Figure 9.1 is an extract from a spreadsheet template showing how to compile estimates of annual costs associated with a project. The numbers in the extract are illustrative only.
 

Data source: CIE
 

This extract distinguishes between:

• fixed costs (those that are not a function of area) and variable costs (those that are a function of area)

• start-up costs (in Year 1) and ongoing costs (for all following years).

The distinction between fixed and variable costs is very important for the business case:

• It allows the analysis to test whether the project can cover variable costs. If it cannot, it will be unable to cover the fixed costs of the project.

• The magnitude of fixed costs (relative to overall costs) determines the minimum viable size for the project. 

Note that this template extract also includes the opportunity cost of land. This is a variable cost (it depends on the number of hectares) and occurs every year.