You should know how to keep records of the quality, price etc. of milk coming into your centre.

You should know how to:
- find the fat content of your cream and skim milk so you can

- calculate the fat content of your products.

You should know how to find the costs of:
- raw materials
- wages
- depreciation etc.
so that you can calculate the cost of each litre of milk, kilogram of butter etc.

Note: 1 fu = 1 part fat in 100 parts milk

- the cream from

- the skim milk.

Note: See also T8 Milk Payment.

Note: See T3 Milk Quality Control for a method of checking the fat content.

- how much you pay farmers for their milk from 

the milk payment scheme

- how many l of milk you buy from the farmers every week or everymonth
 

- how much you pay for electricity or for wood, fuel oil etc.

- how much you pay for processing aids e.g. starter culture, detergents, rennet, salt etc. from the bills
 

- the costs of equipment e.g. trucks, tanks

- buildings

remember:

fat is more expensive than skim milk.

Production costs of market milk and butter

This month, the prices are:  Milk price:  10 mu/l
                                             fat content:  4.2%
18

Assuming fat value is                           The cost of 1 fu is:
 50 % of the milk price                    10 mu x 50% x 1 = 1.19 mu/fu
                                                                                 4.2 mu

From Example 3, each day:

             you receive:                                         you produce:

 200 1.2 fat whole milk     >       195.4  13.4% fat    +     2.1 kg  83% fat
                                              pasturized market milk             butter

Your daily payment to the farmer for milk is:

200  1x 10mh  = 2000 mu/day

                                           Cost of l milk:                         Cost of 2.1 kg

                                          milk (50%)=5mu                fat 4.6 kgx38%vfat
                                                                                       x 1.19mu = 208 mu

                                                        +                                             +

                                           fat 3.4 fu x 1.19mu/fu        milk 4.6 x 5 mu
                                                                =4.05 mu                       =23 mu

                                                                =9.05 mu                       =231 mu
 

                                          Cost of 195.4 l milk
                                             195.41 x 9.05 mu

                                                           = 1,768 mu         1,999 mu ~ 2,000 mu

                                                                  Cost 1 kg 231 mu = 110 mu
                                                                                    2.1 kg

Each month you receive:

200 l x 30 days = 6,000 l milk.

20 If your electricity bill for 1 month is 6,000 mu, your electricity costs are:

6,000 mu/month  = 1 mu/l milk.
6,000 l/month

After 20 years, you assume:
- their value is 0 mu.

They lose value each year: 
annual depreciation.

Assuming they lose the same value each year, depreciation costs/month:

= 100,000 mu = 417 mu/mon
   20 years x 12 months

You assume your milk production stays the same. 

Therefore depreciation costs/l milk:

= 417 mu/month = 0.07 mu/l.
   6,000 l/month

When new, your equipment costs are:

300,000 mu.

After 10 years, you assume:
- its value is 50,000 mu.

Assuming it loses the same value each year,
depreciation costs/month =

300,000 - 50,000 mu = 2,083 mu/mon
10 years x 12 months

Therefore, depreciation costs/l milk:

= 2,083 mu/month = 0.35 mu/l.
   6,000 l/month

                                 mu
Milk                                        9.05
Electricity                               1.00
Chemicals                               0.25
Depreciation                           0.44
(0.07 + 0.37)
Wages                                     0.50
(estimate)
Packing materials                  0.25

Total production costs for

1 l 3.4 % pasteurized milk  = 11.49mu
 
 
 
 
 

Note: For your own production,add all of your other costs e.g. Transport, water etc.

You must add your profit to the total production costs.
                                    mu
Total production costs of 

1 l market milk                        11.5

30 % profit (11.49 x 30)           3.5 
                          100

Sale price               15.0 mu
 

4.6 l of cream to make 2.1 kg of butter

So for 1 kg of butter, you need 4.6 = 2.2 l cream.
                                               2.1
Your total production costs for 1 kg butter are:

butter                                     110.30

electricity 
   (2.2 l cream x 1 mu)                2.20

chemicals                                    0.25

depreciation 
   (2.2 l cream x 0.44)                 0.97

wages 
   (2.2 l cream x 0.50)                 1.10

packing materials                       0.25

Total:     115.07mu/kgbutter

Total production costs  mu

of 1 kg butter         115.00
  +
30 % profit              35.00

Sale Price         150.00 mu/kg

 

Keep accurate reception records

(4)

Standardization
Separate                          Whole milk
into:               cream                       skimmilk	(5)
Check for contents and  calculate amounts for:	(6-10)
products:   market      market          butter                         milk           cream	(7)

Calculate production costs

Cost of:                                  raw milk                                  electricity                                  processing aids                                  buildings and equipment                                  wages	(11-12) (13) (14) (15) (16)
Divided by:-----------------------------= Unit Production Cost	(17-21)
amount of butter produced                      +
Other costs
	(22-23)
=  Total Production Costs	(24-27)
+
Profit
Sale Price