4. Ownership Cost Calculation

Try these first

1. 1.

   What factors do you need to calculate the annualized initial cost?

   Hint

   Remember, it's about what you pay to keep the equipment annually.

2. 2.

   What does salvage value represent?

   Hint

   Think about what you can sell it for later.

3. 3.

   What does the annualized initial cost represent?

   • Current value of the equipment
   • Uniform annual cost
   • Sum of all costs

   Hint

   Focus on 'annual' when remembering this.

4. 4.

   Is salvage value a significant part of the total ownership cost?

   • True
   • False

   Hint

   Think about what you get back at the end!

5. 5.

   A contractor has a bulldozer worth ₹5,00,000 with a salvage value of ₹50,000. The useful life is projected to be 10 years, and the operating hours are 2000 annually. Calculate an approximate hourly cost considering common costs.

   Hint

   Work through each cost and then sum them!

6. 6.

   Your scoring method uses the average cost of two models, one costing ₹6,00,000 with a 15% salvage value, and another costing ₹7,00,000 with a 10% salvage. If both have a lifespan of 12 years, or 2500 hours, calculate the average hourly costs.

   Hint

   Calculate both models' costs separately before averaging.