet, however these subtotals will be calculated automatically in

Step 3.

Table 4.12 shows example data of the purchase of 8 pairs of steel tipped boots, followed by 1 pair of steel-toed

boots, and 4 chainsaws. The price for each pair of boots was $50, and the chainsaws cost $3,000 each.

Because the boots will last only two years, the depreciation cost is half of the total cost of these items.

Similarly, because the chainsaws will be used up in 3 years, the depreciation cost is one third of the total cost,

or $4000 ($12000/3 years). Note that the user has placed a (P) in the columns for the activities in which the

boots are used, as these are used by each person in a team, and a (T) in the columns for the activities in which

the chainsaws are used, as only one person per team uses a chainsaw. Note that the boots were used in all of

the activities and the chainsaws are used in the inventory, tree felling and product measurement activities. In

phases 2 and 3 we will begin the process of dividing the costs of the machinery and equipment items among

the activities in which the items were used.

Advanced Option: Phase 2 – Enter information on total days worked * worksheet: (2,3) Enter: Mach-Equip Ph. 2 (Annex 1)

Go to the (2,3) Enter: Mach-Equip Ph. 2 worksheet (Table 4.13, Annex 1). This worksheet is used only at the

end of the period of analysis, when all of the data for this period regarding labor and machinery and

equipment purchased or used have been collected. The data for the purchase of machinery and equipment

should have first been entered in the (2,3) Enter: Mach-Equip Ph. 1 worksheet, in written form (Step 2) or using

a computer (Step 3). Now some specific labor data will be added in the (2,3) Enter: Mach-Equip Ph.2

worksheet. The main steps are: (1) Enter the names of the major activities below the title "Subtotal of Days


Worked for each Activity"; these should be the same activities entered in (2,3) Enter: Mach-Equip Ph. 1

worksheet. (2) Copy all of the data from the table in the (2,3) Enter: Mach-Equip Ph. 1 worksheet into the table

in the (2,3) Enter: Mach-Equip Ph. 2 worksheet. This information can be entered in written form (Step 2) or

with the computer (Step 3), either by entering the information manually or with the copy and paste functions.

(3) Finally, at the end of the period of analysis, enter the "Subtotal of Days Worked for each Activity" found in

the (2,3) Enter: Labor worksheet used as follows. In the cells underneath the names of the activities where a

"P" was entered, replace the "P" with the "Subtotal of Days Worked" from the column "Sum" for the

corresponding activity; where a "T" was entered, replace the "T" with the Subtotal from the column "Leader"

for the corresponding activity. These subtotals are found at the bottom of the table for the activity in the (2,3)

Enter: Labor worksheet. The columns without an arrow contain formulas that automatically calculate values if

data are entered with a computer.

Note: If the same item is purchased several times (e.g., boots, compasses) and at the same per unit price,

the cost of the items can be combined using the following steps. Select all of the rows of data in the table

and sort them by the column "Item". Then, for the items that were purchased various times at the same price,

sum the quantities purchased and, in the first line for this item, enter the total quantity in the column

"Quantity". Then delete the other lines for this item. Repeat this for other items that were purchased several

times at the same per unit price. There should be one line for each item. If the same item was purchased

several times but for different prices, do not combine these items -- keep them separate.

Table 4.13 shows the same example data for machinery and equipment costs from Phase 1, but the “P”s and

“T”s in the columns for the productive activities have been replaced with the “Subtotal of Days Worked for

each Activity”. These subtotals are from the completed (2,3) Enter: Labor worksheet. Under the activity

“Inventory” the “P” from phase 1 was replaced with 10.5 days (the sum of days worked in the activity

“Inventory” by all workers) in the rows for the item “steel-toed boots” because these items were used in the

activity “Inventory”. Similarly, also under the activity “Inventory”, the “T” from phase 1 was replaced with 5.5

days (the sum of days worked by the team leaders) for the item “chainsaw”, which was also used in the activity

“Inventory”. The subtotal of days worked is different for the chainsaw because it was used at the level of the

team, rather than at the personal or individual level. Continuing with our example, under the activity

“Planning”, there are 8 days (the sum of days worked for this activity by all workers) in the rows for steel-toed

boots; there are no days entered in the row for “chainsaw” because a chainsaw was not used in the activity

“Planning”. The “Total Days Worked per Item” is the sum of days worked across the activities in which each

item was used. In our example, the “Total Days Worked per Item” is 50.5 days for the steel-toed boots and

15.5 days for the chainsaws.


Table 4.10. Excerpt from the (2,3) Enter: Mach-Equip Ph. 1 (Simple Option) worksheet with example data.

Table 4.11. Excerpt from the (2,3) Enter: Mach-Equip Ph. 2 (Simple Option) worksheet with example data.

Day Mo. Year Item Unit QuantityPrice / Unit

($)* Total Cost ($)

Useful Life

(in # of years

or productive

periods)

** Depreciation

Cost ($)Inventory Planning

Harvest

/ Tree

felling

Transport /

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

13 5 2011 Steel-toed boots Pair 8 50.00 400.00 2 200.00 √ √ √ √ √

25 8 2011 Steel-toed boots Pair 1 50.00 50.00 2 25.00 √ √ √ √ √ Second purchase of steel-

toed boots

15 9 2011 Chainsaw Individual 4 3,000.00 12,000.00 3 4,000.00 √ √ √

$ 12,450.00

Total Annual

Depreciation

Cost $ 4,225.00 Total Cost of Machinery & Equipment

Machinery and Equipment Activity in which Item was UsedDate

Observations


($)

* Total Cost

($)

Useful Life

(in # of years or

productive

periods)

**

Depreciation

Cost ($)

Inventory PlanningHarvest /

Tree felling

Transport /

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

13 5 2011 Steel-toed boots Pair 8 50.00 400.00 2 200.00 10.5 8.0 10.0 12.0 10.0 50.5


15 9 2011 Chainsaw indiv 4 3,000.00 12,000.00 3 4,000.00 10.5 10.0 10.0 30.5

$ 12,450.00

Total

Depreciation $ 4,225.00

Date

Total Cost of Machinery & Equipment

Observations

Machinery and Equipment Subtotal of Days Worked for each ActivityTotal

Days

Worked

per Item


Table 4.12. Excerpt from the (2,3) Enter: Mach-Equip Ph. 1 (Advanced Option) worksheet with example data.

Table 4.13. Excerpt from the (2,3) Enter: Mach-Equip Ph. 2 (Advanced Option) worksheet with example data.


($)

* Total Cost

($)

Useful Life

(in # of years

or

productive

**

Depreciation

Cost ($)

Inventory Planning

Harvest /

Tree

felling

Transport

/

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

13 5 2011 Steel-toed boots pair 8 50.00 400.00 2 200.00 P P P P P

25 8 2011 Steel-toed boots pair 1 50.00 50.00 2 25.00 P P P P P Second purchase of steel-toed

boots

15 9 2011 Chainsaw Indivitual 4 3,000.00 12,000.00 3 4,000.00 T T T

$ 12,450.00

Total

Depreciation


Observations

Date Machinery and Equipment Activity in which Item was Used


Unit ($)

* Total Cost

($)

Useful Life

(in # of years or

productive

periods)

**

Depreciatio

n Cost ($)

InventoryPlannin

g

Harvest /

Tree felling

Transport

/ Skidding

Product

Meas.

&

Loadin

g

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓



15 9 2011 Chainsaw Indivdual 4 3,000.00 12,000.00 3 4,000.00 5.5 5.0 5.0 15.5

$ 12,450.00

Total

Depreciation

Cost $ 4,225.00

Observations


Date Machinery and Equipment Subtotal of Days Worked for each Activity

Total

Days

Worked

per Item


Phase 3 - Distribute the depreciated costs of the items across activities * worksheet: (2,3) Enter: Mach-Equip Ph. 3 (Annex 1)

Next, we need to divide the depreciation cost of each item across the productive activities in which it was

used. To do this we will estimate the proportion of time that each item was used in each activity. To estimate

this proportion of time, we will use the “Sub-total of Days Worked for each Activity” and the “Total Days

Worked per Item” noted in phase 2.

Go to the (2,3) Enter: Mach-Equip Ph. 3 worksheet. This worksheet is used only at the end of the period of

analysis, when all of the data for this period regarding labor and machinery and equipment purchased or

used have been collected, and the (2,3) Enter: Mach-Equip Ph. 2 worksheet has been completed. This

worksheet can be used with data collected through either the "Simple" or " Advanced" options in phases 1 and

2. Data on items purchased will now be transferred to this worksheet from the (2,3) Enter: Mach-Equip Ph. 2

worksheet used, and organized and analyzed by activity; there should be one table per activity. Enter

information in the columns with an arrow (↓). The columns without an arrow contain formulas that will

automatically calculate values. The main steps are: (1) First, enter the name of each major activity and the

Supervisor of the activity at the beginning of a table provided below; additional tables may be added if

necessary. (2) In each table, enter in the first column all of the items of Machinery and Equipment used in the

corresponding activity; verify the items by reviewing the column that corresponds with each activity in the

(2,3) Enter: Mach-Equip Ph. 2 worksheet used. (3) Next, for each item, enter the "Annual Depreciation Cost"

from the (2,3) Enter: Mach-Equip Ph. 2 worksheet used. (4) Then, for the same item, enter the "Subtotal of

Days Worked for this Activity" for the corresponding activity from the (2,3) Enter: Mach-Equip Ph. 2 worksheet

used. (5) Finally, enter the "Total Days Worked per Item", from the (2,3) Enter: Mach-Equip Ph. 2 worksheet

used; this is the total number of days worked for all of the activities in which this item was used. The columns

without an arrow contain formulas that automatically calculate values if data are entered with a computer.

The formula for calculating “Cost of the Item per Activity” is in the worksheet. At the bottom of each table is

the subtotal of “Cost of the Item per Activity”. These calculations can be performed in Step 2 and the results

can be written in the worksheet, however these calculations will be done automatically in Step 3.

The proportion of the depreciation cost per activity is computed by dividing the “Subtotal of Days Worked” for

the specific activity by the “Total Days Worked per Item” over all activities, and then multiplying that ratio by

the depreciation cost for that item. In Table 4.14, for example, it can be seen that steel-toed boots are used

over 10.5 days in the activity “Inventory” and over a total of 50.5 days across all activities. Therefore, of the

total depreciation cost of $200 for the first steel-toed boots in the list, the proportion assigned to the activity

“Inventory” is:

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑏𝑜𝑜𝑡𝑠 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑦 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 =10.5 𝑑𝑎𝑦𝑠

50.5 𝑑𝑎𝑦𝑠𝑥 $200 = $41.58


Table 4.14. Excerpt from the (2,3) Enter: Mach-Equip Ph. 3 worksheet with example data for the activity “Inventory”.

Collect data for administrative activities

* worksheet: (2,3) Enter: Admin (Annex 1)

Administrative costs are those related to keeping the initiative running. The costs: labor related to

administration, machinery and equipment, and materials, services, and other costs.

Go to the (2,3) Enter: Admin worksheet. The worksheet contains three tables for the three main types of

inputs. In the Labor-Salaries table, enter information for each person who is paid for work that is generally

related to keeping the initiative running. These include people who run the initiative, e.g., the Director, the

Administrator, technicians, who receive monthly salaries, and/or who work on multiple activities at the same

time, e.g., cooks who prepare food for workers involved in different types of activities. In contrast, the people

whose labor information is recorded in the (2,3) Enter: Labor worksheet are usually temporary workers who

work on specific productive activities (e.g., inventory, harvest) and are paid based on the number of days

worked or what they produce. Enter information in the columns with an arrow (↓). The formulas for

calculating “Total Monthly Compensation” and “Total Labor Cost” are in the worksheet. At the bottom of the

table is the subtotal of “Total Labor Cost”. These calculations can be performed in Step 2 and the results can be

written in the worksheet, however these calculations will be done automatically in Step 3. In the example

shown in Table X, the initiative pays Joanna, the Forest Engineer, $2,400 per month in salary and pays $480 per

month for her benefits. If Joanna works for 12 months, then it will cost the initiative $34,560.

In the Materials and Services table (Table 4.16 and Annex 1), enter information on all materials, services, and

other supplies purchased and used for administrative activities, e.g., copy paper, print cartridges, rent,

internet. Enter information in the columns with an arrow (↓). The columns without an arrow contain formulas

that will automatically calculate values. The formula for calculating “Subtotal Cost” per item is in the

worksheet. At the bottom of the table is the subtotal cost for all items. These calculations can be performed in

Step 2 and the results can be written in the worksheet, however these calculations will be done automatically

in Step 3. In the example in Table 4.16, rent was $770 per month and was paid for 12 months. In contrast,

many other expenses vary by month, e.g., utilities, office supplies, so these should be recorded each time the

expense occurs.


Machinery / Equipment Depreciation

Cost ($)

Subtotal of

Days

Worked for

Each

Activity

Total Days

Worked

per Item

* Cost of the

Item per

Activity ($)

Observations

↓ ↓ ↓ ↓ ↓

Steel-toed Boots 200.00 10.5 50.5 41.58

Steel-toed Boots 25.00 10.5 50.5 5.20

Chainsaw 4,000.00 10.5 30.5 1,377.05

1,423.83 Subtotal per activity


In the Machinery and Equipment table (Table 4.17 and Annex 1), enter a list of all of the equipment used by

the administrative staff, such as computers and vehicles. Remember, it is important to include machinery and

equipment that is used, even if it was purchased in another productive period and/or paid for by someone else

(e.g., a partner organization or donor). Enter information in the columns with an arrow (↓). The columns

without an arrow contain formulas that will automatically calculate values. Because machinery and equipment

can be used for more than one productive period, their cost must be depreciated over their useful life, or the

number of productive periods over which the items are used. The formula for calculating annual depreciated

cost is in the worksheet. At the bottom of the table is the subtotal cost, which is the sum of the annual

depreciation cost for each item. These calculations can be performed in Step 2 and the results can be written

in the worksheet, however these calculations will be done automatically in Step 3. In the example in Table

4.17, an initiative purchased a truck for $97,400 on August 1, 2011. It is expected that the truck will be used

for 3 years, and will have no value after that time. The annual cost of depreciation for the truck is then

$32,466.67.


Table 4.15. Excerpt from the (2,3) Enter: Admin worksheet with example labor data.

Table 4.16. Excerpt from the (2,3) Enter: Admin worksheet with example materials and services data.

Labor - Salaries

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

- - - Joanna Forestry Engineer 2,400.00 480.00 2,880.00 12 34,560.00

- - - Maria Administrator 2,400.00 480.00 2,880.00 12 34,560.00

- - - Jorge Cook 600.00 120.00 720.00 6 4,320.00

73,440.00$ Subtotal Cost

DateName Position / Title

* Subtotal Monthly

Compensation ($)

** Subtotal

Annual Labor

Cost ($)

Number of

Months of Work

Monthly

Salary ($)

Monthly

Benefits ($)Observations

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

- - - per year 12 770.00 9,240.00

1 8 2011 per month 1 300.00 300.00 varies by month

2 8 2011 per year 1 1,500.00 1,500.00

3 8 2011 per event 1 5,000.00 5,000.00


16,440.00$

Utilities

DateItem Observations

* Subtotal Cost

($)

Subtotal Cost

Quantity Price / Unit ($)Unit

Rent

Vehicle maintenance (total)

Training

Office supplies


Table 4.17. Excerpt from the (2,3) Enter: Admin worksheet with example machinery and equipment data.

Table 4.18. Excerpt from the (2,3) Enter: Sales worksheet with example timber sales data

Machinery and Equipment

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

1 6 2011 Computer, printer,

programs

Packaged

computers

4 3,500.00 14,000.00 3 4,666.67

1 8 2011 Flatbed Truck Individual 1 97,400.00 97,400.00 3 32,466.67

111,400.00$

Subtotal

Depreciated

Cost 37,133.33$

* Subtotal Cost ($)

Date Useful Life (in #

of years or

productive

periods)

** Depreciation

Cost ($)Observations

Subtotal Cost

UnitItem Quantity Price / Unit ($)

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

1 3 2011 Madeiras Tropicais logs hardwood 1 m 3 500 280 140,000.00

10 3 2011 Laminas de Belem logs lightwood 1 m 3 400 100 40,000.00

900 180,000.00$ Total

ObservationsDate

Unit of

Product or

Service Sold

(m3, kg,

liters)

Quantity

Sold

Price / Unit

Sold ($)

* Subtotal

Revenue ($)Name of Buyer Product

Description of

Product or Service

(species, value

group)

Quality

Grade

Currency

Exchange Rate (if

applicable)


Frequently excluded costs and other issues

In our experience, we have identified many costs that are often forgotten or otherwise excluded when people

think about inputs and costs for forest-based initiatives, as well as some types of costs that may cause

confusion. These include, by type of input or cost:

Labor: Family labor is often overlooked, especially when family members are not paid based on how many

days they work. However, their work is part of the true cost of the product or service, and we strongly

recommend that it be included.

Materials and Services: It can be difficult to know if some activities should be recorded as labor or

services. For example, if someone spends 5 days transporting products, such as Brazil nuts, that person

could potentially be included in the monitoring and analysis worksheets as either a temporary worker

under Labor costs, or as a service provider under Materials and Services. We recommend that if the

person uses his or her own machinery or equipment (e.g., a boat or motorcycle) to transport the product,

that they be included as a Service. In contrast, if the person uses the machinery or equipment of the

initiative to do this, then their time worked should be included as Labor.

Machinery and Equipment: For machinery and equipment that was purchased a long time ago or that

someone else purchased, it can be difficult to know how much was paid. In this case, we recommend that

you record the amount that item of machinery or equipment would cost today as the price of the item.

Maintenance costs: Maintenance and repairs to machinery and equipment can be a significant cost and

should be included.

Administrative Costs: Costs that are often forgotten and that should be assigned to administration include

fees to submit management plans for approval, taxes, training, and certification. In addition, infrequent

costs that are often overlooked include travel to a city to deliver or pick up required administrative forms

and paperwork, or lodging and transportation costs for government personnel that visit the initiative to

approve end of harvest reports.

Collect revenue data

* worksheet: (2,3) Enter: Sales (Table 4.18, Annex 1)

All sales of products or services should be monitored and recorded as income.

Go to the (2,3) Enter: Sales worksheet. Each time a sale is completed, enter information in the columns with

an arrow (↓). The columns without an arrow contain formulas that will automatically calculate values. The

table can be adapted as necessary. The formula for calculating “Subtotal Revenue” is in the worksheet. At the

bottom of the table is the “Total Revenue”. These calculations can be performed in Step 2 and the results can

be written in the worksheet, however these calculations will be done automatically in Step 3.

In the example shown in Table 4.18, on March 1, 2011, 500 m³ of high value logs were sold to Madeiras

Tropicais for a price of $280/m³, and 400 m³ of medium value logs were sold at a price of $100/m³. The total

revenue from the timber sales noted in the table was $180,000.


Step 3. Enter data into worksheets * (2,3) Enter worksheets (Annex 1s)

The worksheets for Steps 2 and 3 are the same, and this is why the beginning of the titles of the worksheets for

Steps 2 and 3 is (2,3) Enter. For Step 3, data written into (2,3) Enter worksheets in Step 2 should be entered

into the same worksheets using a computer; otherwise data can be entered directly into the (2,3) Enter

worksheets using a computer now.

You should carefully follow the instructions in Step 2 and in the Instructions box at the top of each

worksheet for entering data into the worksheets. You should also verify that all of the automatic

multiplication and summing formulas in the worksheets are correct!

Step 4: Compile data on productive activities, administration, and revenues/sales * (4) Compile worksheets (Annex 1)

Just as separate (2,3) Enter worksheets are included for labor, materials and services, and machinery and

equipment, there are also separate (4) Compile worksheets for each of these types of inputs or costs. The (4)

Compile worksheets organize the subtotal costs for each type of input or cost (e.g., labor) of all activities into

one table, and also provide the total cost (e.g., total labor cost for all activities). As data are entered in the

(2,3) Enter worksheets into the tables for each productive activity, a subtotal per activity is automatically

calculated at the bottom of each table. These subtotals are automatically copied through links into the (4)

Compile worksheets in the “Subtotal of Cost” column. Similarly, the data entered for administrative costs in

the (2,3) Enter: Admin worksheet will be summed and automatically copied through links into the (4) Compile:

Admin worksheet by type of input.

Go to each of the (4) Compile worksheets. First, enter the names of the major productive activities in the first

column of each worksheet. Then review the numbers in the “Subtotal of Cost” column in each worksheet to

verify the correctness of the links and the accuracy of the data copied between the (2,3) Enter and the (4)

Compile worksheets. Do this by going back to each (2,3) Enter worksheet to see if the subtotal cost for each

activity has been copied over to the related (4) Compile worksheet correctly. For example, does the subtotal

for each activity in the (4) Compile: Labor worksheet match the subtotal from each table in the (2,3) Enter:

Labor worksheet used? If the links are incorrect, they need to be corrected. It is useful to review the (4)

Compilation worksheets on a regular basis, such as weekly, so that you can see how costs are increasing during

the productive period by activity and input type.

Tables 4.19 to 4.22 provide example data in excerpts of each of the (4) Compile worksheets. For example in

Table 4.19, we can see that the subtotals of labor costs were $235 for the activity Inventory and $180 for the

activity Planning. These subtotals will automatically update as additional labor costs are entered into the (2,3)

Enter: Labor worksheet used.


Note: For labor data, the (4) Compile: Labor worksheet is linked to the (2,3) Enter: Labor (Time) worksheet to

automatically copy over the "Subtotal of Cost per Activity". If you used the production option for monitoring

labor costs, you need to create links in the column "Subtotal of Cost per Activity" in the (4) Compile: Labor

worksheet to the subtotals of labor costs in each table in the (2,3) Enter: Labor (Prod) worksheet. If you used

a combination of time and production options for monitoring labor costs, you need to create links in the

column "Subtotal of Cost per Activity" in the (4) Compile: Labor worksheet to the subtotals of labor costs in the

appropriate tables in the (2,3) Enter: Labor (Time) and (2,3) Enter: Labor (Prod) worksheets.

Table 4.19. Excerpt from the (4) Compile: Labor worksheet with example data for two productive activities (data for the other three activities are not shown).

Table 4.20. Excerpt from the (4) Compile: Mat-Services worksheet with example data for two productive activities (data for the other three activities are not shown).

Table 4.21. Excerpt from the (4) Compile: Mach-Equip worksheet with example data for two productive activities (data for the other three activities are not shown).

Table 4.22. Excerpt from the (4) Compile: Admin worksheet with example data.

ActivitySubtotal of Wages

per Activity

Data Introduced or

Verified by (Name)

Data Introduced or

Verified on (Date)

↓ ↓ ↓

Inventory 235.00 Patricia Ruiz 30.06.2011

Planning 180.00 Patricia Ruiz 15.08.2011

Total Cost 415.00$

Activity Subtotal of Cost per ActivityData Introduced or

Verified by (Name)

Data Introduced

or Verified on

(Date)

↓ ↓ ↓

Inventory 1,153.00 Patricia Ruiz 01.11.2011


Total Cost 1,913.00$


Verified by (Name)

Data Introduced

or Verified on

(Date)

↓ ↓ ↓

Inventory 1,423.83 Joao Sosa 01.11.2011

Planning 35.64 Joao Sosa 01.11.2011


Labor ($)Materials and

Supplies ($)

Machinery and

Equipment ($)

↓ ↓

73,440.00 16,440.00 37,133.33 127,013.33 Joao Sosa 01.11.2011

Subtotal of Cost by Type of Cost

Administration

Cost Subtotals

Data

Introduced or

Verified by

(Name)

Data

Introduced

or Verified

on (Date)

Total Cost ($)


Step 5: Analyze data The (5) Analyze worksheets pull all of the cost and income data together to provide the results of the financial

monitoring and analysis. The (5) Analyze: Summary worksheet provides the results in table format, and the (5)

Analyze: Graphs worksheet provides the results in graphic form.

