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A short class with Sarah and her students. The other ways are under More.
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Today we’re discussing Ownership Costs, a vital aspect of construction management. Ownership costs include depreciation, taxes, and insurance. Can anyone tell me what depreciation is?
Isn't depreciation the reduction in value of the equipment over time?
Exactly! And how do we calculate it?
By subtracting the salvage value from the initial cost and dividing that by the machine's useful life!
Great job! Remember, depreciation helps us understand how much value the equipment loses, which factors into our total cost of ownership.
Now let’s move on to operating costs. What do you think fuel cost encompasses?
Fuel costs would be based on the equipment's fuel consumption and the cost per unit of fuel.
Exactly! If a machine consumes fuel at a rate of 5 gallons per hour, and fuel costs $3 per gallon, what's the hourly fuel cost?
$15 per hour.
Right! Always keep in mind the load conditions as they can affect fuel consumption.
Let’s discuss the Caterpillar and Peurifoy methods for estimating equipment costs. What’s unique about these methods?
I think they both offer systematic approaches for calculating costs, right?
Correct! Caterpillar focuses on depreciation and operating costs, while Peurifoy introduces the time value of money for a more precise estimation.
So Peurifoy's method may be more accurate because it considers the timing of cash flows?
Absolutely! Remember, its key components include using the Uniform Series Capital Recovery Factor.
If an excavator costs $100,000 and has a salvage value of $10,000 with a useful life of 5,000 hours, the hourly depreciation would be ($100,000 - $10,000) / 5000 = $18/hour.
For fuel costs: if a machine uses 4 gallons per hour and fuel costs $2 per gallon, the fuel cost per hour is 4 * $2 = $8.
Depreciation’s the game, value drops, that’s the name!
Imagine a machine as a person aging; as it works, it loses its value with every hour, just like getting older. This is depreciation!
FOG: Filters, Oil, Grease - don’t forget these for operational ease!
COOL: Costs (Ownership), Operating, Outsourced labor, and lifespan - remember these for total calculation!
Term
What does depreciation measure?
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Term
What is the responsibility of the Caterpillar Method?
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The total cost involved in owning and operating construction equipment, including depreciation, taxes, insurance, and operational expenses.
The reduction in the value of an asset over time, calculated by deducting its salvage value from the initial price and dividing that by its useful life.
Expenses incurred in the operation of equipment, including fuel costs, consumable costs like filters and lubricants, and maintenance.
A widely used approach for estimating equipment costs, focusing on ownership and operating expenses.
A method for estimating equipment costs that incorporates the time value of money principles for greater accuracy.
The Ownership Cost involves estimating both ownership and operating costs for construction equipment, focusing on methods like Caterpillar and Peurifoy.
This section outlines the concepts of ownership and operating costs in construction equipment management. It covers the Caterpillar and Peurifoy methods for cost estimation, detailing the calculation of depreciation, fuel cost, consumables, and operating wages to provide a comprehensive understanding of total equipment costs.
The section on Ownership Cost explores the core components involved in estimating total equipment costs in construction management, especially utilizing the Caterpillar and Peurifoy methods. The lecture first revisits the concept of ownership cost before providing a stepwise approach to estimating costs associated with equipment, focusing on: