3. Operating Cost Estimation

So just add up everything the ownership cost all the operating cost and operating wages also you will get the total ownership and the operating cost following the Peurifoy guidelines.

In this section, we begin by emphasizing the importance of calculating total costs associated with equipment. This includes not just the purchase price but also ownership costs, operating costs, and wages needed to operate the equipment. Understanding the total operating cost is crucial for budgeting and financial planning in construction projects.

Imagine running a restaurant. You wouldn't just factor in the rent for the location; you'd also need to consider bills for utilities, salaries for your staff, and costs for ingredients to figure out how much it actually costs to run your restaurant each month.

Now let us workout from examples on how to estimate the equipment cost using these 2 methods. (Refer Slide Time: 20:19) So you can see this problem in this problem you can estimate the cost for the dump truck.

Here, we will apply the methodologies to a specific example—a dump truck. By using practical illustrations, we can break down how costs are estimated for different equipment, which will help us grasp the concepts more effectively.

Think of it like budgeting for a new car. You look at the sticker price but also consider insurance, fuel, and maintenance when understanding the total cost of having that car.

It is an; heavy equipment high end equipment you can see that these trucks will be operated only in the project sites.

Off-highway trucks, such as dump trucks, are specialized equipment designed for use in construction or mining sites. They are not legal for operation on public roads due to their size and weight. This specificity impacts their operating costs as they are specifically tailored and priced for heavy-duty tasks.

Just like a race car is built specifically for racing and not legal on regular streets, an off-highway truck is tailored for heavy-duty tasks on construction sites.

The requirements are according to the type of the machine for which you are going to estimate.

Ownership costs consist of several components such as initial purchase price, depreciation, interest, insurance, and taxes. Depending on the type of machine, these costs can vary significantly. Each factor contributes to understanding the financial commitments of owning heavy machinery.

When you buy a house, you not only think about the mortgage payment but also property taxes, home insurance, and maintenance costs—similarly, ownership costs encompass all these financial elements for equipment.

So under the ownership cost let us calculate the depreciation first.

Depreciation is a way to account for the reduction in value of the equipment over its useful life. It can be calculated using the straight-line method, where the initial cost less any salvage value is spread evenly over the asset's lifetime. This helps companies plan for the eventual loss of value and prepare for future investments.

Think of it like how a new car loses value each year. The calculations help you understand how much it 'costs' you per year to own that car based on its decreasing value.

Now let us move on to the operating cost estimation. So I have given you the question the average fuel consumption factor is 0.09 liters per hour per horsepower.

Operating costs involve calculating fuel consumption, labor, maintenance, and other variable costs associated with the use of the equipment. For example, knowing the fuel consumption factor (liters per hour based on horsepower) allows businesses to project fuel costs accurately depending on expected usage.

Just like planning a road trip requires estimates of fuel costs based on mileage and gas prices, estimating operating costs requires a detailed calculation based on how much the equipment will be used.

So now add all your operating cost components. So what are all the different operating cost components we have estimated so far.

Once all components—fuel costs, maintenance, tire costs, etc.—are calculated, they are summed up to derive the total hourly operating cost. This gives a more comprehensive view of how much it costs to use the equipment in an hour, which is crucial for budgeting and Operations.

It's similar to calculating the total cost of hosting a party by adding up the costs of food, drinks, decorations, and venue rental. You need the full picture to understand what you'll spend.

Total hourly ownership cost = ₹ 2713.00/hr; Operator wages = ₹ 200.00/hr; Total cost = ₹ 6122.29/hr.

Finally, adding together the total ownership costs, total operating costs, and operator wages provides the full picture of what it costs to operate the equipment per hour. This total cost is crucial for project managers and financial planners to make informed decisions about budget allocations and resource management.

Like planning the budget for a home renovation project, you gather all costs together—material purchases, contractor fees, and permits—to understand the total financial commitment.

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