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4 cards from this section. Quick, good the night before a test.
What are the two main types of costs associated with construction equipment?
Think of recurring expenses throughout the equipment's life.
What does economic life refer to?
Consider when costs start rising.
What happens to operating costs as equipment ages?
Think about wear and tear over time.
The economic life is defined as the point where total costs are at their...?
Consider when it might be most efficient to replace equipment.
Consider a company that has two excavators. One is 5 years old with increasing maintenance costs, and another just purchased. Analyze the potential savings if the older excavator is replaced this year instead of next.
Break down the costs year by year for clarity.
You manage equipment for a construction firm. If you know that the operational cost for each year increases by 12%, and maintenance starts at $15,000 for a new machine, what would be the average annual cost over a 10-year span if the economic life is reached?
Apply the formula for geometric sums!
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