Complete the Summary worksheet

* worksheet: (5) Analyze: Summary (Annex 1)

Go to the (5) Analyze: Summary worksheet. First, enter information about the producer in the tables

"Information about the Producer" (Table 4.23) and "Basic Operational Information" (Table 4.24). Table 4.23

indicates that the initiative analyzed is the Coomflona initiative, which produced logs in 2011. Table 4.24

indicates the harvest area was 1,000 hectares (ha), from which 15,064 m³ of logs were harvested. This

resulted in an average harvest intensity of 15.06 m³ per hectare.

Table 4.23. Excerpt from the (5) Analyze: Summary worksheet with example data for the table “Information about the Producer.”

Table 4.24. Excerpt from the (5) Analyze: Summary worksheet with example data for the table “Basic Operational Information.”

Now go to the “Cost by Activity and Input Type” table. Enter the major productive activities in the first column

in the table "Cost by Activity and Input Type"; the Administrative costs are always included after the list of

major productive activities. Rows can be added to the table as necessary. There are links between this

worksheet and each of the (4) Compile worksheets for subtotal cost data as well as the (2,3) Enter: Sales

worksheet for total income data. The rest of the columns do not have an arrow because they contain either

data copied over with links from other worksheets or formulas that automatically calculate values. You should

verify that all links and formulas are correct in every worksheet before accepting these results! It is quite

easy to accidentally exclude some cells from summing formulas, especially as rows are added or deleted

within worksheets. If any of your formulas or links are wrong, or your data are incorrect or incomplete, it will

cause errors in your results.

Name of Initiative

Product or Service Analyzed

Period of Analysis Harvest 2011

Information about the Producer

↓

Coomflona

Logs

↓

$

1,000

m3

15,064

15.06

Basic Operational Information

Monetary Unit

Area of Production (ha)

Unit of Sale

Quantity sold

Average Quantity Sold/Area


Table 4.25 has example data for the Coomflona initiative. In Table 4.25 we see the subtotal per input type, for

example, the total cost of Labor was $254,550. We also see in Table 4.25 the subtotal per activity; for

example, the total cost of the activity Inventory was $50,068, which was 7% of the Total Cost of all activities

($689,741). The average cost per unit was calculated by dividing the Total Cost by the Total Quantity Sold

(15,064 m3), which provides a result of $46/m3 of logs sold.

Table 4.25. Excerpt from the (5) Analyze: Summary worksheet, with example data in the table “Costs by Activity and Input Type”.

Next, go to the “Revenue, Net Revenue, and Rate of Return” table. The Total Income is copied over in a link

from the (2,3) Enter: Sales worksheet, and the Total Cost is copied from the “Costs by Activity and Cost Type”

table just discussed above. You should verify that the links are correct! In Table 4.26, we see in the example

data for Coomflona that the Total Revenue ($1,609,005) was greater than the Total Cost ($689,741) by

$911,264, which is the Net Revenue or Profit. The rate of return is automatically computed by dividing the

Total Revenue by the Total Cost. In this case, the rate of return was 133%. This means that, for each $1

expended to produce logs, the sale of logs provided revenues of about $2.32, or $1.32 profit.

Table 4.26. Excerpt from the (5) Analyze: Summary worksheet with example data for the table “Revenue, Net Revenue, and Rate of Return”.

Finally, go to the “Other Goals to Be Analyzed” table. In the columns “Goals” and “Expected Results”, enter the initiative’s original financial and other goals, as identified in Step 1. Then enter the actual result for each of the goals in the last column.

Activity LaborMaterials and

Services

Machinery and

Equipment

Subtotal Cost

($)Percent

Average Cost

per unit ($)

↓

Inventory 46 699 1 873 1 496 50,068 7% 3

Planning 3 757 35 655 1 014 40,427 6% 3

Harvest 30 771 15 750 7 504 54,025 8% 4

Skidding 49 086 57 589 6 040 112,714 16% 7

Product measurement &

loading

39 213 162 485 3 184

204,881 30% 14

Administration 85 024 119 532 23 070 227,626 33% 15

Subtotal Cost $ 254 550 $ 392 883 $ 42 308 $ 689 741 100% $ 46

Percent 37% 57% 6%

Value

Total Revenue $ 1 601 005

Total Costs $ 689 741

Net Revenue (Profit) $ 911 264

Rate of Return 132%

Financial Indicator


Table 4.27. Excerpt from the (5) Analyze: Summary worksheet with example data for the table “Other Goals to be Analyzed”.

Complete the Graphs worksheet

*worksheet: (5) Analyze: Graph (Annex 1)

Graphs provide a visual summary of results that many people find easier to understand than tables of

numbers.

Go to the (5) Analyze: Graph worksheet where we provide six graphs to illustrate the financial analysis results

in graphical form: the first four graphs pertain to costs by activity, and the last two graphs pertain to cost by

input type (labor, materials and services, and machinery and equipment). First, go to the table “Total Cost by

Activity (Data for Figures 1-4)”. Verify that the Activities listed in the first column of the table and the Cost

Subtotals in the second column are correct. These activities and costs are copied over through links to the (5)

Analyze: Summary worksheet. Graphs 1-4 are automatically generated based on the values in this table. The

graphs 1 and 2 show the same information, and graphs 3 and 4 show the same information. The graphs are

provided as options (you can choose which ones meet your needs best) and include:

Figure 1. Total Cost by Activity. This is a simple bar graph that shows the cost of each activity. (see Figure 4.3 a below)

Figure 2. Total Cost by Activity. This is a stacked bar graph, which shows the contribution of each cost towards the total cost of the operation. (see Figure 4.3 b below)

Figure 3. Proportion of Total Cost by Activity. This is a pie graph or chart that shows the relative cost of each productive activity; each slice of the pie represents the proportion of Total Cost for one activity. (see Figure 4.4 a below)

Figure 4. Proportion of Total Cost by Activity. This is a stacked bar chart that shows the relative costs of each activity in a different way. (see Figure 4.4 b below)

In Figure 4.3 a and b, you can see that Administrative costs were the highest (over $220,000) and Product

measurement/loading and Skidding were the second and third highest costs. Figure 4.3 b shows the

contribution of each activity in terms of cost to the cumulative total cost of operations.

Expected

Result Actual Result

↓ ↓

60.00 67.00

19m³/há 15,8m³/há

Sim

Goals (Examples)

Number of full time jobs generated from timber

operations

Harvest rate (volume) for logs sold per hectare

Generate R$ 300,000 to purchase a central office building

↓


(a)

-

50,000

100,000

150,000

200,000

250,000C

ost

in $

Figure 1. Total Cost by Activity

(b) Figure 4.3 (a,b). Figures 1 and 2 from the (6) Analyze: Graphs worksheet

In Figures 4.4a and b below, you can see the proportion of each activity’s cost as part of the whole or total cost

of production. These graphs also make it clear that costs associated with administration and the activities

Product measurement/loading and skidding were the highest.

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Co

st in

$


Administration

Product measurement &loading

Skidding

Harvest

Planning

Inventory


(a) (b) Figure 4.4 (a, b). Figures 3 and 4 from the (6) Analyze: Graphs worksheet

Next, go to the table “Cost by Input Type (The data for Figures 5 and 6)”. Verify that thee Cost Subtotals in the

second column are correct. These values are copied over through links from the (5) Analyze: Summary

worksheet. Figures 5 and 6 are automatically generated based on the values in this table, and show the same

information. The graphs are provided as options (you can choose which one meets your needs best) and

include:

Figure 5. Proportion of Total Cost by Input Type. This is a pie graph or chart that shows the relative cost of each cost type; each slice of the pie represents the proportion of Total Cost represented by one input type (e.g., labor). (see Figure 4.5 a below)

Figure 6. Proportion of Total Cost by Input Type. This is a stacked bar graph that shows the relative cost of each input type. (see Figure 4.5 b below)

In Figures 4.5 a and b, you can see that materials and services costs (57% of total costs) were larger than labor

costs (37%), and much larger than machinery and equipment costs (6%).

(a) (b)

Figure 4.5 (a, b). Figures 5 and 6 from the (6) Analyze: Graphs worksheet

Figure 3. Proportion of Total Cost by Activity

Inventory

Planning

Harvest

Skidding

Product measurement& loading

Administration0%

20%

40%

60%

80%

100%


Administration

Product measurement &loading

Skidding

Harvest

Planning

Inventory

Figure 5. Proportion of Total Cost by Input Type

Labor

Materials andServices

Machinery andEquipment

0%

20%

40%

60%

80%

100%




Labor


Step 6: Discuss the results *worksheet: (6) Discuss (Annex 1)

It is important to discuss the results of the financial monitoring and analysis in order to ensure the accuracy of

the data and results, to try to understand why the results are the way they are, and to understand what the

results mean for the initiative. This discussion should include everyone involved with the initiative: e.g.,

business manager/administrator, professional foresters and technicians, temporary field staff, community

leadership, partner organizations.

Go to the (6) Discuss worksheet. Before you move to the last step, discussion of the results, you should verify

AGAIN that all of the formulas and links in all of the worksheets are correct. In the (6) Discuss worksheet we

provide a list of questions to aid a discussion of the results of the monitoring and analysis. Examples of

questions to be discussed include: What do the results indicate to you about the initiative? Were your goals

reached? Are any of the results surprising? How might you change the initiative with regard to labor,

machinery and equipment, materials and services, administration, or sales to improve your results/meet your

goals in the future? How might you change the monitoring of the costs and revenues in the future?

In the example of Coomflona, we found that Administrative costs, especially for technical staff, were quite high

(Table 4.25). We discussed that if technical costs could be shared with other initiatives or if the state (or other

donor) were to provide subsidized technical assistance, these costs could be reduced significantly. Also, the

positive rate of return was quite high. If the initiative needs a new source of finance, e.g., a bank loan, or

investment, e.g., from a private investment fund, this monitoring data and analysis could be presented as

evidence that the initiative is running a financially viable operation.

NOTE: Be sure to save the worksheet file with a reference in the title to the productive period that was

analyzed, e.g., “Harvest 2011”, or “Period July 2013 – June 2014”.


5. EXTENSIONS OF THE BASIC FINANCIAL ANALYSIS

In addition to the basic financial analysis described above, you can use the monitoring data you collected to

answer other types of questions. First, we describe the differences between variable and fixed costs and

explain why it is important to balance these two types of costs in the organization of an FI. Next, we explain

how sensitivity analysis can be used to evaluate the financial impact of changes in productivity or prices in a

given productive period. Then, we introduce the concept of net present value, which is useful for evaluating

investments that provide benefits over several productive periods. Finally, we also briefly discuss the use of

the Green Value tool to estimate the start-up costs of a new forest-based initiative.

Variable and Fixed Costs

When thinking about the best size of a FI, you should be aware of two types of costs – referred to as variable

costs and fixed costs. As might be expected, total cost (described in section 3) is simply the sum of the variable

costs and fixed costs:

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 + 𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡

The difference between variable cost and fixed cost is simple: variable costs change with the level of

production, whereas fixed costs do not. For example, the amount of money spent on activities such as felling

trees will increase along with the number of trees felled and the number of felling crews employed. Or, the

amount of money spent on activities such as the collection of non-timber forest products will increase along

with the volume of products collected.

