3.2.1 Transaction costs

This type of cost includes all expenditures that have to be incurred in the process to fulfill the administrative procedures defined by rules, regulations, and laws, in order to manage the forest. Those expenditures are mainly necessary to acquire the permission to perform the silvicultural intervention, but they include the costs to prepare the forest area, to entrust LCs with the work, to ensure effectively results, and to monitor the results. The whole transaction costs are defined formally frame in which FCs and LCs must work in order to safeguard public interest as well as the forest and other social aspects (work safety aspect). Both FLOs and LCs sustain transaction costs.

FLOs' transaction costs include the following:


These costs per unit area usually decrease, but total cost increases according to the area interested in the process (proportional principle) (Figure 3). Expenditures for those performances are defined as bunched cost by


Operative Machinery Costs Analysis within Forest Management Implementation Frame DOI: http://dx.doi.org/10.5772/intechopen.87572

#### Figure 3.

• Executive: in which LC performs silvicultural intervention. It includes selected trees felling, extraction, transportation, and stacking of the timber in the

• Conclusive: in which the goodness of the silvicultural intervention is verified.

In order to implement the four steps of the transformation process, many services and inputs must be purchased on the market. Total costs are the sum of three

This type of cost includes all expenditures that have to be incurred in the process to fulfill the administrative procedures defined by rules, regulations, and laws, in order to manage the forest. Those expenditures are mainly necessary to acquire the permission to perform the silvicultural intervention, but they include the costs to prepare the forest area, to entrust LCs with the work, to ensure effectively results, and to monitor the results. The whole transaction costs are defined formally frame in which FCs and LCs must work in order to safeguard public interest as well as the forest and other social aspects (work safety aspect). Both FLOs and LCs sustain

• Selecting and entrusting an LC with implementation of forest utilization

• Technical responsibility to safeguard the FLO's interest during the activity

permission and the forest rules, regulations, and laws

for those performances are defined as bunched cost by

• negotiation between the LC and forest consultant;

• Verification of the forest utilization conformity to the standard defined by the

These costs per unit area usually decrease, but total cost increases according to the area interested in the process (proportional principle) (Figure 3). Expenditures

landing.

Timber Buildings and Sustainability

cost types (Table 10):

• Transaction costs

• Operative costs

• Overhead costs

3.2.1 Transaction costs

transaction costs.

• Forest consultancy

• Administrative fees

• dedicated market survey;

86

• Technical documents and drafts

FLOs' transaction costs include the following:

3.2 Costs

Transaction costs. Source: Our elaboration.


The LCs' transaction costs are related to the obligations concerning the following:


The LC costs are defined by market survey.

#### 3.2.2 Operative costs

All expenditures to implement technological cycle are defined as operative cost (Table 11). These costs are sustained to transform trees into marketable timber products, mainly by the LC and only a few for FL. They include expenditure to buy primary and secondary productive factors.

Main primary factors are as follows:


maintenance costs, insurance and other contribution, cost of rapid consumption parts, etc. in order to define the cost machine.

• Financial capital necessary for the possession and use of working capital above descripted, to remunerate workers as well as to cover the interest of financial advances for the activity development.

4. Monetary evaluation of forest management

Operative Machinery Costs Analysis within Forest Management Implementation Frame

• What is the timber forest products' market price?

• Combination of the above-mentioned approaches

have to sustain in order to obtain the product under evaluation.

conditions for large market participation by the LCs.

the following two objectives is pursued:

market product.

and the highest stumpage price.

89

Literature offers three approaches to answer the questions above, which are as

In all these approaches, results are based on common comparative method. This method ensures a strictly direct or indirect connection between market and the

Theoretical background on evaluation method has been defined from International Valuation Standard Council [21]. In this contest, two main approaches are suitable: market comparison approach and cost approach. The first obtains the timber value by comparing the timber under evaluation with other similar timbers sold in the market; for which, price and at least one technical parameter are well known. The latter defines the value considering all expenditures that the enterprise

Timber evaluation can have different assessments depending on whether one of

b. Optimization of market functioning: FLOs target to create the most favorable

The first target tends to favor the major LCs, even if the LCs who would take

technologically advanced, have greater financial availability, and have wider timber markets, as they can be international timber markets. The hypothesis is that this setting should ensure an effective use of timber and that it can achieve the highest addend value. On the other hand, the second target tends to align itself with the most frequent conditions compared to the local area framework, so as to allow the greatest participation of the local LCs at the market. The hypothesis is that if a large number of LCs take part in the market, that should ensure highest LC competition

part in the market are very few in number, at least only one. Those LCs are

a. Timber optimization uses: FLOs' target is to ensure the most appreciated

Main questions of forest management are:

DOI: http://dx.doi.org/10.5772/intechopen.87572

• What is the standing forest market price?

• What is the forest management cost?

• Market price approach

• Cost approach

good under evaluation.

4.1 Appraisal theory

follows:


#### 3.2.3 Overhead costs

Also named as indirect costs, these do not contribute directly to obtain the product but exist to ensure LC functioning. They are related to the LC unit as a whole, and they cannot be applied or traced to any specific unit of output. Overhead costs include the following:


#### 3.3 Revenues

The output of the silvicultural activity can be expressed in terms of volume or value. The first results by measurement operations of the standing, with special emphasis to the volume of row timber material removal from the ground [V] differentiated for market destination [i] and expected to be sold in the polder (first competitive timber market). The latter is the result of the volume of row timber material for the relative market price [MP]. Data can be collected by market survey, or dedicated statistical publication.

Formally,

$$\text{VdM} = \sum\_{j \to 1}^{m} (V\_i \* MP\_i)^j$$

Operative Machinery Costs Analysis within Forest Management Implementation Frame DOI: http://dx.doi.org/10.5772/intechopen.87572
