2.2.5. Total Cost Calculation

Try these first

1. 1.

   What is the formula for calculating depreciation?

   Hint

   Look at how ownership costs are calculated.

2. 2.

   Name two components of operating costs.

   Hint

   Think about what it costs to run equipment.

3. 3.

   What is the primary formula for determining depreciation costs?

   Hint

   Consider the components of ownership costs.

4. 4.

   True or False: The Peurifoy method considers the timing of cash flows?

   • True
   • False

   Hint

   Think about the differences between these two methods.

5. 5.

   Using a bulldozer with an initial cost of $250,000 and a salvage value of$30,000 over 8,000 hours, calculate the depreciation and include potential fuel costs based on a consumption factor of 0.8 gallons/hour.

   Hint

   Break each calculation into parts—start with depreciation and then fuel cost.

6. 6.

   Given different repair factors based on usage ranges, develop a robust estimate for a machine that has been used for 12,000 hours, with a repair factor of 15% of ownership costs.

   Hint

   Utilize the ownership cost to verify repair costs.