In contrast to variable costs, fixed costs do not change with the level of production during a productive period

(although these costs can change between productive periods as the size of a FI grows or shrinks). These costs

must be paid regardless of the volume of products produced. The main categories of fixed costs include:

• Administrative costs – These costs are associated with office work in support of a FI, such as planning and

record keeping, and include the cost of office personnel as well as rent and other costs of maintaining

office space. These costs also include technical assistance in developing forest management plans and

training in forest operations. Other fixed costs that we recommend be included in Administrative costs

when using the Green Value method include:

o Infra-structure costs – These costs are for permanent installations such as roads, bridges, or buildings

required for the production of forest products.

o Interest – These costs are for money that is borrowed to finance the operations of a FI.

• Depreciation cost of machinery and equipment– These costs spread the purchase price of machinery and

equipment which are used for several productive periods, such as chainsaws and trucks, over the useful

life of the item.

The difference between variable and fixed costs can be understood using the example of the Coomflona

forest-based initiative described in chapter 3 and by looking at the following figure. For this example, two

costs constitute the fixed costs of production: the depreciation of machinery and equipment and project

administration. These two activities support any level of timber harvesting that occurs in the production area,


but do not vary with the level of timber harvest. As you can see in Figure 5.1, fixed costs do not increase (or

decrease) as the number of units of timber harvested increases.

Fixed Costs

$246,864

49

Quantity of timber produced (m3)

Variable Costs

Total Costs $689,741

Cost

Figure 5.1. Fixed, variable, and total costs for the Coomflona forest-based initiative.

In contrast, variable costs increase with the quantity of timber produced – therefore the variable cost curve

slopes upwards. In the timber harvesting example, variable costs are associated with several activities:

inventory, planning, felling, skidding, product measurement, and loading.

Average costs can be computed for variable costs and fixed costs. We note that average fixed costs associated

with FI administration (including technical assistance and training) are often large relative to other costs

(Humphries et al. 2012), but are often omitted from analysis. In order to evaluate the financial sustainability of

FIs, it is essential to include all fixed and variable costs in the analysis.

The slope of the variable cost line shown in the figure above reflects the average variable cost –the slope will

increase (become steeper) as average variable cost increases. Average variable cost for an FI is computed in

two steps. First, it is necessary to compute total variable cost by summing the variable costs associated with

all activities that alter the quantity of final product produced. Second, average variable cost is computed by

dividing total variable cost by the quantity of products produced using standard production units (such as cubic

meters of wood or kilograms of nuts):

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡


In the timber harvesting example, average variable cost is $29.40 ($442,878/15,064 m3) or about 64% of the

average total cost ($45.70). Note that, in Figure 5.1, average variable cost does not change as the quantity

produced is increased (because the slope of the variable cost curve does not change).

Average fixed cost is equally simple to compute – divide total fixed cost (sum all the fixed costs) by the

quantity produced:


𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 = 𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡


In the timber harvest example, average fixed costs were $16.39 ($246,864/15,064 m3), or about 36% of the

average total cost ($45.79). In this formula, note that the average total fixed cost will decrease as the quantity

produced increases (recall that fixed cost does not change with the quantity produced). That is, as the

denominator increases, the numerator is constant, and so the average fixed cost continually shrinks as the

quantity produced increases.

Now, imagine a different scenario in which the road building and administrative costs are the same as before,

but that only one-half as much timber is harvested. While average variable cost is not affected (because each

unit costs the same amount to produce), average fixed cost will increase dramatically (because total fixed cost

is divided by fewer units). Under this scenario, average fixed cost will double (from $16.39/m3 to $32.78/m3)

and average total cost will increase by about 36% (from $45.79 to $62.18). This situation could also occur if

the FI buys expensive machinery (such as a sawmill) that isn’t used very often. In this case, the average fixed

cost associated with depreciation could easily exceed the increase in average revenue associated with sawing

lumber from logs.

Sensitivity Analysis

Users of the Green value tool can test the sensitivity of FI financial results to potential changes in production,

input prices, or output prices by conducting what is known as a sensitivity analysis. This can be easily

accomplished by changing the values of production rates, costs or prices in the (2,3) Enter or (4) Compile

worksheets, and then evaluating how the indicators of financial performance change in the (5) Analyze:

Summary worksheet.

For example, the productivity of inventory activities in a timber harvest operation might be improved by

paying workers based on the area they complete each day rather than paying them a flat daily rate. This

change provides an incentive for workers to accomplish these tasks in fewer days so they have more time, for

example, to spend with their family or accomplish other activities. Suppose that a preliminary test of this idea

indicated that paying workers on an area basis increases the productivity of these two activities by 25%. Given

this information, it would be important to the FI to understand how this change in productivity would affect

the cost of the timber harvesting operation.

To answer this question, we again refer to the timber harvesting example from the Coomflona forest-based

initiative described in Chapter 3. The first adjustment to the financial analysis that needs to be made is to

adjust the labor costs for the inventory activities to reflect the anticipated 25% increase in productivity. This

can be accomplished by multiplying the costs associated with the initial labor productivity for the inventory

($46,669) by 0.75. Second, the monitoring data show that this activity employed two teams of 5 people for

110 days. Due to the increase in productivity, however, these workers will now be able to complete these

activities in about 82 days. This reduction in the number of days worked will reduce the amount of food

needed for field workers, thereby reducing food expenses.


Examining the monitoring worksheet for Administration (where the cost of food is recorded), it is seen that the

cost of food for field workers was about $30,650. Examining the monitoring worksheet for Labor, it is seen

that inventory activities account for about 28% of the field work, or about US$8,582 ($30,650*0.28) worth of

food consumed in the field camp. Reducing the number of days worked by the inventory crew would then

reduce the field food cost for the inventory teams by $2,145 ($8,582*0.25). Thus, we reduce the cost of

Materials and Services associated with the Administration activity by this amount (Table 5.1; changes in the

table are indicated by the arrows, →).

Table 5.1. Sensitivity analysis of annual total costs for the Ambé forest enterprise initiative (US$)

Activity Labor Materials &

Services

Machinery &

Equipment

Subtotal Cost ($)

Percent

Average Cost per unit sold

($)

↓

Inventory 35,024 1,873 1,496 38,393 6% 3.35

Planning 3,757 35,655 1,014 40,427 6% 2.68

Harvest 30,771 15,750 7,504 54,025 8% 3.59

Skidding 49,086 57,589 6,040 112,714 17% 7.48

Product measurement & loading

39,213 162,485 3,184 204,881 30% 5.00

Administration 85,024 117,387 21,433 225,481 33% 15.00

Subtotal Cost $ 242,876 $ 390,739 $ 42,308 $ 675,922 100% $ 45.70

Thus, given this scenario, labor costs were reduced by $11,674 (or 7%) and material & services costs were

reduced by $2,145 (or 1%). Overall, the assumed increase in inventory productivity decreased total costs by

$13,819 (or 2%). Consequently, this scenario would appear to benefit the FI by reducing costs and also would

benefit workers who could accomplish their tasks in less time.

The Discount Rate and Net Present Value

The presentation up to this point has focused on financial measures used to analyze cash flow from a single

harvest season. However, the basic financial tools described here can be extended to consider other types of

financial analyses that extend across several harvest seasons. For example, a FI might consider purchasing a

sawmill so that the community could sell value-added products such as lumber instead of, or in addition to,

logs. Because the purchase of a sawmill could occur at present and then be used to saw timber from this

years’ harvest as well as from several future harvests, how could a FI use financial analysis to decide whether

or not buying a sawmill makes financial sense? That is, how should the cost of an item that is purchased today

be compared with the receipts that could be produced by using that item several years into the future?

Estimating the discount rate

Two related issues must be considered when making this decision. First, it is important to recognize that all of

the costs and revenues associated with an investment must be placed on a common basis and viewed from the

same point in time. This is because the value of a given amount of money today is greater than the value of an

identical amount of money at some time in the future. The difference between these two values is known as


the time value of money, and the way to adjust the value of money over different time periods is to use the

discount rate.

To see this, consider a situation where a donor offers your FI a deal in which you can receive a specified

amount of money now or one year from now. To make this example concrete, consider that a donor offers

your FI $1,000 today. How much would the donor need to offer to you one year from now in order for you to

forego the current payment and wait one year to receive a payment? If you would be willing to wait one year

if the donor provided you with $1,100, the difference in these values reveals your discount rate. In this

example, your discount rate would be computed as:

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 = $1,100

$1,000− 1 = 1.1 − 1 = 0.10

or 10 percent.

The discount rate that applies to your FI will depend on how urgently your FI needs the payment today. For

example, if production by the FI is not possible without the $1,000 today, then your FI might require a very

high future donation (say, $1,500) in order to forego the payment today. In this case, your FI would have a

very high discount rate (50 percent). On the other hand, if your FI has adequate funds saved to begin

production this year, then the FI might be willing to forego the payment today in order to receive a more

modest payment (say, $1,100) one year from now.

Estimating net present value

The discount rate that applies to your FI is useful for making investment decisions for items such as a sawmill

that will be used for several years. To see how discount rates affect investment decisions, let’s assume that

your FI receives a net revenue (profit) of $1,000 next year from the sale of timber products. What is the

equivalent value today for a net revenue of $1,000 received next year?

The general formula for computing the present value of a net return that occurs t years in the future is:

𝑁𝑒𝑡 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 = 𝑁𝑒𝑡 𝑟𝑒𝑡𝑢𝑟𝑛 𝑡 𝑦𝑒𝑎𝑟𝑠 𝑖𝑛 𝑓𝑢𝑡𝑢𝑟𝑒

(1 + 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒)𝑡 𝑦𝑒𝑎𝑟𝑠 𝑖𝑛 𝑓𝑢𝑡𝑢𝑟𝑒

To see how to use this formula, set t = 1 to represent next year, and assume that the discount rate is 10%. This

formula is now written as:

𝑁𝑒𝑡 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 = $1,000

(1 + 0.10)1= $909.09

This formula says that the value of receiving a net return of $1,000 one year from now is equivalent to

receiving $909.09 today.

To see the impact of time on the value of money, let’s perform the same calculation to determine how much a

net return of $1,000 received 10 years in the future is worth today. The formula now is:


𝑁𝑒𝑡 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 = $1,000

(1 + 0.10)10= $613.50

This shows that the value of a net return of $1,000 received 10 years from now is $613.50 today (when the

discount rate used is 10%). If the discount rate is larger, say 50%, then the net present value of receiving

$1,000 in ten years is only $17.34!

Investment decisions

These concepts can be used to analyze whether or not it makes financial sense for a FI to purchase a sawmill.

To illustrate the analysis, we develop a scenario based on the following assumptions:

(1) A sawmill costs $50,000 and will be operable for 10 years. Using the straight-line depreciation

method, the annual fixed depreciation cost is then $5,000. Because repair and maintenance costs are

expected to increase over the useful life of the sawmill, fixed costs are increased by $250 during each

of the final 5 years of operation.

(2) Production in the first year provides 25m3 of lumber. This amount increases to 50m3 in year two, and

then remains at 75m3 for each following year. This schedule reflects the idea that several harvest

seasons will be required for a FI to become fully familiar with sawmill operation and maintenance.

(3) Lumber is sold for $200/m3.

(4) The variable cost of sawing lumber is $115/m3.

(5) Two discount rates are used to portray different rates of time preference – 10% and 50%. These are

discussed further below.

Given these assumptions, the cash flow for each year that the sawmill is expected to be in operation is shown

in Table 5.2. We note that all of the values in the table have been rounded off to the nearest integer (whole

number).

It is important to notice that the annual net revenue during the first two years of operation is negative. This is

because the production of lumber in those years is low, as the FI gains familiarity using the sawmill.

Consequently, the fixed costs associated with using the sawmill are spread over relatively few units of output,

and the total costs are greater than the total revenue. This situation changes in the third year of production as

production is increased, and fixed costs are spread over more units of output. The net revenue then becomes

positive for all remaining years of production.


