3.1. Components of Cost: Owning Cost and Operating Cost

Try these first

1. 1.

   What does owning cost include?

   Hint

   Think about what expenses are incurred by owning equipment.

2. 2.

   What is operating cost?

   Hint

   Consider costs that recur during operations.

3. 3.

   What is included in owning costs?

   • Purchase Price
   • Fuel Costs
   • Labor Costs

   Hint

   Focus on long-term ownership expenses.

4. 4.

   True/False: Operating costs are only considered when equipment is actively used.

   • True
   • False

   Hint

   Think about what costs accrue during usage.

5. 5.

   A construction company buys a crane for $120,000 with an expected life of 15 years and a salvage value of$30,000, calculate its annual depreciation using the straight-line method.

   Hint

   Use the straight-line formula for depreciation.

6. 6.

   Imagine you are preparing a budget for a project involving a loader and an excavator. The loader has owning costs of $400 per week and operational costs of$200 per week, while the excavator has owning costs of $300 and operational costs of$150. Calculate the total weekly cost for both machines.

   Hint

   Sum up both owning and operating costs for each machine.