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COST OF OWNING AND OPERATINGCONSTRUCTION EQUIPMENT

1. Factors affecting the cost include:• Cost of equipment delivered to the owner.

• The severity of the conditions under which it is used.

• The care with which it is maintained and repaired.

• The number of hours used.

• The demand for used equipment (salvage value = SV)

2. Estimate Cots: includes

a) - Depreciation Costs.

b) – Maintenance & Repair.c)  – Investment cost.d) – Fuel consumption.e)  – Lubricating Oil.

a- Depreciation Costs:

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1-straight line method :

Total dep. = original cost – salvage value

→ 12000  – 2000 = $ 10,000

Annual dep. Cost = $ 10,000 / 5 yrs. = 2000 $/ yr.Hourly dep. Cost = $ 2,000 / 2000 hr =$ 1 / hr

Widely used method.

2- Declining – Balance Method.

end of year %. Depreciation Dep. For current yaer $ Book Vlue

0 0% $0.00   $12,000.001 40% $4,800.00 $7,200.00

2 40% $2 880 00 $4 320 00

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3-Sum of the Years Digit Method.

End of year %

Depreciation

$TotalDep.

Dep. For currentyear 

Book Value $

0 0   10000.00 0.00 12000.00

1   0.33333   10000.00   3333.33 8666.67

2   0.26667   10000.00   2666.67 6000.00

3   0.2   10000.00   2000.00 4000.00

4   0.13333   10000.00   1333.33 2666.67

5   0.06667   0.00   666.67 2000.00

∑15

First we sum end of year digits, in the above example theysum to {15}, then we predict the depreciation via dividing inreverse way, in other words every year takes its due of 

depreciation that the first of the five years would come 5/15and so do.

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Vary with the type , the service and the care. Expressed as a % of annual cost of depreciation Experience records serve as a guide in estimating these costs.

c – Investment cost.Includes interest on the money invested, taxes of all types , insurance and storage as a %of ~ 15-25%.

For example:Original cost $ 25 , 000

Useful life = age of equipment till beinggarbage

5 yrs.

Salvage value after 5 yrs. $ 0

Beginning of Year Cumulative depreciation.$ Value of Equipment1 0 25,0002 5,000 20,000

3 10,000 15,0004 15,000 10,0005 20,000 5,0006 25,000 0

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WITHOUT SALVAGE VALUE

P

   B  o  o   k   V

  a   l  u  e

P / n

1 2 3 4 nLife in years with no salvage value

AVERAGE VALUE ( P )

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SALVAGE VALUE CONSIDERED :

PBook value

( P-S)/ n {( P-S)/ n}+ S

S

0 1 2 3 4 nLife in years WITH SALAVAGE VALUE

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Two types of engines used in construction equipments:Gasoline and Diesel engines.

Gasoline engine consumption =0.06 gal / hp. hr.

Diesel engine consumption =0.04 gal / hp. hr.

For example:

A power shovel with a diesel engine rated at 160 fwhp. When used to load trucks, the engine mayoperate at a max power while filling the dipper, requiring 5 sec. out of a cycle time of 20 sec. duringthe other 15 sec. the engine may operate at not more than one half of its rated power . assume that theshovel operates 50 min per hour.- Calculate the diesel consumed per hour.

Solution:To do that we need to have , the engine factor and the time factor, the operating factor

Engine factor:

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hp x f x0.006 lb/hp.hr cq = +

7.4 lb/gal t

q = quantity assumed, gal / hr.

hp. = rated horse power for engine.c. = capacity of crankcase, galf. =operating factort. = # no. of hours between changes.

The above formula based on :

An operating factor of 60 %Quantity of oil consumed per rated horsepower hour, between changes, will be 0.006 lb.

For example:

Engine =100 hp.

Crankcase capacity = 4 gal.Operating factor = 60 %Number of hours between changes 100 hr

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Determine the probable cost per hour for owning and operating a 25 cu-yd heapedcapacity bottom dumb wagon with six rubber tires, the following information willapply:

Engine 250 hp, Diesel.Crankcase capacity 14 gallonTime between oil changes 80 hrOperating factor 60 %Useful life 5 years – 2000 hr/yr – with no salvage value

Life of tires 5,000 hrRepair of tires 15% of tire depreciationCost delivered including freight and taxes = $ 92,623Cost of tires =$ 12,113M & R = 50% OF DepreciationInvestment rate = 15%

1- fuel consumed per hr = 250 * 0.6 * 0.04 = 6.0 gal2- lubricating oil consumed per hr:

250 x 0.6x0.006 lb/hp.hr 14

q = +

7.4 lb/gal 80=0 3 gal / hr

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Fixed cost = 32,515 / 2000 hr = $ 16.26Tire depreciation =12,113 / 5,000 = $ 02.42Tire repairs = 0.15 * 2.42 = $ 00.36Fuel = $4 * 6 gal = $ 24.00Lubricating oil = 0.3 * $15 = $ 04.50Total cost per hour... Excluding labor = $ 47.54

Say the labor takes $10/ hr

Then the total cost = $57.54

You must add profit marginBy about 10 to 15 % or if you want tomake favour with people and just take

the cost .. and run the job on you ..