Table 5.2. Hypothetical example of annual cash flow and net present value (sum of the discounted annual net revenue) associated with the purchase of a sawmill.

Year

Annual

fixed cost

($)

Annual

variable

cost ($)

Annual total

cost ($)

Annual

total

revenue

($)

Annual

net

revenue

($)

Discounted

annual net

revenue ($)

(r = 0.1)

Discounted

annual net

revenue ($)

(r = 0.5)

1 5,000 2,875 7,875 5,000 -2,875 -2,875 -2,875

2 5,000 5,750 10,750 10,000 -750 -682 -500

3 5,000 8,625 13,625 15,000 1,375 1,136 611

4 5,000 8,625 13,625 15,000 1,375 1,003 407

5 5,000 8,625 13,625 15,000 1,375 939 272

6 5,250 8,625 13,875 15,000 1,125 699 148

7 5,250 8,625 13,875 15,000 1,125 635 99

8 5,250 8,625 13,875 15,000 1,125 577 66

9 5,250 8,625 13,875 15,000 1,125 525 44

10 5,250 8,625 13,875 15,000 1,125 477 29

SUM 51,250 77,625 128,875 135,000 6,125 2,434 -1,699

The negative net revenues that are anticipated during the first two years of production are consequential, and

can be used to demonstrate how the discount rate affects the decision of whether or not to purchase a

sawmill. A FI that does not urgently need income in the near future will have a low discount rate – we use a

10% discount rate for this FI. In Table 5.2, you can see that the net present value (the sum of the discounted

annual net revenues) for this FI would be positive ($2,465). This amount is less than the undiscounted sum of

annual net returns over the 10 year production period ($6,125) because, as discussed above, income received

in the future is worth less than income received today – which is when the investment decision is being made.

However, the sum of the discounted annual net returns received in the future is large enough to offset the

negative net returns received during the first two years of production and, consequently, the net present value

is positive. Although this result provides a financial justification for the purchase of a sawmill, a FI would want

to compare the net present value of selling boards to the net present value of selling logs. If the net present

value of selling logs is greater than the net present value of sawing logs into boards, then the FI may want to

forego the purchase of a sawmill even when the net present value of sawing boards is positive.

This scenario is contrasted with a FI that urgently needs income to continue production. This FI would have a

high discount rate - we use a 50% discount rate for this FI. Because of the high discount rate, the positive

discounted annual net revenues for this FI are not large enough to offset the negative net returns during the

first two years of production. As you can see in Table 5.2, the net present value for this FI is negative (-$1,699).

This result suggests that this FI should not purchase a sawmill. The urgent need for income in the near term

suggests that this FI should not spend money on a sawmill now in hopes of higher earnings in the future.

Evaluation of Start-up Costs for New Community-based Forest Enterprises

In addition to the use of the financial concepts presented here to organize and analyze the costs and revenues

of a FI that is already in operation, these concepts could be used to evaluate the costs for starting a new FI. In

this case, it would be necessary to develop a forest management plan for the FI and obtain the required

permits to harvest timber. During the time that the forest management plan is being developed, it would also


be necessary to construct a financial plan. This would require conducting most of the steps outlined above for

monitoring, compiling, and analyzing data.

A major difference, however, between the analysis of an on-going FI and planning for a new FI is that many of

the costs of performing activities would need to be estimated. This could be accomplished by a meeting of

technical staff who are familiar with the area of the proposed FI. This team would need to estimate: (1) the

activities that the FI would be engaged in, (2) the number of people and amount of time required to complete

each activity, (3) the cost of employing each person, (4) the materials and equipment associated with each

activity, and (5) the cost of purchasing the materials and equipment. We note that in order to estimate the

start-up cost of a FI, the purchase price – and not the annual depreciation cost – of equipment should be used

in the financial analysis. This will provide an estimate of the total amount of capital (money) needed to get a FI

started.

An estimate must also be made of the volume of products that will be sold as well as the expected unit price of

those products. A final challenge would be to estimate the administrative costs associated with a new FI. The

financial plan should include sensitivity analysis to evaluate how sensitive the financial indicators are to

different assumptions about input and output prices, as well as assumptions about rates of production.


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advancing forest tenure reform. Rights and Resources Initiative, Washington, DC. 54 p.

United Nations, 1992. Rio Declaration on Environment and Development. Source: United Nations Conference

on the Human Environment, Stockholm, 5-16 June, 1972.

White, A. and A. Martin, 2002. Who owns the world's forests? Forest tenure and public forests in transition.

Washington, DC: Forest Trends, Center for International Environmental Law, 30 p.


Annex 1. Worksheets


User Guide

Steps Description Worksheets

Step 1. Plan Enter general information about the product, the producer, the

period of time to be analyzed, the forest-based initiativ'e goals, the

principal activities to be monitored, and the responsibilities for

monitoring. Also note any assumptions used in the financial

analysis.

(1) Plan: Monitor

(1) Plan: Assumptions

Step 2. Collect Collect cost and income data and record it in written form using

printed worksheets for each type of input (labor, materials and

services, and machinery and equipment). This step can be

combined with Step 3.

Step 3. Enter Enter the collected data in digital form in worksheets using a

computer. The worksheets are the same for Steps 2 & 3.

Step 4. Compile Calculate subtotals per type of input and per activity. (4) Compile: Labor

(4) Compile: Mat-Services

(4) Compile: Mach-Equip

(4) Compile: Admin

Step 5. Analyze Present the costs per activity and per input type, and calculate total

income, net income, and rate of return. Illustrate results using

graphs and charts.

(5) Analyze: Summary

(5) Analyze: Graphs

Step 6. Discuss Register the main points from the discussion of the results. (6) Discuss

The worksheets are the same for Steps 2 & 3.



(2,3) Enter: Mat-Services

(2,3) Enter: Mach-Equip Ph. 1



(2,3) Enter: Admin

(2,3) Enter: Sales

Instructions

Before working with the worksheets in this file, it is important to read through the "Green Value: User's Guide". Chapter 4 of the Guide gives detailed instructions on how to complete the six steps for performing a financial analysis using the worksheets. Each of the steps should be completed in sequential order. In addition, at the top of each worksheet are detailed instructions.

An overviewof the six steps for simplified financial analysis and the worksheets used in each step is provided below.


(1) Plan: Monitor

What is the product or service that will be monitored and analyzed? (e.g., logs, crafts, tourism)

What is the unit of monitoring and analysis? (e.g., a family, an association, a work group, a cooperative)

What is the time period of analysis? (e.g., Jan - Dec 2010, Harvest season 2009, trimester 1 of 2010)

What currency is used?

What are the goals the forest-based initiative (FI) wants to accomplish which this tool could help monitor and analyze?

(e.g., have a rate of return of 15%, have $5,000 in profit for a school fund)

<continued below>

Timber logs.

Cooperative

2011 harvest season (Jan - Dec 2011)

USD

1000 ha

Describe the unit of production for the product or service. (e.g., an area of 100 hectares of forest, a crafts workshop, a lodge with 4 rooms

1) The FI should create at least 60 full time jobs for people in the community.

4)

3) The FI should generate at least R$ 300 000 in profit in order to purchase a building for its central office

2) The FI should harvest at least 19 m3/ha of logs

Instructions: This is a list of important questions to help the forest-based initiative (FI) plan its monitoring activities. Convene a meeting of key stakeholders in the FI, including staff, managers/administrators, engineers, technicians, and temporary workers to discuss the

importance of monitoring, what goals should be monitored, which activities need to be included in the monitoring, and who will do the monitoring.

Notes: Additional questions may be added as desired.

Name of Initiative: Coomflona


Major field activities (Examples provided) Minor activities involved in each major activity

(1) Inventory Mark the areas to be inventoried, open trails for the

inventory, record inventory data, cut vines on harvest trees

(2) Planning Analyze the inventory data, plan and map harvest

activities, write the annual harvest plan, open secondary

roads and patios

(3) Tree felling Registration of information about trees that are cut

Preparation of the tree to be skidded

(4) Transport / Skidding Transport of the trees to a secondary tree patio/deck

(5) Product measurement & loading Cutting of logs to commercial lengths

Measurement of logs

Loading of logs onto truck for transport to central patio

Decisions regarding monitoring

X

(2) Which option will be used to monitor data: "Simple" or "Complex"? See Chapter 4 of the User Guide to help with this decision.

X

First written and then Digital: All data will be collected in written form first, and then entered in digital form with a

computer.

Digital: All data will be entered directly in digital form with a computer (written form will not be used); the analysis will

proceed from Step 1 to Step 3, skipping Step 2.

Varies: For some activities data will be entered in written form, and for other activities it will be entered directly in digital

form, as follows: (Explain)

(3) Which of the following methods for data collection and entry will be used? Place an "X" in the box by the method to be used.

Time worked per day per worker

Production per day per worker

A combination of time for some activities and production for other activities, as follows: (Explain)

Simple

(1) Which will be the basis for monitoring Labor costs of productive activities for temporary workers: time, production, or a combination? Place an "X"

in the box by the method to be used.

What are the major productive activities to be monitored related to the production and sale of the product being analyzed? It is important to define at

most 3 to 5 major activities because these will be the basis for the financial monitoring and analysis. The activities related to the administration of

the FI will be considered under the cost type "Administration" and do not need to be included in this l ist.


Who will implement the monitoring activities and how frequently?

Note the responsible person and how frequently they will perform their duty (e.g., daily, weekly, monthly)

Responsibilities Responsible person Frequency

Collecting field data for each activity Team leader Daily

Verifying the data was collected correctly Technician Daily

Entering data into the Excel worksheets Administrative assistant Weekly

Verifying the data was entered correctly Technician Weekly

Report the interim results to the staff and lead discussion President of the Cooperative with the Technician Monthly

Report the final results to the staff and lead discussion President of the Cooperative with the Technician At the end of the harvest

season

Make changes to next year's monitoring plan as necessary Technician At the end of the harvest

season


(1) Plan: Assumptions

For Costs -- SEE CHANGES IN SPANISH VERSION

Labor

- The field workers work 8 hours per day. If one day the workers work for up to 4 hours, this is a half (.5) day; if the workers work more than 4

hours, this is a full (1) day .

Materials

- Because for this harvest season we did not monitor the cost of food consumed for each productive activity, this cost has been included as

materials in Administrative costs.


Administration

- We included costs of trainings that we received for free from the ProManejo project.

- The administrator works 75% on timber activities and 25% on non-timber forest product activities for the cooperative. Therefore only 75% of

his salary is included in this analysis for timber products.

For Income

Sale

- The buyers of the wood products pay the taxes (17%); this will be negotiated with each buyer.

General Production Assumptions

Notes: This is a list of reminders on how and why certain things were calculated the way they were. For example, reminders can be noted here like how labor costs which are not usually paid were calculated, or transformation rates for processing (e.g., the volume of boards that is produced from 1 cubic meter of logs). This list can be particularly useful for working on scenarios.

Instructions: Use this worksheet to record under the appropriate headingany assumptions you make while compiling and analyzing cost and revenue data. For costs, note assumptions by type (e.g., Labor, Materials and Supplies, Machinery and Equipment, Administration).

Example assumptions are provided in italics below.



Instructions: Use this worksheet for the option "Time" to enter information about temporary workers for each major activity related to the product being analyzed (e.g., Inventory, Harvesting, etc.), as defined in Step 1. The data can first be collected in written form and then entered into this worksheet using a computer. The other option is to enter the data directly in this worksheet using a computer. Use one table for each major activity. First, enter the name of each major activity and the Supervisor for this activity at the beginning of a table provided below; tables may be added if necessary. The "Supervisor" is the person in charge of supervising the completion of the activity. Then enter information in the columns with an arrow (↓). To enter the "Days Worked" data, in the columns for each day of the week (Monday to Sunday) enter if each person worked 1 complete day, a half day, or did not work. The columns without an arrow contain formulas that automatically calculate values when data are entered using a computer.

