3. Module 2 - Estimation of the Cost Associated with the Equipment

Try these first

1. 1.

   What are owning costs?

   Hint

   Consider what you pay just to have the equipment.

2. 2.

   Name one method of estimating equipment costs.

   Hint

   Think about the average over time.

3. 3.

   What are the two major components of equipment costs?

   • Safety and Handling Costs
   • Owning and Operating Costs
   • Installation and Commissioning Costs

   Hint

   Think about what costs are incurred just to own versus to operate.

4. 4.

   True or False: Accurate cost estimation is essential for effective project planning.

   • True
   • False

   Hint

   Consider the planning phase of a project.

5. 5.

   A contractor estimates to purchase a concrete mixer for $80,000 with a useful life of 10 years. Calculate the straight-line depreciation and total owning costs if the annual operating costs are projected at$5,000.

   Hint

   What is the formula for straight-line depreciation?

6. 6.

   A company must decide between two excavators. Excavator A costs $250,000 with operating costs of$25,000, while Excavator B costs $400,000 but has operating costs of$15,000. If their economic lives are both 15 years, which excavator should the company choose based on total cost estimation?

   Hint

   List both owning and operating costs over their lifetimes.