2.2.2. FOG Cost

Try these first

1. 1.

   What does FOG stand for in the context of equipment costs?

   Hint

   Think of what consumables are used in machinery operation.

2. 2.

   What is the formula for calculating depreciation?

   Hint

   Recall the components needed for depreciation calculation.

3. 3.

   What is the significance of FOG costs in equipment operation?

   • They reduce energy consumption.
   • They increase machinery lifespan.
   • They have no significance.

   Hint

   Consider the maintenance needs of machinery.

4. 4.

   The Peurifoy method uses which of the following for cost estimation?

   • True
   • False

   Hint

   Think about how cash flows work over time in budgeting.

5. 5.

   Calculate the total operating cost for a piece of machinery with an initial price of $100,000, a salvage value of$10,000, a depreciation period of 5,000 hours, and operating 50 hours with fuel consumption of 5 gallons per hour at $3 per gallon. FOG represents 15% of fuel cost.

   Hint

   Break it down into depreciation, fuel cost, and then adding FOG.

6. 6.

   Given an initial cost of $120,000, estimated annual maintenance (not including tires) as 12$9,000. Calculate the operating cost considering an annual usage of 2,000 hours.

   Hint

   First calculate the maintenance cost adjusted for tire costs, then divide by yearly usage to find hourly costs.