Reminders: Be sure to use a different table for each major activity. Be sure to also use a different row to record data for each worker that worked and for each week of work. Data should only be entered in this worksheet for temporary workers, not for permanent workers. Example data are provided in italics for two days of work below.

[SIMPLE OPTION]

(2, 3) Enter: Labor (Time) Name of Initiative: Coomflona

* Subtotal of Wages: Subtotal of Days Worked x Daily Wage



↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

1.0 0.0 1.0 1.0 1.0 1.0 0.0 5.0 25.0 125.0 He left on Tues. to

work on another

activity

Patricia Ruiz 10/06, 11/06,

12/06, 13/06,

14/06, 15/06

10 6 2011 1 Paulo Rocha Note taker 1.0 1.0 1.0 0.5 1.0 1.0 0.0 5.5 20.0 110.0 He got sick on Thurs.

in the afternoon.

Patricia Ruiz 10/06, 11/06,

12/06, 13/06,

14/06, 15/06

0.0 0.0

0.0 0.0

10.5 235.00$

Data Entered

By (Person)Observations

Workers

Position

Edivan Inventory

General Information

Data Entered On

(Dates)Name of Worker

Subtotal of

Days

Worked

Days Worked


0 = did not work)

Work

location

Daily Wage

($)

First day of the

week


* Subtotal of

Wages ($)


[SIMPLE OPTION]

* Subtotal of Wages: Subtotal of Quantity x Wage per Unit



↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

Inventory

trails


on another activity


trails

3.0 1.0 3.0 0.5 3.0 0.5 0.0 11.0 10.0 110.0 5.5 He got sick on Thurs. in

the afternoon.

0.0 0.0

0.0 0.0

23.0 236.00$ 10.5

Unit of

Production

Subtotal of

Days WorkedObservations

First day of the

weekWork



Quantity

Wage per

Unit ($)

* Subtotal of

Wages ($)


Inventory Edivan


(2, 3) Enter: Labor (Prod) Name of Initiative: Coomflona

Instructions: Use this worksheet for the "Production" option to enter information about temporary workers for each major activity related to the product being analyzed (e.g., Inventory, Harvesting, etc.), as defined in Step 1. The data can first be collected in written form and then entered into this worksheet using a computer. The other option is to enter the data directly in this worksheet using a computer. Use one table for each activity. First, enter the name of each major activity and the Supervisor for this activity at the beginning of a table provided below; tables may be added if necessary. The "Supervisor" is the person in charge of supervising the completion of the activity. Then enter information in the columns with an arrow (↓). To enter "Quantity Produced" data, in the columns for each day of the week (Monday to Sunday), enter the quantity that each worker produces per day. Continuing in the same line, in the column "Subtotal of Days Worked", count and enter the total number of days worked in the corresponding week for each worker. The columns without an arrow contain formulas that will automatically calculate values when data are entered using a computer.



[ADVANCED OPTION]

(2, 3) Enter: Labor (Time) Name of Initiative: Coomflona



Day Mo. Year M T W Th F Sat Sun Sum Leader Other

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

1.0 0.0 1.0 1.0 1.0 1.0 0.0 5.0 5.0 25.0 125.0 He left on Tues. to

work on another

activity

Patricia Ruiz 11/06; 13/06,

16/06

10 6 2011 1 Paulo Rocha Note taker 1.0 1.0 1.0 0.5 1.0 1.0 0.0 5.5 5.5 20.0 110.0 He got sick on Thurs.

in the afternoon.

Patricia Ruiz 11/06; 13/06,

16/06

0.0 0.0

0.0 0.0

10.5 5.0 5.5 235.00$

Subtotal of Days

Worked


Data Entered On

(Date)

First day of the

weekWork


Days Worked


0 = did not work)

Daily

Wage ($)

* Subtotal of

Wages ($)

Data Entered By

(Person)

Inventory Edivan

General Information Workers

Observations

Instructions: Use this worksheet for the "Time" option to enter information about temporary workers for each major activity related to the product being analyzed (e.g., Inventory, Harvesting, etc.), as defined in Step 1. The data can first be collected in written form and then entered into this worksheet using a computer. The other option is to enter the data directly in this worksheet using a computer. Use one table for each activity. First, enter the name of each major activity and the Supervisor for this activity at the beginning of a table provided below; tables may be added if necessary. The "Supervisor" is the person in charge of supervising the completion of the activity. Then enter information in the columns with an arrow (↓). To enter data for "Days Worked", in the columns for each day of the week (Monday to Sunday), enter if each person worked 1 complete day, a half day, or did not work. Continuing in the same line, in the column "Sum", the subtotal of days worked for each worker for the week will be automatically calculated. Next, for each worker, the subtotal of days worked from the column "Sum" should be entered again as follows: if the worker was the leader of the work group (or one of various work groups), enter the same subtotal of days worked in the column "Leader"; if the worker was not the leader of a work group, enter the subtotal of days worked in the column "Other". The columns without an arrow contain formulas that will automatically calculate values when data are entered using a computer.



[ADVANCED OPTION]

(2, 3) Enter: Labor (Prod) Name of Initiative: Coomflona



Day Mo. Year M T W Th F Sat Sun Sum Leader Others

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓


operator

Inventory

trails

3.0 0.0 3.0 1.5 3.0 1.5 0.0 12.0 10.5 126.0 5.0 5.0 He left on Tuesday

to work in another

activity


trails

3.0 1.0 3.0 0.5 3.0 0.5 0.0 11.0 10.0 110.0 5.5 5.5 He got sick on

Thursday in the

afternoon.

0.0 0.0

0.0 0.0

23.0 236.00$ 10.5 5.0 5.5

Inventory Edivan


Observations* Subtotal of

Wages ($)

First day of the

weekWork


Unit of

Production


Quantity

Wage per

Unit ($)


Subtotals of Days Worked

Work - Days

Instructions: Use this worksheet for the "Production" option to enter information about temporary workers for each major productive activity related to the product being analyzed (e.g., Inventory, Harvesting, etc.), as defined in Step 1. The data can first be collected in written form and then entered into this worksheet using a computer. The other option is to enter the data directly in this worksheet using a computer Use one table for each activity. First, enter the name of each major activity and the Supervisor for this activity at the beginning of a table provided below; tables may be added if necessary. The "Supervisor" is the person in charge of supervising the completion of the activity. Then enter information in the columns with an arrow (↓). To enter "Quantity Produced" data, in the columns for each day of the week (Monday to Sunday), enter the quantity each worker produced per day. Continuing in the same line, in the column "Sum," under the headings "Work-Days" and "Subtotals of Days Worked", count and enter the subtotal of days worked for each worker for the corresponding week. Next, for each worker, the subtotal of days worked from the column "Sum" should be entered again as follows: if the worker was the leader of the work group (or one of various work groups), enter the same subtotal of days worked in the column "Leader"; if the worker was not the leader of a work group, enter the subtotal of days worked in the column "Others". The columns without an arrow contain formulas that will automatically calculate values when data are entered with a computer.



Instructions: Use this worksheet to compile data for Labor costs at the end of the period of analysis. These data should first be registered in the (2,3) Enter: Labor worksheets. Now this Labor data will be compiled and analyzed for each activity in this worksheet. First, enter the names of the activities in the column "Activity". Then enter information in the other columns with an arrow (↓). Rows can be added to the table as needed. The "Total Cost" at the bottom of the table is automatically calculated. NOTE: This worksheet is linked to the (2,3) Enter: Labor (Time) worksheet through links. The links will automatically copy over the subtotal of the "Subtotal of Wages" per activity from the bottom of each table in the (2,3) Enter: Labor (Time) worksheet to the column below titled "Subtotal of Wages per Activity". If you used the production option for monitoring labor costs, you need to create links in the column "Subtotal of Wages per Activity" in this worksheet to the subtotals of wages in each table in the (2,3) Enter: Labor (Prod) worksheet. If you used a combination of time and production options for monitoring labor costs, you need to create links in the column "Subtotal of Wages per Activity" in this worksheet to the subtotals of wages in the appropriate tables in the (2,3) Enter: Labor (Time) worksheet and the (2,3) Enter: Labor (Prod) worksheet.

Reminders: Verify that all major productive activities are listed in the column "Activity". Be sure each "Subtotal of Wages per Activity" is updated based on the tables in the (2,3) Enter: Labor worksheet used. Verify all links are correct.

Example data are provided in italics below based example data in the (2,3) Enter: Labor (Time) worksheet for the Simple option.

ActivitySubtotal of Wages

per Activity

Data Introduced or

Verified by (Name)

Data Introduced or

Verified on (Date)

↓ ↓ ↓

Inventory 235.00 Patricia Ruiz 30.06.2011


Harvest / Tree felling 225.00 Patricia Ruiz 15.08.2011

Skidding 510.00 Patricia Ruiz 30.10.2011

Product measurement & loading 225.00 Patricia Ruiz 30.10.2011


(4) Compile: Labor Name of Initiative: Coomflona


(2,3) Enter: Mat-Services Name of Initiative: Coomflona

* Subtotal Cost = Quantity x Price / Unit



Unit ($)

* Subtotal Cost

($)

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

12 6 2011 aluminum tags (.5 m) box 1 13.00 13.00 Joao Sosa 12.06.2011

13 8 2011 fuel liter 600 1.90 1,140.00 Joao Sosa 13.08.2011

-

-

Subtotal per activity 1,153.00$

Date Cost Data

ObservationsData entered by

(Name)

Data entered on

(Date)

Instructions: Use this worksheet to enter data for Materials (e.g., aluminum tags, gasoline, oil) and Services (e.g., preparation of Annual Operating Plan, training) for each activity related to forest management (e.g., Inventory, Harvesting, etc.), as defined in Step 1. **Materials are items that last less than one year or harvest season.** The data can first be collected in written form and then entered into this worksheet using a computer. Another possibility is to enter the data directly in this worksheet using a computer. Use a different table for each major activity. First, enter the name of each major activity and the Supervisor for the activity at the beginning of a table provided below; additional tables may be added if necessary. Then enter information in the columns with an arrow (↓). The columns without an arrow contain formulas that automatically calculate values when the data are entered using a computer.

Reminders: Be sure to use a different table for each major activity. Also, be sure to use a different row to record data for each item purchased for use in the forest management activities. Always record the date the items were purchased. When the purchase of the same item is made several times, each purchase should be recorded on a different row and under the specific activity for which it was purchased. For example, if 600 liters of fuel were purchased on 13 August 20131for the activity Inventory , and then 400 liters more fuel was purchased on 10 September 2011 for Harvest activities, the 600 liters should be recorded under Inventory and the 400 liters should be listed under Harvest activities. Example data are provided in italics below.


(4) Compile: Mat-Services Name of Initiative: Coomflona

Instructions: Use this worksheet to compile data for Materials and Services costs at the end of the period of analysis. These data should first be registered in the (2,3) Enter: Mat-Services worksheet. Now this Materials and Services data will be compiled and analyzed for each activity in this worksheet. First, enter the names of the major activities in the column "Activity". Then enter information in the other columns with an arrow (↓). Rows can be added to the table as needed. This worksheet is linked to the (2,3) Enter: Mat-Services worksheet to automatically copy over the value "Subtotal per Activity" from the bottom of each table to the column below titled "Subtotal of Cost per Activity". The "Total Cost" is automatically calculated.

Reminders: Verify that all major productive activities are listed in the column "Activity". Be sure that each "Subtotal of Cost per Activity" is updated based on the tables in the (2,3) Enter: Mat-Services worksheet. Verify all links are correct.

Example data are provided in italics below.


