2.3. Total Cost Calculation Using Caterpillar Method

Try these first

1. 1.

   What is depreciation?

   Hint

   Think about how things wear out.

2. 2.

   List one component of ownership costs.

   Hint

   These costs are related to owning equipment.

3. 3.

   What does the Caterpillar method calculate?

   • Operating Costs
   • Total Equipment Costs
   • Depreciation Only

   Hint

   Think about the comprehensive nature of this method.

4. 4.

   True or False: Operating Costs are included in Ownership Costs.

   • True
   • False

   Hint

   Recall the definitions of both terms.

5. 5.

   Calculate the total hourly cost for a dump truck that has an ownership cost of ₹2713.00/hr, operating cost of ₹3209.29/hr, and operator wages of ₹200/hr. Show your calculations.

   Hint

   Add these three components together.

6. 6.

   If the useful life of the dump truck changes to 15 years, recalculate the hourly depreciation cost using the original price without tire cost.

   Hint

   Update the life value in the depreciation formula.