Chapter 2 Problem 2

CONCLUSION Equipment costs include the ownership costs of deprecia- tion and interest, taxes and licenses, insurance, and storage: and the operation costs of tires and other wear items, fuel. lubricants and filters, and repair reserves. Data to calculate these costs are available from historical data and the equip ment manufacturer the loader. The life of the tires is estimated to be 3,600 hours, Tire repairs are expected to be 15% of the cost of the tires. The interest rate is 7.5%. The company adds to the interest rate 1.5% for property taxes, 2.0% for insur- ance, and 1.0% for storage. The fuel consumption is es timated to be 10.75 yal/hr, at an estimated cost of $2.10/gal. It is estimated that under normal conditions its hourly lubricant consumptions are as follows: crankcase, 0.064 sgal/hr; transmission, 0.018 gal/hr; final drives including differential, 0.039 gal/hr; and hydraulic controls, 0.035 Igal/hr. Two tubes of grease are used dur- ing each 8-hour day to lubricate the grease fittings. The local costs of lubricants are as follows: oil for the crankcase, $6.99/gal; transmission fluid, $5.49/gal; oil for the final drives, 58.79/gal; hydraulic fluid, $3.41/gal; and grease, $3.89/tube. The filters for the loader cost PROBLEMS 1. The purchase price of a loader including the tires, sales tax, and all other costs associated with its purchase is $210,000. The life of the loader is 9 years, at which time it will have an estimated salvage value of $23,000. The replacement cost of the tires is $11,000 for all tires on Equipment Costs 253 $0.44/hr of operation, including the labor to install them. The estimated repair reserve is $14.40/hr. Using 1,500 billable hours per year, determine the hourly own- ership and operation cost of the loader. 2. The purchase price of the hydraulic excavator, including sales tax and all other costs associated with its purchase, is $150,000. The life of the excavator is 6 years, at which time it will have an estimated salvage value of $20,000. The interest rate is 8.25%. The taxes and licensing costs are $3,220/yr, the insurance costs are $2,930/yr, and the storage costs are $2,110/yr. The fuel consumption is estimated to be 3.0 gal/hr, at an estimated cost of $1.85/gal. It is estimated that under normal conditions, its hourly lubricant consumptions are as follows: crankcase, 0.008 gal/hr; final drives, 0.001 gal/hr; and hydraulic controls, 0.021 gal/hr. One tube of grease is used during each 8-hour day to lubricate the grease fit- tings. The local costs of lubricants are as follows: oil for the crankcase, $7.43/gal; oil for the final drives, $8.99/gal; hydraulic fluid, $3.56/gal; and grease, $4.01/tube. The filters for the excavator cost $0.25/hr of operation, including the labor to install them. The esti- mated repair reserve is $4.20/hr. Using 1,400 billable hours per year, determine the hourly ownership and op- eration cost of the excavator. 3. Set up Excel Quick Tip 22-1 in Excel