4. Total Cost Overview

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 first chunk, we learn that to determine the total cost of operating a piece of equipment (like a dump truck), we need to calculate various costs. This includes ownership costs (the costs of owning the equipment), operating costs (costs endured while operating the equipment), and wages paid to operators. By summing all these costs, we arrive at the total equipment cost, as outlined by the Peurifoy guidelines, which offers a structured approach for estimating construction and equipment costs.

Think of running a small delivery business. You need to consider not only the purchase cost of your delivery vehicle but also its fuel, maintenance, insurance, and the salary of your driver. Just like in this equipment example, your total cost just wouldn't be the price of the vehicle alone.

This truck is not permitted on the public highways. It is heavy equipment high end equipment you can see that these trucks will be operated only in the project sites.

Here, we define what off-highway trucks are. Unlike regular vehicles that can drive on public roads, off-highway trucks, like the dump truck mentioned, are designed specifically for construction sites and other project-specific environments. This distinction is important as it affects how we calculate costs associated with usage, maintenance, and durability.

Imagine a construction site filled with bulldozers and dump trucks. These machines are like specialized tools in a toolbox — designed for specific tasks that normal cars or trucks cannot do. They have unique features and cannot be taken onto public roads, much like how specific cooking tools can only be used in certain recipes.

The requirements are according to the type of the machine for which you are going to estimate. You can choose the appropriate estimation handbooks and choose the values estimated accurately.

This chunk emphasizes the need for accurate data when estimating costs related to heavy machinery. Depending on the type of equipment, appropriate handbooks should be used to select the relevant values for fuel costs, maintenance, depreciation, etc. These estimations are crucial for preparing realistic budgets and project plans.

It's similar to following a recipe when you're cooking. You need the right ingredients and quantities to ensure your dish turns out well. Just as missing a key ingredient could ruin a meal, using incorrect values for equipment costs can lead to budget overruns in a construction project.

The other associated cost are the interest rate which is nothing but 8% insurance 2% and taxes 3%.

When calculating the total cost of ownership, we must include other expenses like interest on loans used to purchase the equipment, insurance costs, and taxes. In this example, the rates are specified: 8% for interest, 2% for insurance, and 3% for taxes. These percentages will be applied to the average value of the truck to estimate their total contribution to the overall cost.

Think about buying a house. Along with the mortgage payment, you also have to pay property taxes, homeowners insurance, and possibly interest on your loan. Each of these adds to the total monthly cost of owning your home, just like these additional costs add to the total cost of owning a truck.

The truck is expected to have annual use of 1600 hours. ... its useful lifetime the hourly usages 20000 hours.

This part discusses how we assess the usage of the truck. It is projected to be used for 1600 hours each year and is expected to have a total life of 20,000 hours. Understanding these metrics helps in spreading out the depreciation over its useful life and will influence the cost calculations significantly.

If you plan to use your bike for commuting every day, you might estimate how many weeks each month you'll use it. If you know your bike will last for several years, you can figure out how much it costs per ride based on your estimated overall use.

Now we shall calculate the depreciation, ... useful life of the machine.

Depreciation is the reduction in value of the equipment over time due to wear and tear. Here, the method for calculating it involves taking the initial purchase price, subtracting the tire cost, and dividing by the useful life of the truck. This helps in determining how much value the truck loses annually, which is essential for budget planning.

Think of a new car that you buy. Each year, it loses value because it gets older and is used more. By tracking this annual depreciation, you can better understand its value if you decide to sell it after a few years.

The annual repair cost is 6% of the initial cost excluding the tire cost.

In addition to depreciation, regular maintenance costs like repairs also need to be accounted for in the total cost of ownership. Here, it is stated that repairs cost 6% of the initial price (minus tire costs) annually. This estimation ensures you set aside enough funds for maintenance to keep the equipment in good working order.

Imagine owning a smartphone. You might pay for a protective case, repair fees if it breaks, or regular software updates. These ongoing expenses are similar to the maintenance costs associated with heavy machinery.

Now calculate all the total ownership cost components ... total hourly ownership cost as rupees 2713 per hour.

Finally, after all individual components are calculated (like depreciation, interest, insurance, and repairs), we add them together to find the total hourly ownership cost. This final figure is crucial as it will be used in further calculations to determine overall project costs when the truck is in service.

When planning a family vacation, you might add up all costs, including flights, hotel stays, food, and activities. By understanding the complete expense, you can budget accordingly and avoid overspending, just like calculating total ownership costs for equipment.

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