5. Peurifoy Approach to Equipment 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.

This chunk introduces the basic principle of Peurifoy's approach. It states that to estimate the cost of equipment, one must consider three main components: ownership cost, operating cost, and operating wages. The ownership cost refers to the costs incurred while owning the equipment, such as depreciation, interest, insurance, and taxes. Operating costs involve expenses directly related to the operation of the equipment, like fuel and maintenance. Finally, operating wages are the expenses for labor.

Imagine running a food truck. You need to add up your expenses for the truck (ownership cost), costs for ingredients and staff (operating cost), and wages you pay to your chef (operating wages) to determine how much you need to earn each day to make a profit.

Now let us workout from examples on how to estimate the equipment cost using these 2 methods. In this problem you can estimate the cost for the dump truck. It is off highway truck, why we call it as off highway? This truck is not permitted on the public highways.

This chunk introduces a practical example of estimating costs using a dump truck. It clarifies that dump trucks categorized as 'off highway' are typically used at construction sites and not on public roads. This distinction is important as it affects the cost estimation process since these trucks cater to specific projects and environments.

Think about the difference between a delivery truck used for local deliveries and a construction dump truck. The delivery truck navigates streets and highways, while the dump truck never leaves the construction site, making it specially designed for that environment, impacting its costs and maintenance needs.

The initial cost is given so it was purchased with the deliver price of 3 crores. The tire cost of this machine is 11 lakhs. The requirements are according to the type of the machine for which you are going to estimate.

This chunk highlights specific cost elements. The initial purchase price of the dump truck is 3 crores, while the tire cost amounts to 11 lakhs. It emphasizes that the total ownership cost must be estimated based on these specific costs, which can vary significantly depending on the machine type.

When buying a car, you might consider the car price (initial cost) and the cost of a new set of tires. If the car's base price is high, you'll need to ensure your budget accounts for these additional expenses, as not doing so might leave you unprepared for future costs.

The other associated cost are the interest rate which is nothing but 8% insurance 2% and taxes 3%. So other component of the ownership is also given.

This chunk breaks down the ownership costs associated with the dump truck. It includes interest (8% of the investment), insurance (2% for coverage), and taxes (3% applicable on the ownership). This detailed breakdown is crucial for calculating the total cost of ownership.

Imagine you own a home; you have the mortgage interest, homeowners insurance, and property tax. Just like these home costs, the dump truck incurs similar fees that contribute to its overall cost, impacting your budget and profitability.

And the truck is expected to have annual use of 1600 hours. So every year the truck is operating for 1600 hours.

This segment specifies that the dump truck will be used for approximately 1600 hours each year. This parameter is significant when calculating operating costs, as it helps in budgeting for fuel, maintenance, and labor based on how often the equipment is in use.

Think of a lawn care company: if it mows lawns for about 1600 hours each year, they need to budget for fuel and maintenance. Similarly, if the dump truck operates for a set number of hours, those hours will directly correlate to its operating costs.

Then the diesel consumption of the truck for average working condition is 0.09 liters per hour per horsepower.

Here, we address the specifics of calculating depreciation. The depreciation formula is highlighted, where the initial cost minus the tire cost is divided by the vehicle's useful life in hours. This estimation helps understand the annual cost related to the wear and tear of the vehicle over its useful life.

Imagine you buy a new smartphone for $600, and you know it will last about 2 years. Each year, you would say it has lost value, something like$300 per year. Similarly, with the dump truck, we estimate how much value it loses over time due to usage.

Total hourly ownership cost = 1445 + 780.30 + 195.08 + 292.61 = ₹ 2713.00/hr

In this part, the ownership cost components are summed to give a total of ₹ 2713.00 per hour. This total includes values from depreciation, interest, insurance, and taxes. Understanding this total helps in assessing the economic feasibility of operating the equipment.

Picture running a cafe: you would sum up all your costs—rent, supplies, and staff wages—to figure out how much revenue you need to generate weekly to break even. The dump truck operates similarly; understanding these costs ensures profitable operations.

So now let us move on to the operating cost estimation.

This chunk introduces the process of determining operating costs, which include fuel, filter oil, grease, and maintenance expenses. Each of these costs plays a crucial role in overall budgeting for equipment operation.

Consider running a motorcycle delivery service. The owner has to budget for fuel, maintenance, and oil changes. Just like that, for the dump truck, every minute expense of operation is included to ensure it runs effectively and profitably.

Total equipment cost as rupees 6122.29 per hour.

Finally, after calculating both ownership and operating costs, the total cost of running the dump truck is estimated to be ₹ 6122.29 per hour. This figure is crucial for understanding the financial demands of the equipment and for making informed business decisions.

Imagine a contractor determining the total cost to rent a crane for a construction project. By breaking down all possible costs, including operation and leasing fees, they arrive at a comprehensive expense, guiding their financial planning for the project.

As I mentioned earlier Peurifoy is considered as the father of the modern construction engineering.

This concluding chunk acknowledges Peurifoy's contributions to the field of equipment cost estimation and management. It highlights how his methods provide structured approaches for practitioners to assess and estimate equipment-related expenses methodically.

Just like a well-known chef creates recipes that many cooks follow, Peurifoy offers a well-tested framework for estimating equipment costs, which guides engineers and project managers in successful planning for construction projects.

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