1.8. Cost Variation with Age of Equipment

Try these first

1. 1.

   What are the two main types of costs associated with construction equipment?

   Hint

   Think of recurring expenses throughout the equipment's life.

2. 2.

   What does economic life refer to?

   Hint

   Consider when costs start rising.

3. 3.

   What happens to operating costs as equipment ages?

   • Decrease
   • Increase
   • Remain Constant

   Hint

   Think about wear and tear over time.

4. 4.

   The economic life is defined as the point where total costs are at their...?

   • Highest
   • Lowest

   Hint

   Consider when it might be most efficient to replace equipment.

5. 5.

   Consider a company that has two excavators. One is 5 years old with increasing maintenance costs, and another just purchased. Analyze the potential savings if the older excavator is replaced this year instead of next.

   Hint

   Break down the costs year by year for clarity.

6. 6.

   You manage equipment for a construction firm. If you know that the operational cost for each year increases by 12%, and maintenance starts at $15,000 for a new machine, what would be the average annual cost over a 10-year span if the economic life is reached?

   Hint

   Apply the formula for geometric sums!