Question

Homework #2: Equipment Rate Development Develop familiarity with the cost components of Equipment and how to develop an hourly equipment rate jective: Using the concepts presented in the lecture and the information provided below, develop an hourly equipment rate for a late-model Cat 320N excavator using an excel spreadsheet. Develop hourly Ownership and Operating components separately and then combine them for a total hourly rate. 1. Delivery Cost: $18,000 Cost of Money: Annual Usage: 1,000 hours Purchase Price: $240,000 Economic Life: 10,000 hours Salvage Value: 20% of Purchase Price License& Insurance: 2% of hourly depreciation Annual Repair Manhours: 400 Repair Labor Cost: $100/hour Annual Parts: $18,000 Annual Supplies: $1200 Daily Servicing (assume a 10-hour workday): 0.4 hour per day Service Labor & Truck: $110/hour Filters, Oil & Grease: $750/year Average Fuel Consumption: 5.5 gal/hour Fuel Cost: $3.40/gal Ground Engaging Components: $420 Ground Engaging Components Average Life: 250 hours 2. Repeat the exercise based upon an annual usage of 800 hours Due: Beginning of next class Page 1 of 1 1/30/2019

Answer 1

1) Computation at annual usage of 1000 hours

Ownership Rate
Purchase Price	2,40,000
Salvage Value	48,000
Net Value	1,92,000
Economic Life	10,000	Hours
Annual Usage	1,000	Hours
Effective Life	10	Years
Depreciation	19,200
License & Insurance	384
Delivery cost each year	1,800
Cost of Money	12,000
Total Yearly Ownership Cost	33,384
Ownership per hour rate ($)	33.4
Operating Rate
Annual Repair Cost	40,000
Annual Parts	18,000
Annual Supllies	1,200
Annual servicing	4,400
Filter, Oil and Grease	750
Annual Fuel	18,700
Ground Engaging Components	1,680
Total Yearly Operating Cost	84,730
Operating per hour rate ($)	84.7
Total Hourly rate ($)	118.1

2) Computation at annual usage of 800 hours

Ownership Rate
Purchase Price	2,40,000
Salvage Value	48,000
Net Value	1,92,000
Economic Life	10,000	Hours
Annual Usage	800	Hours
Effective Life	13	Years
Depreciation	15,360
License & Insurance	307
Delivery cost each year	1,440
Cost of Money	12,000
Total Yearly Ownership Cost	29,107
Ownership per hour rate ($)	36.4
Operating Rate
Annual Repair Cost	40,000
Annual Parts	18,000
Annual Supllies	1,200
Annual servicing	3,520
Filter, Oil and Grease	750
Annual Fuel	14,960
Ground Engaging Components	1,344
Total Yearly Operating Cost	79,774
Operating per hour rate ($)	99.7
Total Hourly rate ($)	136.1