2.2.4. Repair Cost

Tire replacement cost can be estimated by finding the estimated life of tires in hours, which can be obtained from your manufacturer or past records. Then, you can calculate the hourly tire cost, factoring in tire repair costs, which is typically an additional 15% of the tire replacement cost.

To determine the cost associated with tires for a piece of equipment, first, you need to estimate how long the tires will last, typically expressed in operational hours. This information can be acquired from the manufacturer of the tires or from previous records of usage. Once you have the expected lifespan in hours, you can divide the total replacement cost of the tires by this lifespan to derive the hourly tire cost. Additionally, it's crucial to factor in potential repair costs, which are usually accounted for as a percentage of the replacement cost. In this case, it's common to add about 15% to account for repairs.

Imagine you own a delivery service with a fleet of vans. Each van has tires that you need to replace, and you find out from the tire dealer that the tires last about 50,000 miles before needing replacement. If the tires cost you $1,000, you can figure that they cost you about$0.02 per mile ($1,000 / 50,000 miles). To prepare for repairs down the line, you might allocate an additional$150 (15% of $1,000) to your budget, ensuring you have enough funds to manage tire issues as they arise.

For estimating repair costs of the machine (excluding tire costs), use a repair factor based on the initial cost of the machine, specifically the delivered price excluding tires. This factor can be derived from literature for different conditions or from the equipment handbook. Then, divide this amount by the annual usage of the equipment to get the hourly repair cost.

Repair costs for machinery can be estimated by first determining a repair factor which is a percentage of the machine’s initial cost, discounting the cost of tires since they are calculated separately. This repair factor can be found in technical literature or manufacturer’s handbooks, and it usually varies based on the kind of work the equipment is subjected to. Once you establish the repair factor, multiply it by the delivered price of the machine (again, excluding tire costs). Finally, to get the hourly rate for repairs, divide this total by the estimated annual hours the equipment will be in operation.

Consider a construction company that uses an excavator costing $100,000, excluding tires. They determine through their service records that repairs typically run about 5$5,000 in repairs annually. If the excavator works approximately 2,000 hours a year, the hourly repair cost would be $5,000 divided by 2,000 hours, equating to$2.50 per hour for repair costs. This helps in budgeting and ensures that funds are allocated for service needs.

The total costs will encompass all ownership and operating cost components. This includes the detailed repair and tire costs as well as other operational expenses like labor, fuel, and consumables.

When estimating the overall costs for operating equipment, it's essential to compile all the costs related to ownership and operation. This means calculating not only the repair and tire costs discussed earlier but also factoring in other costs such as fuel expenses, consumables (like filters and oils), and labor. Each component contributes to the complete cost of ownership over time, ensuring the company has a comprehensive view of its expenditures. To accurately capture these costs, operators often use historical data, industry standards, and estimates to develop a reliable budget for their equipment.

Think of a bakery that needs to calculate the total cost of running an oven. The total costs don't just include the purchase price of the oven; it also involves the costs of electricity, gas, maintenance, and replacement parts, just like how repair and operating costs need to be estimated for construction equipment. If a bakery estimates that running the oven costs $10 each day for gas,$5 for electricity, and they expect to spend about $2 on parts occasionally, this adds up to an effective daily operating cost of$17, which, when multiplied by the operational days in a month, gives them a clear budget for oven costs—similar to estimating machinery costs in construction.

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