Verified by (Name)

Data Introduced

or Verified on

(Date)

↓ ↓ ↓

Inventory 1,153.00 Patricia Ruiz 01.11.2011


Harvest / Tree felling 1,012.00 Patricia Ruiz 01.11.2011

Transport / Skidding 8,626.00 Patricia Ruiz 01.11.2011

Product measurement & loading 75.00 Patricia Ruiz 01.11.2011



[SIMPLE OPTION]

(2,3) Enter: Mach- Equip Ph. 1 Name of Initiative: Coomflona

* Total Cost = Quantity x Price / Unit

** Depreciation Cost = Total Cost / Useful life


($)* Total Cost ($)

Useful Life

(in # of years

or productive

periods)

** Depreciation

Cost ($)Inventory Planning

Harvest

/ Tree

felling

Transport /

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

13 5 2011 Steel-toed boots Pair 8 50.00 400.00 2 200.00 √ √ √ √ √

25 8 2011 Steel-toed boots Pair 1 50.00 50.00 2 25.00 √ √ √ √ √ Second purchase of steel-

toed boots

15 9 2011 Chainsaw Individual 4 3,000.00 12,000.00 3 4,000.00 √ √ √

-

$ 12,450.00

Total Annual

Depreciation


Machinery and Equipment Activity in which Item was UsedDate

Observations

Instructions: Use this worksheet for the "Simple" option as the first phase for entering data for Machinery and Equipment (e.g., boots, compass, chainsaw) used for each major activity related to the product being analyzed (e.g., Inventory, Harvesting), as defined in Step 1. This data can first be entered in written form and then introduced in digital form in this worksheet using a computer. Another possiblity is to enter the data directly in this worksheet using a computer. In this worksheet, first enter the names of the major activities in the columns below the title "Activity in which Item was Used"; columns for activity names can be added or deleted as needed. Next enter information in the rest of the columns with an arrow (↓). In the columns for the activities, for each activity, enter a check (√) in the columns that correspond to the items that are used in this activity. The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer.

Reminders: Be sure to use a different row to enter data for each item purchased for use in the product or service being analyzed. Always enter the date each item is purchased. When the same item is purchased several times, enter each purchase on a different row. For example, if 8 pairs of steel-toed boots were bought on May 13, 2011, and then 1 more pair was purchased on September 25, 2011, the purchase of 8 pairs should be recorded in a different row than the purchase of the 1 pair. If a short time period is being analyzed, it is important to enter the useful life in terms of productive periods to avoid overestimating the depreciation costs for the period being analyzed. For example, if the costs for one trimester are being analyzed, the useful life should be entered in terms of trimesters (instead of years).






($)

* Total Cost

($)

Useful Life

(in # of years or

productive

periods)

**

Depreciation

Cost ($)

Inventory PlanningHarvest /

Tree felling

Transport /

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓



15 9 2011 Chainsaw indiv 4 3,000.00 12,000.00 3 4,000.00 10.5 10.0 10.0 30.5

- 0.0

$ 12,450.00

Total

Depreciation $ 4,225.00

Date


Observations

Machinery and Equipment Subtotal of Days Worked for each ActivityTotal

Days

Worked

per Item

[SIMPLE OPTION]

(2,3) Enter: Mach-Equip Ph. 2 Name of Initiative: Coomflona

Instructions: Use this worksheet for the second phase for entering cost data for Machinery and Equipment for the "Simple" option. This worksheet is used only at the end of the period of analysis, when all of the data for this period regarding labor and all purchases have been entered. The data for the purchase of Machinery and Equipment should have first been entered in the (2,3) Enter: Mach-Equip - Ph. 1 worksheet. Now some specific labor data will be added in this worksheet. Enter data in all the columns with an arrow (↓). The main steps are: (1) Enter the names of the major activities below the title "Subtotal of Days Worked for each Activity"; these should be the same activities entered in the (2,3) Enter: Mach-Equip Ph. 1 worksheet. (2) Copy all of the data from the table in the (2,3) Enter: Mach-Equip Ph. 1 worksheet into the table below. This information can be entered in written form or with the computer. (3) Finally, at the end of the period of analysis, enter the "Subtotal of Days Worked for each Activity" found in the (2,3) Enter: Labor worksheet used according to the following rules. In the cells underneath the names of the activities where a check (√) was placed, replace the check with the "Subtotal of Days Worked for each Activity" for the corresponding activity. The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer.

Note: In Phase 3, these labor data are used to determine the proportion of depreciated cost of each item to be allocated to each activity. Optional: If the same item is purchased several times (e.g., boots, compasses) and at the same price, the cost of the items can be combined using the following steps. Select all of the rows of data in the table and sort them by item name. Then, for the items that were purchased various times at the same price, sum the quantities purchased and, in the first line for this item, enter the total quantity in the column "Quantity". Then delete the other lines for this item. There should be one line for each item. If the same item was purchased several times but for different prices, do not combine these items -- keep them separate.



[ADVANCED OPTION]





($)

* Total Cost

($)

Useful Life

(in # of years

or

productive

**

Depreciation

Cost ($)

Inventory Planning

Harvest /

Tree

felling

Transport

/

Skidding

Product

Meas. &

Loading

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

13 5 2011 Steel-toed boots pair 8 50.00 400.00 2 200.00 P P P P P

25 8 2011 Steel-toed boots pair 1 50.00 50.00 2 25.00 P P P P P Second purchase of steel-toed

boots

15 9 2011 Chainsaw Indivitual 4 3,000.00 12,000.00 3 4,000.00 T T T

-

$ 12,450.00

Total

Depreciation


Observations

Date Machinery and Equipment Activity in which Item was Used

Instructions: Use this worksheet for the "Advanced" option as the first phase for entering data for Machinery and Equipment (e.g., boots, compass, chainsaw) used for each activity related to the product being analyzed (e.g., Inventory, Harvesting), as defined in Step 1. This data can first be entered in written form and then introduced in digital form in this worksheet using a computer. Another possibility is to enter the data directly in this worksheet using a computer. In this worksheet, first enter the names of the major activities below the title "Activity in which Item was Used"; columns can be added or deleted as needed. Next enter information in the rest of the columns with an arrow (↓). In the columns for the activities, for each activity, enter either a "P" or an "T" in the column that corresponds to the items that are used in this activity as follows: enter a "P" if the item is personal equipment (e.g., helmets are used by each and every person in the team) or a "T" if the item is used at the level of the work team (e.g., one compass is used per team). The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer.

Reminders: Be sure to use a different row to enter data for each item purchased for use in the product or service being analyzed. Always enter the date each item is purchased. When the same item is purchased several times, enter each purchase on a different line. For example, if 8 pairs of steel-toed boots were bought on May 13, 2011, and then 1 more pair was purchased on September 25, 2011, the purchase of 8 pairs should be recorded in a different row than the purchase of the 1 pair. If a short time period is being analyzed, it is important to enter the useful life in terms of productive periods to avoid overestimating the depreciation costs for the period being analyzed. For example, if the costs for one trimester are being analyzed, the useful life should be entered in terms of trimesters (instead of years).



[ADVANCED OPTION]





Unit ($)

* Total Cost

($)

Useful Life

(in # of years or

productive

periods)

**

Depreciatio

n Cost ($)

InventoryPlannin

g

Harvest /

Tree felling

Transport

/ Skidding

Product

Meas.

&

Loadin

g

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓



15 9 2011 Chainsaw Indivdual 4 3,000.00 12,000.00 3 4,000.00 5.5 5.0 5.0 15.5

-

$ 12,450.00

Total

Depreciation

Cost $ 4,225.00

Observations


Date Machinery and Equipment Subtotal of Days Worked for each Activity

Total

Days

Worked

per Item

Instructions: Use this worksheet for the second phase of entering cost data for Machinery and Equipment for the option "Advanced". This worksheet is used only at the end of the period of analysis, when all of the data for this period regarding labor and purchases have been entered. Data for the purchase of Machinery and Equipment should first have been entered in the (2,3) Enter: Mach-Equip Ph. 1 worksheet. Now some labor data will be added in this worksheet. Enter data in all the columns with an arrow (↓). The main steps are: (1) Enter the names of the activities below the title "Subtotal of Days Worked for each Activity"; these should be the same activities entered in (2,3) Enter: Mach-Equip Ph. 1. (2) Copy all of the information from the table in the (2,3) Enter: Mach-Equip Ph. 1 worksheet into the table below (including cost information and the "P"s and "E"s under the activity names). This information can be entered in written form or with the computer. (3) Finally, at the end of the period of analysis, enter the "Subtotal of Days Worked for each Activity" found in the (2,3) Enter: Labor worksheet used according to the following rules. In the cells underneath the names of the activities where a "P" was entered, replace the "P" with the "Subtotal of Days Worked" from the column "Sum" for the corresponding activity; where a "T" was entered, replace the "T" with the Subtotal from the column "Leader" for the corresponding activity. The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer.

Note: In Phase 3 these labor data are used to determine the proportion of depreciated cost of each item to be allocated to each activity.



* Cost of the Item per Activity = Depreciation Cost x Subtotal of Days Worked for Each Activity / Total Days Worked per Item


Machinery / Equipment Depreciation

Cost ($)

Subtotal of

Days

Worked for

Each

Activity

Total Days

Worked

per Item

* Cost of the

Item per

Activity ($)

Observations

Data

Introduced

by (Name)

Data

Introduced on

(Date)

↓ ↓ ↓ ↓ ↓ ↓ ↓

Steel-toed Boots 200.00 10.5 50.5 41.58 Joao Sosa 1.11.2011

Steel-toed Boots 25.00 10.5 50.5 5.20 Joao Sosa 1.11.2011

Chainsaw 4,000.00 10.5 30.5 1,377.05 Joao Sosa 1.11.2011

1,423.83 Subtotal per activity

Instructions: Carefully follow these instructions. Use this worksheet for the third phase of monitoring costs for Machinery and Equipment, at the end of the period of analysis for data collected through either the "Simple" or "Advanced" options in phases 1 and 2. Data on items purchased will now be transferred to this worksheet from the (2,3) Enter: Mach-Equip Ph. 2 worksheet, and organized and analyzed by activity; there should be one table per activity. Enter information in the columns with an arrow (↓). The columns without an arrow contain formulas that will automatically calculate values. The main steps are: (1) First, enter the name of each major activity at the beginning of a table provided below; additional tables may be added if necessary. (2) In each table, enter in the first column all of the items of Machinery and Equipment used in the corresponding activity; verify the items by reviewing the column that corresponds with each activity in the (2,3) Enter: Mach-Equip Ph. 2 worksheet used. (3) Next, for each item, enter the "Depreciation Cost" from the (2,3) Enter: Mach-Equip Ph. 2 worksheet used. (4) Then, for the same item, enter the "Subtotal of Days Worked for each Activity" for the corresponding activity from the (2,3) Enter: Mach-Equip Ph. 2 worksheet used. (5) Finally, enter the "Total Days Worked per Item", from the (2,3) Enter: Mach-Equip Ph. 2 worksheet used; this is the total number of days worked for all of the activities in which this item was used. The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer.

Reminders: Verify that all activities implemented are listed and have their own cost calculation tables below.

Example data are provided in italics below based on the example data from the Simple option in the (2,3) Enter: Mach-Equip - Ph. 2 worksheet.


(4) COMPILE: MACH-EQUIP Name of Initiative: Coomflona


Verified by (Name)

Data Introduced

or Verified on

(Date)

↓ ↓ ↓

Inventory 1,423.83 Joao Sosa 01.11.2011

Planning 35.64 Joao Sosa 01.11.2011

Harvest / Tree felling 1,356.03 Joao Sosa 01.11.2011

Transport / Skidding 53.47 Joao Sosa 01.11.2011

Product measurement and loading 1,356.03 Joao Sosa 01.11.2011


Instructions: Use this worksheet to compile data for Machinery and Equipment costs at the end of the period of analysis. These data should first have been registered in the (2,3) Enter: Mach-Equip Ph. 1 worksheet. Now these data will be compiled and analyzed for each activity in this worksheet. First, enter the names of the activities in the column "Activity". Then enter information in the other columns with an arrow (↓). Rows can be added to the table as needed. This worksheet is linked to the (2,3) Enter: Mach-Equip Ph.3 worksheet to automatically copy over the value "Subtotal per Activity" from the bottom of each table to the column below titled "Subtotal of Cost per Activity". The Total Cost is automatically calculated .

