A 5 x 5 x 2 factorial design was used to determine the effects of temperature and initial moisture content on the decomposition rate of paper mill sludge with broiler litter composted in a laboratory-scale incubator-bioreactor system. The composting system included ten 4 L volume (filled to 2.76 L) small-scale bioreactors. A first order kinetic model based on CO2 captured using 200 ml of 3.0 N NaOH was used to calculate the decomposition rates. Data on monitored process variables showed that the composting process was not oxygen or moisture limited. Regression analysis applied on the decomposition as a function of temperature and moisture showed that the maximum decomposition occurred around 58degreesC and 44% w.b. (ash free moisture of 62% w.b.) using the 2-D Gaussian model (R-2 = 0.96). The utilization of this result on operating cost of composting showed that operating the system at 60degreesC would require 31% of the energy cost of operating at 50degreesC.