Truck Fleet Costs
©Dr. B. C. Paul 2000 Revised 2008, 2009Note – This presentation includes screen shots from the Caterpillar
Performance Handbook, Catapillar’s FPC Program, Western Mine Cost Service Costing Manuals, the U.S. Bureau of Labor Statistics Web
Site, and other materials and spreadsheets compiled by the Author
Truck Production Costs
Divided into Ownership and Operating Costs
Ownership includes• Annualized Investment Costs• Taxes and Insurance• Tax advantages
Operating Costs are Incurred as Vehicle performs service
Using Menu Requires a lot of side calculations
Latest Editions of Cat HandbookHas removed cost estimatingSections. Have to revert toEarlier issues (which we haveOnline)
Lets Go for Fuel First
Getting Fuel Consumption Rates
Info from 29th Ed Cat Handbook
Our Conditions are Medium
Our truck isA 777
We getAbout17 gallons/hr
We assumed$2.0/gal.17*$2=$34/hr
A Comment on Fuel Costs
We are assuming a truck fleet for Iran and middle eastern fuel costs are low
We can see diesel fuel posting regularly but our gas station prices are with tax• Off highway diesel does not have the highway tax• It is colored red and called “Red Dog”• Can estimate by removing tax from typical posted
prices• Companies vary with respect to issues like bulk buying
and delivery cost that can swing things several pennies more
Enter the Lube/Filter/Grease
Terex rule of thumb wasHigh and 10% of fuel
Undercarriage is a dozerOr tracked machineThing – 0 here
Repair Reserve Next
Vehicle Life Impacts Repair Costs
Cat 777 will last 40,000 to60,000 hours
Under Average ConditionsAbout 50,000
Table from Cat Handbook29th Edition (online)
Actual cost Varies with Life of Machine
If we go forA 50,000 hourLife we willPay about1.5 times whatIs in the tableOr $15/hour
Need to Get Tire Life
Where most tires wear outBut some cut is zone B
An average is 3,000 hours
If retread cost is about 1.5Times normal tire andLife is about 1.75
Cat Handbook does notGive a cost.
Western Mine Cost Service Has Books of Costs
Including Tires in theSupply section
This resource isAvailable online forStudents or bySubscription fee forCommercial users.
A Calculation of Tire Cost
6 tires * $8,900 each is $53,400 Because of heating considerations
I’m not retreading• $53,400 / 3,000 hours = 17.8/hour
Another Source Is the US Bureau of Labor Statistics
Note that I can pullPay and Benefit byArea and Occupation
Comment on Estimating
In addition to books, manuals and internet sources
Remember the Buddy Network Excerpts from Trade Journals Your Companies Own Historical Cost
Records Local Union Contracts or State Wage
Scales Vendor Quotes
Cooking Our Estimate
In our problem we are given that they will use Women truck drivers because if the Israelis launch an air strike they want something that is disposable (and teaching cows to drive was not successful)
Normally there are other costs• Unemployment, workers comp, social security,
vacation, health etc.• You can calculate specifically or use rule of thumb
estimating• 40-60% burden• I’ll go at low end for quarry
1.4 * $15.75 = $22.05
Input My Knowns
I already scheduled2772 hrs per yearWith 80% availabilityIn my example
I also know the truck should last about 50,000 hours
At 2,218 hours per year that about 22.5 years
Getting My Truck Cost
Looks like I’ll beAbout $1,062,000For my Cat 777
Using WesternMine CostService
Price and Tires
Most Prices are Quoted at theFactory – Your have freightAnd assembly (I added a littleExtra as you saw)
Tires are a wear item so oftenThey are deducted from the priceTo avoid double counting
Truck weighs 161,000 lbs or1,610 units of 100 lbs – use $4/100Weight rule to estimate freight about$7,000 double for assembly
The Issue of Taxes and Insurance
Rule of thumb is that Tax and InsuranceAre about 5% (2.5% each) ofAverage Annual Investment(I wish they would call it average annual value)As vehicles values go down so does tax on insurance
Average value of calculation is
(N+1)/2N * Cost where N is life
Substitute and crank
33/64*$1,600,000 = $825,000 * 0.025 = $20,625
Griping About FPC
FPC does not handle time value of money
Taxes and Insurance are high in the early years and low in the late years• A mathematical average does not
show what this can do when investors are looking for a return on money
The Interest Problem
If money is borrowed most of the interest comes early• I’ll show a method for getting time
value of money into it even if FPC tries to ignore it.
From Engineering Economics Get the Interest Rate Comparison
Spreadsheet
Standard Fixed Period Compound Interest Loan
9 Interest Rate1 Number of Compounding Periods/Year
0.09 Period interest rate (as a decimal)1 Number of Payments/Year
0.09 Payment Interest Rate (as a decimal)10 Years for Loan Payoff
1600000 Loan Amount0 Down Payment Required0 Set Up Fees0 Set Up Fees Rolled into Loan0 Points Up Front 0 Points Cost0 Points Rolled into Loan 0 Points Cost
249312.1 Initial Guess for Payment
249312.1 Payment Amount249312.8 Final Payment Amount893121.7 Interest Paid
0 Fees Paid
Put in that I borrowMoney at 9% over10 years to pay forThe Truck
The Spreadsheet Gives a Yearly History of Interest
Payments
Period Debt Interest Payment Principal1 1600000 144000 249312.1 105312.12 1494688 134521.9 249312.1 114790.23 1379898 124190.8 249312.1 125121.34 1254776 112929.9 249312.1 136382.25 1118394 100655.5 249312.1 148656.66 969737.6 87276.38 249312.1 162035.77 807701.8 72693.17 249312.1 176618.98 631082.9 56797.46 249312.1 192514.69 438568.3 39471.14 249312.1 209841
10 228727.3 20585.46 249312.8 228727.311 0 0 0 012 0 0 0 0
Use Excels Copy functionAnd copy the interestColumn and paste it intoClass Assistant(Another EngineeringEconomics Spreadsheet)
Get the Total Life Cycle Cost of the Interest
A typical mine looksFor 15% rate of return
The truck goes intoAlmost immediateService – time zero
Lasts for 32 years
An equivalent streamOf interest over 32Years is $79,378
Plug it Into FPC
I could have doneThe total lifeCycle cost trick toThe InsuranceAnd Property TaxToo
At this point I know it costs me$107.85/hr to own the truck