CoffeeMan9000 wrote:Without a revenue assumption there isn't any amortization of the cost of the machine. This appears to be a calculation of how many roasts it takes to make the initial machine cost equal to the green cost.

Not quite. BDL is taking a 1500 gram sample roast cost of greens ($6/500 gram = $18 /1500 gram) vs greens cost of 250 gram ($3) yielding a sample roast expense savings of $15 per roast. $6000 sample roaster cost / $15 per roast expense = 400 roasts to payback

Bryan is just starting out. He's got a chance to purchase a nice used USRC 5kg locally later this year and he's considering trying to learn how to roast on a some sort of an entry level drum roaster for fun now and potentially profit later. Huky, Quest, Hottop, USRC Sample roaster, Bella Taiwan or Yang Chia, TJ-067, Toper or Ambex 1 or 2 kg. (etc) just to get his coffee "chops."

millcityroasters wrote:Not quite. BDL is taking a 1500 gram sample roast cost of greens ($6/500 gram = $18 /1500 gram) vs greens cost of 250 gram ($3) yielding a sample roast expense savings of $15 per roast. $6000 sample roaster cost / $15 per roast expense = 400 roasts to payback."

If the "savings" that generate the amortization are 1,500g v 250g ( = 6,000/(18 - 3) = 400) and 1,500g v 500g, shouldn't the amortization be 6,000/(18 - 6) = 500? Perhaps I am missing something.

I think BDL's premise was based in sample roasting 250 gram roasts with a USRC sample roaster vs 1500 gram roasts on a USRC 5 kg roaster.

I only followed his logic. It's up to Bryan to decide whether it speaks to his situation.

Admittedly I did not use the term "amortize" in any of it's modern, accounting senses -- as for instance in "depreciating" intangible assets for tax purposes -- but in its older sense of extinguishing a debt through with small contributions. I'm sorry if I confused the financially sophisticated. Let's forget "amortizing" and try it again:

• Assume that "specialty" green beans average $6/500g; then
• The cost in greens of profiling a 250g charge is $3; and
• Of profiling a 1500g charge is $18; and
• Of profiling a 500g charge is $6.

Now let's compare the cost of greens in different roasters in order to find out how many roasts it would take before the roaster which required the smallest charge paid for itself.

• If developing a profile in Roaster A requires 250g of greens and costs $3/charge, and developing a profile in roaster B requires 1500g of greens and costs $18/charge, then how many charges must be roasted before the greens savings by using Roaster A instead of Roaster B amount to $6000?
• The difference in green costs between roasters is $15/charge. And the problem can be solved by dividing $6000 by $15; therefore
• The answer is 400 roasts.

• If developing a profile in Roaster A requires 250g of greens and costs $3/charge, and developing a profile in roaster C requires 500g of greens and costs $6/charge, then how many charges must be roasted before the greens savings by using Roaster A instead of Roaster C amount to $6000?
• Using the same reasoning as the previous example, we divide $6000 by $3; and
• The answer is 2000 roasts.

Clear now?

Rich

It is certainly somewhat clearer. I think the confusion stems from a poorly-specified analysis. Are you comparing the temporary use of a sample roaster prior to acquiring a larger roaster or are you analyzing the ongoing cost savings associated with using a smaller roaster and smaller batch sizes? If the former is the case, $6,000 is clearly the wrong figure against which to compare variable costs. If it is the latter, then the numbers add up, but then a key issue is the degree to which results from the sample roaster can be translated to the larger roaster.

I would recommend laying out your assumptions and the goals of your analysis, along with any non-standard definitions that are in your mind when you formulate your thoughts. This will make your posts much more useful.

CoffeeMan9000 wrote:I would recommend laying out your assumptions and the goals of your analysis, along with any non-standard definitions that are in your mind when you formulate your thoughts. This will make your posts much more useful.

Thank you for your helpful advice.

Rich