1.2. Outline of presentation

Try these first

1. 1.

   What does depreciation represent in equipment costs?

   Hint

   Think about the lifespan of the machine.

2. 2.

   What are the two main components of equipment costs discussed in this section?

   Hint

   Recall the breakdown we discussed in class.

3. 3.

   What is the Caterpillar method primarily focused on?

   • Fuel Costs
   • Equipment Cost Estimation
   • Operating Hours

   Hint

   Think about the purpose of this method.

4. 4.

   True or False: Operating costs include depreciation.

   • True
   • False

   Hint

   Remember how we classified costs in class.

5. 5.

   You have an excavator with an initial cost of $250,000, a salvage value of$30,000, and its lifespan is 10 years. Calculate the annual depreciation and total ownership cost if the operating cost is estimated at $50,000 per year.

   Hint

   Start with the depreciation calculation before summing total costs.

6. 6.

   An excavator has a fuel consumption rate of 15 gallons per hour, operating for 6 hours daily, with fuel priced at $3 per gallon. What is the daily fuel cost?

   Hint

   Multiplication is key here; remember to multiply through to get the total costs.