How to estimate the cost of 1-hour of microscope use?

For Core Imaging Facilities
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Published on the 4 June 2020

Facility Managers are professionals of many skills, their work requires them to master scientific concepts and to manage a business-like unit. Let’s review some helpful tips to evaluate the cost of 1-hour of microscope use.

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Calculating the cost of any singular good or service is a very complex matter and several methods exist to do so [1]. We are basing this article on the German BioImaging Network paper [2] that advises using the full economic costing (FEC) model [3] to determine the cost of 1-hour of microscope use. This method is to distribute the sum of direct costs and indirect costs over the number of “billable” hours.

    1. Why calculate the cost of 1-hour of microscope use?

    Some Imaging Core Facilities (CF) are accessible only to their internal users, where the operating costs are covered by full funding by the hosting institution.
    But nowadays, Imaging Core Facilities are asked to sustain smooth operating capabilities and to reach a financial balance. Hence why the Core Facilities have opened to external users (industry and academics) and invoice them usage fees. Invoicing requires knowing the cost of the service provided to the user.
    More than to calculate how much to charge users, calculating the cost of 1-hour of microscope use has also the benefit of valuing the indirect work involved in furbishing and maintaining an Imaging Core Facility.

    "Valuing the indirect work involved in furbishing and maintaining an Imaging Core Facilities"

    This cost can later be included in grant applications or exterior funding application files.

    Thirdly, calculating (and following) this value might be interesting to the Facility Manager when questioning how resources are being used and if they could be used more effectively or efficiently (i.e. Management accounting [4] ).
    The hourly cost of machine can be calculated independently for each imaging system or as an average for all the systems available in the Facility.

    2. Evaluate the direct costs

     

    • Service contract
      Most Core Facilities have a service contract associated to some of their imaging systems. Depending of the level of service and the vendor, service can cost up to 8% of the microscope purchase value each year. As an example: for a 300 000€ system, that is 24 000€ for a premium contract each year.

    How to proceed?

    Share of Service contract in Direct costs = Total annual cost of service for your system/yearly number of billable hours
    • Equipment
      Using a system generates additional costs. This can be consumables (such as immersion liquids, optical paper, cleaning products, filters, coverslips, plastic containers…), small equipment (such as objectives, lamps, detectors, adapters, …), or repairs-related costs not covered by service contracts.

      Depending on the level of precision required (for a grant application for instance), you can either calculate your additional equipment costs based on the previous year purchases or evaluate it roughly with a ‘rule of thumb’ value to budget. The German Bioimaging Network indicates an estimation of 10 000€ per year per instrument for a “typical” confocal laser scanning microscope [5].

    How to proceed?

    Share of Equipment in Direct costs = Equipment costs / yearly number of billable hours
    • Staff
      Core Facilities are frequently operated at the limit of their personnel capacity. It leads the Facility Staff to be well occupied between the help brought to users (from basic tips to imaging or software support, and more importantly training) and the time actually spent on the instruments to clean them, troubleshoot issues, assess the systems’ performance, and handle maintenance.

    How to proceed?

    Share of Staff in Direct costs = (Time spent each week to service the instrument per technician x number of worked weeks x hourly cost of a technician) + (Average time spent in user support each week for this instrument per technician x number of worked weeks x hourly cost of technician) / yearly number of billable hours
    We are considering internal engineers or research associates’ time here. Outside technician time, from microscope manufacturers for example is considered through “repairs” or “service contract” as they are usually billed by the manufacturer.

    If you are calculating the cost of staff for a long period, a few years, for example, you may want to consider the evolution of salaries over time, adding a 2 to 3 % increase in your total staff cost per year.

    Image by Stevepb on Pixabay
    • Depreciation
      Depreciation is the reduction over time of the value of your instrument, linked to usage, wear and tear, or obsolescence. You can think it as financing the purchase of the system. There are different formulas for determining the book value of an asset. The most common method and simplest one is the straight-line depreciation.

    How to proceed?

    Share of Depreciation in Direct costs = (Cost of purchase – Salvage value) / (Useful life expressed in years * yearly number of billable hours)
    The salvage value is what you could expect to sell your microscope for at the end of its useful life. The useful life of a microscope might range from 5 to 15 years.

    3. Evaluate the indirect costs

    Overheads are expenses of a business not directly assigned to goods or services provided.
    The first part comes from the infrastructure, things like lighting, water, communications… Your institution might already have an overhead rule, it can be expressed per employee, per office surface, or another relevant allocation key.
    The second part comes from overheads inside your Imaging Core Facility, things like core management software, administrative staff (or part of the time spent on administrative task x hourly salary), staff training, dedicated services (for example if the maintenance of your temperature-controlled environment is in your budget), etc.
    Knowing this figure can prevent you from forgetting hidden costs: depending on what you wish to cover in terms of infrastructure costs, the overheads might be as high as 30 % of the direct costs.[6]

    How to proceed?

    Share of Indirect costs = Sum of Indirect costs / (yearly number of billable hours x number of systems)

    4. Know your usage hours (e.g. billable hours)

    The full instrument utilization is the number of hours per year your system is available to your users. This depends on your opening days and times of availability. The approach is to calculate the overall number of hours per year that your system is available and to subtract an average number of hours for downtime related to maintenance (both internal, external, and times when the system is not available – for example waiting for the technician visit).
    For example: for a Core Facility that is open to its users, 5 days a week for 8 hours over 50 weeks per year, and that has about 10 weeks a year of downtime. [7]

    How to proceed?

    Yearly number of billable hours = (8 hours a day x 5 days a week x 50 weeks) – (8 hours a day x 5 days a week x 10 weeks)

    5. Don’t forget taxes

    Depending on local laws and the type of your organization, you may be subjected to a wildly different type of taxes when you purchase goods and employ people. That may or may not have to be considered in your cost calculation as some taxes are credited back or balanced out.
    The best course of action, if you don’t already know what amount to consider, is to get advice from your accounting services.

    Sources:

    [1] https://en.wikipedia.org/wiki/Management_accounting#Specific_methodologies

    [2] [5] [6] [7] E. Ferrando-May, H. Hartmann, J. Reymann, N. Ansari, N. Utz, H.-U. Fried, C. Kukat, J. Peychl, C. Liebig, S. Terjung, et al., Microscopy Research and Technique 79(6), 463-479, DOI: 10.1002/jemt.22648 (April 2016) https://kops.uni-konstanz.de/bitstream/handle/123456789/34920/Ferrando-May_0-349567.pdf;sequence=3

    [3] The university of Birmingham provides an example of fEC, applied to a larger field (full research grant): https://intranet.birmingham.ac.uk/finance/fEC/Costing/example.aspx

    [4] https://en.wikipedia.org/wiki/Management_accounting

     

    Header photo by Tumisu on Pixabay
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