5. Peurifoy Approach to Equipment Cost Estimation

Try these first

1. 1.

   What does ownership cost include?

   Hint

   Think about the costs associated with having a vehicle.

2. 2.

   Define depreciation.

   Hint

   How does the value of equipment change over time?

3. 3.

   What is included in ownership costs?

   • Fuel
   • Labor
   • Depreciation
   • Interest
   • Insurance
   • Land
   • Office expenses

   Hint

   Think about costs that occur just because you own the asset.

4. 4.

   True or False: Operating costs include depreciation.

   • True
   • False

   Hint

   Operating costs are about usage, not ownership.

5. 5.

   A dump truck has an initial cost of 4 crores with a salvage value of 20%. If the truck has an expected useful life of 15 years, calculate the annual depreciation.

   Hint

   Remember to first find the salvage value before calculating depreciation.

6. 6.

   Calculate the total operating costs for a dump truck if the fuel cost is 1,200/hour, tire wear is 400/hour, and maintenance is 600/hour. If the operator wage is 300/hour, what is the total cost per hour?

   Hint

   Add up all the costs carefully!