2.2. Operating Cost

Try these first

1. 1.

   What are the main components of operating costs?

   Hint

   Remember the acronym FMLM.

2. 2.

   Define the Peurifoy Method.

   Hint

   Think about 'time value' in its definition.

3. 3.

   What does the Caterpillar method primarily focus on?

   • Fuel cost only
   • Ownership and Operating Costs
   • Only labor costs

   Hint

   Consider what this method is used for in construction.

4. 4.

   The Peurifoy method considers what key financial concept?

   • True: Time value of money
   • False: Only upfront costs

   Hint

   Focus on how time affects cost estimation.

5. 5.

   You have an excavator with a purchase price of $200,000, a salvage value of$20,000, and a tire cost of $10,000. It has an estimated lifespan of 15,000 hours. Calculate the hourly depreciation.

   Hint

   Step through the formula, subtract first before dividing.

6. 6.

   Discuss the potential financial impact of inaccurately estimating fuel consumption based on performance handbooks.

   Hint

   Consider both sides of the estimation inaccuracies.