Reminders: Verify that all major productive activities are listed in the column "Activity". Be sure that each "Subtotal of Cost per Activity" is updated based on the tables in the (2,3) Enter: Machi-Equip Ph. 3 worksheet. Verify all links are correct.



<continued below>

(3) ENTER: ADMIN Name of Initiative: Coomflona

* Total Monthly Compensation = Monthly Salary + Montly Benefits

** Total Annual Labor Cost = Total Monthly Compensation x Number of Months of Work

Labor - Salaries

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

- - - Joanna Forestry Engineer 2,400.00 480.00 2,880.00 12 34,560.00

- - - Maria Administrator 2,400.00 480.00 2,880.00 12 34,560.00

- - - Jorge Cook 600.00 120.00 720.00 6 4,320.00

-

73,440.00$ Subtotal Cost

DateName Position / Title

* Subtotal Monthly

Compensation ($)

** Subtotal

Annual Labor

Cost ($)

Number of

Months of Work

Monthly

Salary ($)

Monthly

Benefits ($)Observations

Instructions: Use this worksheet to enter data for Administrative costs, including Labor, Machinery and Equipment, and Materials and Services related to Administration. This data can first be collected in written form and then entered directly into this worksheet using a computer. Another possibility is to enter the information directly into this worksheet with a computer. Enter information in the columns with an arrow (↓). The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer. Reminders: (1) For Labor costs, you can either enter data each time someone is paid, or if they receive the same salary every month, you can simply enter 12 months and calculate their total annual salary. (2) If a short time period is being analyzed, the useful life in terms of productive periods should be adjusted to avoid overestimating the depreciation costs for the period being analyzed. For example, if the costs for one trimester are being analyzed, the useful life should be entered in terms of trimesters (instead of years). (3) Don't forget to include the taxes that the initiative pays under "Materials and Services". Example data are provided in italics below.


* Subtotal Cost = Quantity x Price / Unit

Materials and Services (e.g., diesel, oil, rent, electricity, telephone, water, internet, insurance, vehicle maintenance, training)

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

- - - per year 12 770.00 9,240.00


2 8 2011 per year 1 1,500.00 1,500.00

3 8 2011 per event 1 5,000.00 5,000.00


-

16,440.00$


** Depreciation Cost = Total Cost / Useful Life


Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

1 6 2011 Computer, printer,

programs

Packaged

computers

4 3,500.00 14,000.00 3 4,666.67

1 8 2011 Flatbed Truck Individual 1 97,400.00 97,400.00 3 32,466.67

-

111,400.00$

Subtotal

Depreciated

Cost 37,133.33$

Utilities

DateItem Observations

* Subtotal Cost

($)

* Subtotal Cost ($)

Subtotal Cost

Date Useful Life (in #

of years or

productive

periods)

Quantity Price / Unit ($)

** Depreciation

Cost ($)Observations

Subtotal Cost

Unit

Unit

Rent

Vehicle maintenance (total)

Training

Office supplies

Item Quantity Price / Unit ($)


(4) Compile: Admin

Labor ($)Materials and

Supplies ($)

Machinery and

Equipment ($)

↓ ↓

73,440.00 16,440.00 37,133.33 127,013.33 Joao Sosa 01.11.2011

Subtotal of Cost by Type of Cost

Administration

Cost Subtotals

Data

Introduced or

Verified by

(Name)

Data

Introduced

or Verified

on (Date)

Total Cost ($)

Instructions: Use this worksheet to compile Labor, Materials and Services, and Machinery and Equipment costs related to Administration. This data should have first been registered in the (2,3) Enter: Admin worksheet. Now this data will be compiled by input type in this worksheet. This worksheet is linked to the (2,3) Enter: Admin worksheet to automatically copy over the value "Subtotal Cost" from the bottom of each table to the column below titled "Subtotal of Cost by Type of Cost". The "Total Cost" is automatically calculated.

Reminders: Be sure that the costs are updated based on the final totals from the Enter: Administration worksheet. If links are used, verify they are all correct.




(2,3) Enter: Sales Name of Initiative: Coomflona

* Subtotal Revenue = Quantity Sold x Price / Unit Sold

Day Mo. Year

↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

1 3 2011 Madeiras Tropicais logs hardwood 1 m 3 500 280 140,000.00

10 3 2011 Laminas de Belem logs lightwood 1 m 3 400 100 40,000.00

-

900 180,000.00$ Total

ObservationsDate

Unit of

Product or

Service Sold

(m3, kg,

liters)

Quantity

Sold

Price / Unit

Sold ($)

* Subtotal

Revenue ($)Name of Buyer Product

Description of

Product or Service

(species, value

group)

Quality

Grade

Currency

Exchange Rate (if

applicable)

Instructions: Use this worksheet to enter monitoring data for the sale of products and/or services. Data for the sale of different products and/or services should be included in the same table. This data can first be collected in written form and then entered directly into this worksheet using a computer. Another possibility is to enter the information directly into this worksheet with a computer. Enter information in the columns with an arrow (↓). The columns without an arrow contain formulas that automatically calculate values when data are entered with a computer. The titles of the columns can be adjusted to the products and/or services sold and rows can be added to the table as necessary.

Reminders: Be sure to use a different row to record data for each sale. If within the same sale different products or services are sold at different prices, use one line for each different product or service. Always record the date the items were sold. If changes are made to the column titles, verify that the formula for "Subtotal Revenue" is correct.



<continued below>

(5) Analyze: Summary

↓

Name of Initiative $

Product or Service Analyzed 1,000

Period of Analysis m3

15,064

15.06

Basic Operational Information

Monetary Unit

Area of Production (ha)

Unit of SaleHarvest 2011

Information about the Producer

↓

Coomflona

Logs

Quantity sold

Average Quantity

Sold/Area

Instructions: Use this worksheet at the end of the period of analysis to summarize the total costs, organized by type and by activity, and total income related to the product or service being analyzed. First, enter information about the producer in the tables "Information about the Producer" and "Basic Operational Information". Then enter the major productive activities in the first column in the table "Cost by Activity and Cost Type"; the Administrative costs are always included after the list of major productive activities. Rows can be added to the table as necessary. The columns without arrows either contain links or formulas. The data for the table "Costs by Activity and Input Type" are copied over by links from each of the (4) Compile worksheets for cost data as well as the (2,3) Enter: Sales worksheet for income data. This data can be entered manually if you prefer.

Reminders/Clarifications: Verify all links are correct. If you have an ERROR in any cell, you must update the link or formula in the cell. In the "Basic Operational Information" table, if the type of unit varies for the products or services sold, do not fill in the "Unit of Sale" and "Average Quantity Sold/Area" cells. Formulas for the calculations in this worksheet are explained in Chapter 2 of the User's Guide. Finally, the subtotals in the "Cost by Activity and Input Type" table are from a case study of the Coomflona FI and are estimated real costs. These numbers are not the same as the example subtotals provided in the (2,3) Enter and (4) Compile worksheets because in those tables we used example data to protect the FI's privacy.



Costs by Activity and Input Type (USD)

Activity LaborMaterials and

Services

Machinery and

Equipment

Subtotal Cost

($)Percent

Average Cost

per unit ($)

↓

Inventory 46 699 1 873 1 496 50,068 7% 3

Planning 3 757 35 655 1 014 40,427 6% 3

Harvest 30 771 15 750 7 504 54,025 8% 4

Skidding 49 086 57 589 6 040 112,714 16% 7


loading

39 213 162 485 3 184

204,881 30% 14

Administration 85 024 119 532 23 070 227,626 33% 15

Subtotal Cost $ 254 550 $ 392 883 $ 42 308 $ 689 741 100% $ 46

Percent 37% 57% 6%

Revenue, Net Revenue, and Rate of Return

Value

Total Revenue $ 1 601 005

Total Costs $ 689 741

Net Revenue (Profit) $ 911 264

Rate of Return 132%

Other Goals to be Analyzed

Expected Result Actual Result

↓ ↓

60.00 67.00

19m³/há 15,8m³/há

Sim

Goals (Examples)

Number of full time jobs generated from timber

operations

Harvest rate (volume) for logs sold per hectare

Generate R$ 300,000 to purchase a central office

building

↓

Financial Indicator


Total Cost by Activity (Data for Figures 1 - 4)

Activity Cost Subtotal% of Total

Cost↓

Inventory 50,068 7%

Planning 40,427 6%

Harvest 54,025 8%

Skidding 112,714 16%


loading

204,881 30%

Administration 227,626 33%Total Cost 689,741$ 100%


Inventory

Planning

Harvest

Skidding

Product measurement & loading

Administration

(5) Analyze: Graphs Name of Initiative: Coomflona

-

50,000

100,000

150,000

200,000

250,000

Co

st in

$


Instructions: Use this worksheet to present your results. Enter information in the columns with an arrow (↓). Two tables present the results of the financial analysis and are the basis for the graphs provided below: Figures 1-6. First, in the table "Total Cost by Activity", enter in the column "Activity" the list of major activities and "Administration". The data for the tables are copied over using links to the (5) Analyze: Summary worksheet. Data can be entered manually if preferred. Figures 1-6 are automatically generated based on the data in the two tables. Figures 1-4 present the costs by activity, and Figures 4 and 5 present the costs by type of input. The graphs may be adjusted and new graphs may be added as necessary. Reminders: These graphs are examples and others can be added as necessary. Be sure to verify the source of data for each graph. If links are used, verify they are all correct.


Type of Cost Cost Subtotal% of Total

Cost

Labor 254,549.95 37%

Materials and Services 392,883.47 57%

Machinery and Equipment 42,307.68 6%

Total Cost 689,741.09$ 100.00%

Cost by Input Type (The data for Figures 5 and 6)

37%

57%

6%


Labor



0%

20%

40%

60%

80%

100%




Labor

<(6) Analyze: Graphics continued>


(6) Discuss

1) What do the results indicate about the forest initiative (FI)?

The results indicate that the production of wood is viable for the 2007-2008 harvest, but the administrative costs are very high.

2) Where the FI's goals met?

We exceeded our goals with respect to the number of full time employees and the amount of profit needed to purchase a central office building,

but we did not meet our goal for the volume of timber to be harvested from each hectare.

3) Are any of the results surprising?

The proportion of total costs represented by Administrative costs is surprising. However, the fact that we operate at a large scale for wood

production requires a large team and results in various costs for maintaining the office.

4) What factors are believed to have affected the results? These may be external as well as internal factors, e.g., internal organization of work,

public policies, markets, the scale of production.

The Coomflona is still building capacity and consolidating the team and our systems of production. Each year the area managed and volume of

production are increasing. After a few years of operating at maximum capacity the workers will have more experience and be more efficient, and

the costs should go down.

5) What changes could be made for the FI, in terms of labor, materials and services, machinery and equipment, and administration, and/or sales

to improve the results and/or reach the FI's goals in the future ?

The Coomflona is thinking of purchasing machinery. We should use this financial analysis tool to analyze how this would affect our annual costs.

Also, the Coomflona wants to get certified, which could help us get more buyers and/or perhaps get better prices.

6) What changes could be implemented in terms of monitoring costs and income?

For the next harvest we will organize better our data for each activity, and analyze the total costs and income with this tool.

Instructions: Convene a meeting at the end of the period of analysis for all forest initiative (FI) staff, including managers/administrators, forestry engineers, forestry technicians, and temporary workers, to discuss the monitoring results and what they mean for theFI. Example questions are provided.

Notes: This is a list of sample questions to help the FI discuss its monitoring results. The FI can add or eliminate questions according to their interests.



guide to economic analysis of small-scale … value...illegal activities such as the illegal harvest...

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