10 Questions
The lifetime repair cost factor is 0.85.
False
The hour repair cost is $3.50.
False
Tire cost only includes the cost of tire replacement.
False
Tire repair will add about 20% to tire replacement cost.
False
Table 4 provides a guide to approximate equipment life.
False
The cost of replacing high wear items is included in the equipment operating cost.
True
The operator's wage does not include overtime or premium pay.
False
Total operating costs include overhead or profit.
False
The cost of worker's compensation insurance is excluded from the operator's wage.
False
Total owning and operating cost per hour of operation is calculated by subtracting owning cost from operating cost.
False
Study Notes
Time Value of Money
- Formula to calculate the future value (F) of a current amount of money (P) invested for n periods with an interest rate (i): F = P (1 + i)n
- Formula to calculate the present value (P) of a future amount of money (F) received after n periods with a discount rate (i): P = F / (1 + i)n
Equipment Cost: Owing Costs
- Elements of equipment cost: owning costs and operating costs
- Owing costs: fixed costs incurred each year whether the equipment is operated or not
- Owning costs include:
- Investment cost (cost of finance): calculated using the purchase price, salvage value, and interest rate
- Insurance, tax, and storage costs
- Depreciation: decline in market value of the equipment due to age, wear, deterioration, and obsolescence
Equipment Cost: Operating Costs
- Operating costs:
- Maintenance and repairs
- Fuel, oil, and lubricants
- Tires
- Fuel costs: calculated based on fuel consumption per hour and cost per unit of fuel
- Service costs: includes oil, hydraulic fluids, grease, and filters, as well as labor required for routine maintenance
- Repair costs: estimated as a percentage of the equipment's initial cost less tires
- Tire costs: estimated based on tire life and replacement cost
- Special items: cost of replacing high wear items, such as dozer blades and ripper tips
- Operator costs: includes wages, worker's compensation insurance, Social Security taxes, overtime, and fringe benefits
Calculating Total Owning and Operating Costs
- Total owning and operating cost per hour of operation is calculated by totaling owning costs and operating costs
- Does not include overhead or profit
This quiz covers the formulas for calculating future and present values of investments, including compound interest and discount rates.
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